Description
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Retail Management
EXECUTIVE SUMMARY
Retailing consists of all activities involved in selling goods and services to consumers for their personal, family or household use. It covers sales of goods ranging from automobiles to apparel and food products and services ranging from hair cutting to air travel and computer education. Sales of goods to intermediaries who resell to retailers or sales to manufacturers are not considered as retail activity. Retailing can be examined from many perspectives. A manufacturer of goods like washing machines and refrigerators has many options to reach out to consumers. It can sell through dealers, the company showrooms (Sony World, Videocon Plaza) or hypermarkets (Big Bazaar). The retail sector in India is highly fragmented with organized retail contributing to only 2% of total retail sales. The retail sector in developed countries was also highly fragmented at the beginning of the last century but the emergence of large chains like Wal Mart, Sears, and Mc Donald’s led to rapid growth of organized retail and growing consolidation of the retail industry in these countries. Today, in India we see a rise in the purchasing power and growth of a middle class which follows the western lifestyle. Hence, conditions are conducive for the rapid growth of organized retail in India. Organized retail is growing rapidly and we see the emergence of large organized retail chains like Shoppers’ Stop, LifeStyle and Westside. We also find retail malls mushrooming all over the country. The opportunities in retail industry in India will increase since Indian retailing is on the threshold of a major change. However, with the rapid growth in organized retail and increased emphasis of manufacturers on understanding sales at the retail level, the study of retailing has become increasingly relevant.
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Retail Management
OBJECTIVE OF PROJECT
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To understand the concept of retailing. To understand the origin of retailing To understand the essential factors concerning retail marketing. To identify the supply chain in the retail industry. To identify the different types of retail outlets and retailers To identify the activities and functions associated with retailing. To understand the role and relevance of retailing in India. To understand the operational structures associated with retail
organizations • • • Understanding consumer behaviour in retailing Understanding the importance of store location for a retailer To understand the nature of pricing in retail.
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Retail Management
METHODOLOGY
This project is the mixture of theoretical as well as practical knowledge. Also it contains ideas and information imparted by the guide. The secondary data required for the project was collected from various websites and books of reputed authors. The project started with sorting all the raw data and arranging them in perfect order. To add value to the project and to understand the practicality of retailing business, I have visited various stores who are the best in retailing business. Further, to understand the consumers better, a field survey was also conducted to find out the tastes and preferences, purchasing habits, expectations of the consumers etc. Analysis of this primary data has been done to actually understand the survey in a better way.
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Retail Management
DEFINITIONS OF RETAIL
Retailers are at the end of the supply chain. Retail, according to Concise Oxford English Dictionary, is "the sale of goods to the public for use or consumption rather than for resale" Retail is "to sell in small quantities directly to the ultimate consumer," defines Merriam-Webster Online Dictionary. Retail is `not wholesale,' says Encarta. As a transitive and intransitive verb, the word means `sell goods'. Retail is to sell in small quantities, such as "by the single yard, pound, gallon, and so on," explains Webster Dictionary, 1913. "Retailing consists of the sale of goods/merchandise for personal or household consumption either from a fixed location such as a department store or away from a fixed location and related subordinated services," states Wikipedia. An obsolete meaning is "to sell at second hand". Retail at/for is used when talking about what is sold at a particular price, as in the example, "This model of computer is retailing at Rs.650," that Cambridge Advanced Learner's Dictionary offers. Retailer is "a distributor that sells goods or services to consumers," defines Oxford Dictionary of Business. There are three categories of retailers, it explains: "multiple shops, cooperative retailers, and independent retailers."
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Retail Management Usually, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells individual items or small quantities to the general public or end user customers, usually in a shop, also called store, explains Wikipedia. Thus, "retailers are at the end of the supply chain." Retail credit is what is granted to consumers `for the purchase of goods or services'. Retail price is "the total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail margin." Apart from this pricing, which involves adding a margin to cost, there is also the `suggested list pricing' of manufacturers. The Free Encyclopedia explains, "This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer." At times retail prices can be psychological prices or odd prices, such as `a little less than a round number, e.g., Rs.16.95'. Retail price index or RPI is an index of the price of goods, more like our consumer price index. "The RPI is inclusive of VAT, and other taxes, and as such can change as a result of changes in taxation levels," explains www.lse.co.uk. On http://encarta.msn.com, with `retail anthropology', a phrase that focuses on the behaviour of shoppers to learn what motivates them. One such behaviour is `retail therapy', a humorous phrase to mean "the practice of shopping in order to make oneself feel more cheerful," as Concise Oxford English Dictionary notes. The one who pays for the therapy will surely feel the pinch, though. Current twist in the retail tale, however, is more about the shock therapy that retail gets from antagonists who are averse to multinational retailers dipping into the booming market pie.
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Retail Management
THEORIES AND MODELS OF RETAILING
1. DIALECTIC PROCESS: An evolutionary theory based on the premise that retail institutions evolve. The theory suggests that new retail formats emerge by adopting characteristics from other forms of retailers in much the same way that a child is the product of the pooled genes of two different individuals.
2. LAW OF RETAIL GRAVITATION: -William J. Reilly's Law of Retail Gravitation, as explained on www.appletmagic.com/reilly.htm, has this formula to explain the purchases by residents of county A in the businesses of county B: "kPopulationAxPopulationB/ (DistAB) 2." William J. Reilly of the University of Texas in Austin had access to data on the location of purchases by the residents of the various counties in Texas. He knew that generally the farther away two counties were from each other, the fewer transactions would take place between them. On the other hand, if a county had a big city with a lot of bigger retail stores it would act as a magnet attracting the shopping by residents of surrounding and even distant counties. Also a county that had a larger number of residents would have more transactions with a given county than one with a smaller number of residents. The 1931 formula is "analogous to Isaac Newton's Law of Gravitation that says that two bodies attract each other with a force that is proportional to the product of their masses and inversely proportional to the square of the distance between them."
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Retail Management
3. RETAIL ACCORDION THEORY:A theory of retail institutional changes that suggests that retail institutions go from outlets with wide assortments to specialized, narrow, line store merchants and then back again to the more general, wide-assortment institution. It is also referred to as the general-specific-general theory. Dictionary of Marketing Terms on www.marketingpower.com. 4. RE TAIL LIFECYCLE THEORY:A theory of retail competition that states that retailing institutions, like the products they distribute, pass through and identifiable cycle. This cycle can be partitioned into four distinct stages: i. Innovation, ii. Accelerated development, iii. Maturity, and iv. Decline.
5. WHEEL OF RETAILING THEORY: `Wheel of Retailing' is another cyclical theory, which states that retail evolution process has three phases, viz. entry phase, trade-up phase, and vulnerable phase. It is a theory to explain the institutional changes that take place when innovators enter the retail arena. For example, the maturing or more traditional retail institutions provide facilities, such as rest rooms, carts, wide aisles, food courts and resting areas, and promise services, such as more variety in products, advertisements, delivery, and provision of credit.
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Retail Management
ORIGIN OF RETAILING
Beginnings of Retail Trade:
Early Trade When man started to cultivate and harvest the land, he would occasionally find himself with a surplus of goods. Once the needs of his family and local community were met, he would attempt to trade his goods for different goods produced elsewhere. Thus markets were formed. These early efforts to swap goods developed into more formal gatherings. When a producer who had a surplus could not find another producer with suitable products to swap, he may have allowed others to owe him goods. Thus early credit terms would have been developed. This would have led to symbolic representations of such debts in the form of valuable items (such as gemstones or beads), and eventually money.
Early Markets Over time, producers would have seen value in deliberately over-producing in order to profit from selling these goods. Merchants would also have begun to appear. They would travel from village to village, purchasing these goods and selling them for a profit. Over time, both producers and merchants would regularly take their goods to one selling place in the centre of the community. Thus, regular markets appeared.
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Retail Management
The First Shops Eventually, markets would become permanent fixtures i.e. shops. These shops along with the logistics required to get the goods to them were, the start of the Retail Trade
Origins of Retail Chains It is likely that, as markets became more permanent fixtures they evolved into shops. Although advantageous in many respects, this removed the mobility that a peddler or traveling merchant may still have enjoyed. For some shopkeepers, it made sense to obtain extra stock and open up another shop, most probably operated by another family member. This would recover business from peddlers, create new business and the greater volume would allow the shopkeeper to strike a better deal with suppliers. Thus the Retail Chain would have started. It is thought that this process was started in China over 2200 years ago with a chain of shops owned by a trader called Lo Kass. Excavations reveal that shops in ancient Rome were, in many respects, much like small shops are today, so it is most likely that retailer chains existed then.
From Family Business to Formal Structure Although retail chains would have been mostly run by families, as some chains grew, they would have needed to employ people from outside of their family. This was a limiting factor as there would have been a limit to the amount of trusted non family members available to help run the chain. Another, even more definite limiting factor was the distance the furthest shop would have been from the
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Retail Management original shop. The greater the distance, the more time and effort would have been needed to effectively manage outpost shops and to service them with goods. There was, therefore, a natural barrier to expansion. That was the case until transport and communications became faster and more reliable. When this happened towards the end of the 19th century, chains became much bigger and more widespread. Many of these businesses became more structured and formalized, leading to the retail chains that we see today.
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Retail Management
History of Self-Service Stores
Background Up until the introduction of self-service stores, customers would simply ask the shopkeeper for their goods. The shopkeeper would price them (weighing them if necessary), pack them in a bag or other container (often supplied by the customer), total up the bill and receive payment. There was a personal one-toone relationship between customer and shopkeeper. The First self service Store This all changed in 1915 when Albert Gerrard opened the Groceteria in Los Angeles, the first documented self-service store. This was soon followed a year later by the Piggly Wiggly® self-service store, founded by Clarence Saunders in Tennessee in the U.S. Efficiency These entrepreneurs noticed that their staff had to spend a great deal of time taking grocery orders from customers. The groceries were stacked on shelves 11
Retail Management allowing customers to walk around and browse, collecting their shopping in a basket that was supplied. The shopkeeper would only need to total up the final bill at the end of the process and transfer the goods from the basket to the customer and receive payment. Growth This new type of shopping was more efficient and many customers preferred it. Although personal service stores remain to this day, this new concept started a rapid growth of self-service stores in the United States. Other countries were slow to take up the idea, but there has been a steady rise in the global amount of self-service stores ever since.
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Retail Management
The Birth of Distance Retailing
Definition
Defined here as sales of goods between two distant parties where the deliverer has no direct interest in the transaction, the earliest instances of distance retailing probably coincided with the first regular delivery or postal services. Such services would have started once man had learned how to ride a camel, horse etc.
The reason for distance retailing:
When individuals or groups left their community and settled elsewhere, some missed foodstuffs and other goods that were only available in their birthplace. They arranged for some of these goods to be sent to them. Others in their newly adopted community enjoyed these goods and the demand grew. Similarly, new settlers discovered goods in their new surroundings that they dispatched back to their birthplace, and once again, demand grew. This soon turned into a regular trade. Although such trading routes expanded mainly through the growth of travelling salesmen and then wholesalers, there were still instances where individuals purchased goods at long distance for their own use. A second reason why distance selling increased was through war. As armies marched through territories, they laid down communication lines stretching from their home base to the front. As well as gathering goods from whichever locality they found themselves in, they would have also taken advantage of the lines of communication to order goods from home.
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Retail Management
RETAIL MARKETING
In its simplest form, the retail trade sells goods to end users {customer} of those goods. In order to maximize sales and profits retailers will usually enhance the way they present their goods, their retail outlets and their company. This enhancement is retail marketing. For the success of retail outlets the following is to be taken into consideration: I. Décor II. News Management III. Price Deals IV. Staff Presentation V. Merchandising
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Retail Management
I.
Décor
The way a retail outlet looks will usually inform customers and potential customers about the type of store and type of products it sells. i. Design A store that sells high class goods will usually have high class décor. By contrast, a store that sells basic goods may have basic décor. Retailers will typically want their stores to be different from their competitors. This distinction allows the store to offer a shopping "experience". A store offering distinct décor can score points over their competitors. This dimension is important as it reduces the burden on product versus product and price versus price competition. This ultimately feeds in to the value of the products on offer and helps to maintain margins. A balance needs to strike between this need to be different with the need to make customers feel welcome. Surroundings can be distinct, innovative and even edgy but must not alienate the customer. ii. Frequency of Redecoration Stores that sell fashion goods will often change their décor regularly to reflect the changing nature of their products. For some well established stores, their décor may be synonymous with their business and their product offer. Such stores may seldom change their décor or only change it in minor ways. Some stores offer a mixture of both – they may be well established and have traditional décor, but will also adapt it in order to highlight the changing fashions of their product offer. iii. Lighting Food stores are usually well lit. This re-enforces an impression of hygiene and honesty. It also allows customers to read labels and signs, some of which may
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Retail Management be legally required. The lighting in clothes and some specialist goods stores may vary across the store, according to the products being lit. Such lighting may range from soft, or even dull, to bright and occasionally colored. Very similar factors affect stores that are on the internet. For example, this online store that sells fly killers is mainly white and bright in order to symbolise hygiene. The web site that sells fashion is more colorful.
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Retail Management
II.
News Management
Retailers tend to be quite labor intensive and therefore employ a high number of staff relative to other businesses. The products they sell and the prices that they charge have obvious significance to the populace. These factors mean that what happens at a retailer, especially a large one, can have an impact on many people’s lives. The prices they charge can have a direct effect on the local economy or even the national economy, especially as the inflation rate calculation for a region or country usually includes a high proportion retail price data. a. Free Advertising All of this means that press statements and press conferences by retailers are often run by local and sometimes national media outlets. Many retailers will use this interest to keep their business in the public eye. News stories tend to have more authority than advertising and are virtually free. b. Store Openings A new store opening will often be reported locally. A number of simultaneous openings may gain regional or even national coverage. Even bad news can be used as a promotional tool. For instance, the store chain retailer may also participate in media coverage of store closures, stressing the availability of products in alternative stores that are still open. c. Interviews Interviews given directly to the media by retailers may allow the spokesperson to expand the subject matter being discussed to a promotion of the company and its 17
Retail Management products and services. The retailer spokesperson may have more freedom when giving live broadcast interviews.
d. "Price War" Another way of gaining media attention is to announce a substantial program of price every cost effective deductions and encourage the notion that a “price war” has been started. While this may or may not be the case, having such publicity will be seen by many retailers as positive and compared to paid advertising. e. Character Promotion Much free publicity can be gained by having a famous character affiliated to the retailer. Such individuals often have a flair for gaining publicity. This can occasionally backfire but if it is managed well can be a significant source of promotion. Occasionally the person who owns, or is the chief executive of the company may be good at self-publicity, which will reflect back to the company.
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Retail Management
III.
Price Deals
$. Deal-Making as a Marketing Tool Making deals with customers, such as two for the price of one, for example, is an age-old method of retailing. Whereas deal-making has traditionally been a two-way affair between an individual customer and the retailer - and often still is in small retailers - it has in recent times been used as a marketing tool by the larger chains. $. Technology As technology has advanced, it has been possible for some retail outlets to offer complicated price deals based on various factors such as the amount of goods purchased, or what combination of goods have been purchased. This is possible because the computer system is able to calculate the permutations that arise.
The cash register is, in effect, a terminal to the main computer system and provides its operator and the customer information on the cost of the goods that are being purchased. An example of a price deal is where a store offers money off if a customer buys two packs of a given product. When the first pack’s information is entered into the terminal, the system will calculate the full price. When the second pack is entered it will automatically subtract the discount.
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Retail Management
IV.
Staff Presentation
The way that staff appears to customers and potential customers can have a significant bearing on how a retail store is perceived. Appropriate Appearance of Staff Personal hygiene and cleanliness of staff is important for all retailers and even more so for stores selling food products or drugs. Staff in stores that sell hardware products will often wear overalls. Apart from protecting their own clothes, overalls can give the staff, and therefore the store, a professional appearance and reinforce the practical nature of their products. Staff in a fashion store may be encouraged to wear fashionable clothes themselves. Some stores will provide clothes to staff from their own stock as a way of promoting specific items. Stores that sell information technology equipment, modern gadgets or recorded music may be encouraged to dress very casually so that their predominantly young market will not feel intimidated or alienated by formal dress. Retailers that sell high value goods, or goods that are perceived as high value, may ask their staff to dress formally. Examples are high-class clothes stores and jewelers. Dress codes will mainly apply to larger retailers. With the exception of food and drug stores, it is very common for small retailers to have no dress code at all. Trust
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Retail Management Many stores will ask their management staff to wear dress that is more formal than the rest of the staff, even in some cases where staff are being encouraged to dress fashionably or casually. This contrast may be preferred by stores that wish to make staff appear welcoming while giving the impression that the store is run professionally and can be trusted. Attractive Appearance Some retail stores will recruit staff who they perceive as being good looking. This is especially true of fashion outlets. This practice is rarely an official company policy and is often a subconscious decision. Selection filtering that uses facial or bodily attributes may be considered unlawful in some jurisdictions where it could be considered as discrimination on grounds of race, gender or even age .
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Retail Management
V. Merchandising
The way that products are displayed – or “merchandised” - can have a significant affect on retail sales. For example, sales of fruit and vegetables tend to increase when displays are full and bold. In self-service stores, staple products tend to be merchandised strategically so that customers looking for these items are required to walk past higher profit items such as luxury goods. This can often result in higher sales and higher profits. Merchandising consists of the following elements: - Correct strategic placement in the store - Eye-catching and appealing display - Appropriate point of sale support media (e.g. labels, signs) - Legal requirements are satisfied
? Display Fixtures
Many styles of display fixture may be used, ranging from a simple desk or shelf to very complicated designs. Fixtures may be purpose-built or purchased as standard units. Some may have integral lighting and temperature control. The type of fixture to be used will depend on the products that are to be sold from the unit, the type of store and the available budget.
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Retail Management In recent times there has been a shift away from heavy built-in fixtures towards flexible fixtures that can be moved and adapted with minimal effort. This allows retailers to change merchandising layout or refit their shops more efficiently.
? Magazine Rack:
Configuration Most magazines are made so that they have the integrity to stand near-vertically, resting against a support. Displaying magazines in this way allows the cover to be as fully displayed as possible. Newspapers tend to be laid on their side or are kept in bins. Stores would tend to keep the same newspaper in the same position for the convenience of customers and to avoid an incorrect purchase. Front Cover Exposure Modern magazine racking is designed to expose as much of the front cover as possible. Because of this, many magazine racks have a low front barrier made from transparent acrylic or similar material.
Orientation and Location A typical magazine rack will slope slightly, with the widest sales area at the bottom for fast sellers and newspapers, and with the narrowest space at the top for specialized magazines and those not suitable for children. Although magazine racking is usually found against a wall, it may occasionally be found on a standalone.
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Retail Management
? Pegboard Fixtures
Method of Display Some products can be displayed as hanging items packaged in blister packs or polythene bags. These bags will have a slot or hole punched through them so that they can hang on a rod. Rather than having the rod as a permanent fixture on a display, some stores prefer to use a pegboard. This is an upright panel that is perforated, allowing the rods - called peg hooks - to be placed in a multitude of positions. There are many varieties of peg hook that can be attached to a peg board. Some will have one prong, some two. Baskets can also be attached to peg boards. These may require several peg hooks. One can see these hooks on the street shoe displays.This method of merchandising is relatively low cost but can be very versatile.
? Hanging Fixtures:
Wires The ceiling of a shop can be used to hang various point of sale material and some products. A low cost method of doing this is to have taut wires running the length of the ceiling on which hooks can placed. By using S-hooks or another wire, a poster or other light item can be hung below.
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Retail Management By using high strength thin gauge wire, the customer can be given the impression that the items being hung are almost free-floating, allowing them to have more focus, with less attention being given to fixtures.
Swivel Hooks A product can be attached to the ceiling to a swivel hook. It is a standard hook, except that it will allow a product to fully twist. Hanging Heavy Items Some stores will have sturdier hanging points built into ceilings. These may be made of steel or strong plastic and will be primarily used for hanging heavier items. Hanging fixtures that are directly selling goods to the public will need to be very sturdy and will usually be purposely built into the fabric of the building.
? Display Ring
This is simply a ring, either made from steel or plastic (or both). Products that can be displayed on it will have holes, loops, chains or hooks through which the ring can be threaded. Display rings have an opening point so that products can be threaded onto or off of the ring. Diameter The display ring can vary in diameter, according the size of the products being displayed. A small ring of, say 5 inches in diameter, may, for example, be used to display novelty name tags or other small items with a chain. Larger rings may be
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Retail Management used to hold belts or umbrellas, for instance. Generally the ring will be positioned at a high position so that the products can hang from it and be more noticeable. Security of High Value products Often there is a lock at the opening point. This is useful if high value products are to be displayed on the ring, as long as the ring itself is secured.
? Clothes Hanger
This familiar household item is used extensively in most clothes shops. There are many varieties and their quality can vary widely. Life of the Clothes Hanger Some clothes hangers are designed to minimum specifications. Their main job is to hang the products in store (or in storage) and to last until the customer gets the product home. Excessive re-hanging and general use would eventually cause this low cost hanger to fail. Typically they are made of recycled black plastic. Their design life does not extend to prolonged use by the consumer. More sturdy hangers are available. These may be more appropriate in stores that move stock regularly. Retailers using this type of hanger may also view the hanger itself as an enhancement to the product offer or would feel that it would add to the store's image in the eyes of the customer. These hangers' design life would extend to reasonable use by the consumer. A high class clothes store would often prefer to use wooden hangers with a metal hook. There are also very sturdy hangers that have a closed hook. These are designed to withstand the rigours of regular use within a store and are not taken away by the customer. They can also be used by clothes producers, shippers, wholesalers and garment processors, such as steamers. Materials Used 26
Retail Management There are various basic material variations:
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All plastic All Galvanized Metal Mix of plastic and metal (usually a plastic body and metal hook) Wood and metal mix (usually a wooden body and metal hook) There may also be cardboard or foam covers on the bar (and elsewhere) to prevent creasing There may also be clips on the bar with foam protection
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Varieties There are a wide variety of clothes hanger designs in order to reflect the image of the retailer and to make them appropriate and fit for a particular use. Some examples are:
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Hanger with no bar used for upper garments only Hanger with bar used for upper garments and pants/slacks Small hangers for children and babies Many color variations, especially when made of plastic Bathing suit hanger Attachment Hanger with two hooks on the bar. The hooks may be fixed or may be moveable horizontally and may be lockable so that they maintain their position
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Hanger with the bar attached using springs Hanger with notches cut into the sloping sides. This can be used for garments that have hanging hooks Straight hangers designed for pants/slacks/skirts Various styles and types of cushioning may be placed at some or all parts of the hanger Hangers can be wishbone shaped, curved or bell shaped. The bell shape can compliment certain collar designs
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•
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Retail Management
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Some hangers are made with rubber, foam or flexible plastic extensions in order to yield to the garment's shape Scarf Hanger - a standard hanger but with an open-ended bar Shoe Hanger - a small bar-less hanger with two hooks either side Tie Hook - a small hanger with a very small open-ended bar Blanker Hanger - a very wide and heavy-duty hanger Many hangers can be designed to accept the retailer's logo or message A polyhook bag contains a small plastic hanger as an integral part of the top of the bag. The hook is used so that these packs can be displayed on rods.
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? Jewellery Stand
Because jewellery tends to be small and delicate, it is often displayed on small stands. This allows re-arrangements of displays to be efficient because rather than moving individual pieces one-by-one, the displays can be moved in groups. Depending on the products being displayed, jewellery stands tend to hold a limited amount of related products. Some stands come with security features for high value items. Angled Jewellery Stand or Tray Angled stands are pitched at anywhere between 30 and 90 degrees. These stands are often held in glass counter cabinets or in glass cupboard displays. As such, it is convenient to pull out the tray of products if a customer wants to view them. This allows the customer to see a choice of products, adding to the chances of completing a sale. Stud Earring Stand
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Retail Management This type of stand may typically be 5 inches x 5 inches and hold 8 or 9 pieces. A stud earring stand would either have very small holes to take the earring pins or would have a plain cushion into which the earring pins would be pushed. Ladder Earring Stand A ladder earring stand is a small stand that can be made of wood or plastic that has vertical two posts with several horizontal bars spaced evenly between the posts. The horizontal bars will have hooks, spikes or slits so that the earrings can be attached. Ring Stand Rings may be held in an angled stand, but this time with the rings pushed into slits. Valuable rings may be held in small lidded boxes that are propped up in order to achieve an angled display and are opened when the store is trading. These boxes may have locks. Rings may also be displayed on a stand that is shaped to a lady's hand - either 3D or 2-D. It may be made of plastic, wood or even porcelain or glass, and would be used hold rings on one or more of the fingers. Necklace Stand A necklace stand would typically stand 15 inches high and consist of a central vertical post with right angled posts protruding from the top and possibly lower down the vertical post. Necklaces would hang from the horizontal posts.
Bangle Stand This is similar to a necklace stand but shorter.
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Retail Management Necklace and Choker Bust Display Necklaces (and chokers) can also be displayed on representations of the human bust around which the necklace can be draped. This may be a 3-D dummy of a head and shoulders, a 3-D dummy of just the neck and shoulders or a 2-D cut out of the shape of the neck and shoulders.
Jewellery Showcase Showcases are typically made of transparent plastic or glass and with a variety of possible designs. A typical design is a tower with two or three stories, with each compartment containing items of jewellery. Showcases with high value items may be come with locks and even intruder alarms.
? Hooks and Clips
Stores - especially clothes and hardware stores - will often require hooks and clips in order to display items in a particular position or configuration or to replace hooks or clips that are missing from the product packaging. Range of Items
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Clips for pants and slacks Hanger connector clips and joins Tie Hooks Hooks for dispensing user bags Spring Clips Hook Attachments that are attached to tags using a tagging gun
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Euroslot hang tabs - these are cut outs of euro slots that are basically slits in the top of bags. Occasionally they are required to replace broken slots. 30
Retail Management
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Swivel Pegs - these can be attached to a hanging product, allowing the product to freely swivel through unlimited turns
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Tie Hooks Scarf Clips
? Garment Cover
Clothes - especially when they are high value, will sometimes be kept in garment covers. These may be heavy duty zipped covers, sometimes with a window to allow viewing, or may be disposable thinner, usually transparent, covers. As well as protecting the clothes from dust and other contaminants, they can add to the appeal of the product as they will show that the garments have been taken care of by the retailer and, if sold with the product, can add to its value and appeal.
? Greeting Card Rack
Sloping Tiered Cabinet This type of fixture consists of a series of stepped shelves, usually with a front to each tier. These types of greeting card cabinets may come with large drawers at the base in order to carry extra stock. Sloping cabinets may be made of solid material such as plastic or wood, or may be wired with polyester or similar coating. Sloping tiered cabinets will typically be used in outlets where greeting card sales volume is high. Mini cabinets are also available as counter mounted units.
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Retail Management Spinning Rack A spinning rack (or carousel) may be used where space is limited or where sales are more modest. These racks are easy to move and may be set on castor wheels. Some will have a holder at the top in which point of sale material can be placed. Spinning greeting card racks are designed to stand on the shop floor. Shorter counter mounted ones are also available.
? Point of Sale
• Product Display
Retailers will ensure that fixture displays will bring out the best in products. The optimum way any given product group is displayed can vary widely. Many products benefit from bold and full displays while some other products will benefit from a neat and orderly presentation.
Eye-Catching Displays The way that goods are arranged in a store can make a significant difference to sales. Products that are appealing to the eye will attract customers. Dull or shoddy displays will be ignored by many customers. Research There has been a great deal of research into customers’ preferences when shopping in a self-service store. It is known that when displays are full, sales tend to be higher. This is especially true of fresh foods, and particularly fruit and vegetables. It is also known that products arranged in neat rows, with all labels facing the same way can represent cleanliness and superior quality in the minds
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Retail Management of many customers. Products with a higher profit margin would benefit from such a well-ordered display. Goods that are jumbled in a large container, or display bin, would tend to signify a bargain. Fast selling or reduced-to-clear goods may be appropriate for this kind of display.
Lighting Lighting plays a very important part in store displays. The general lighting used will reflect the type of store. A food store would usually have very bright lights that will be as close to natural light as possible. Dull lighting may give the impression of lack of hygiene. Lights that are too biased away from natural light may change certain colors. For instance, blue tinted strip lights may make fresh red meat appear to be bad. The same aspects are considered for any lighting on the display fixture itself. These lights may be strategically placed to highlight certain aspects of products and could be used to create a particular mood. Lighting in fashion boutiques may include multiple colors in order to bring added glamour to the shop and its products. In a high-class furnishings store, lighting may be softer and light intensity, and even color, may vary across different parts of the sales floor.
•
Legal Requirements
Before any commercial requirements are met, the merchandising of goods must meet all legal requirements. Tobacco and Alcohol
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Retail Management Many states have laws governing the placement of sensitive goods such as tobacco and alcohol. Some states stipulate that these items can only be sold from behind a counter. Labelling There are often many regulations covering the labelling of goods. For instance many states forbid any misrepresentation of the goods being labelled. Regulation may prescribe merchandising and labelling requirements while others may forbid certain things. Codes of Practice As well as statuary regulations, there may also be trade or company codes of practice that the retailer may follow. • Considering Security
When retail stores merchandise their goods they will take into account the risk of stock being stolen from display shelves ("shoplifting"). This is especially true of self-service stores where there is less personal supervision of customers’ activity. Goods at Risk Those goods that are most at risk are:
• • •
High value goods Small or slim packs Potentially addictive products
A combination of any two or three of the above would mean that the product in question is at a very high risk of being stolen. Reducing Temptation
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Retail Management Retail stores usually merchandise the at-risk products away from exit doors to reduce temptation and improve the chances of identifying or apprehending the thief. Very high-risk products are often sold over a counter. For many of these products there may already be statutes that require that they be sold this way. Securing Products Some products may be alarmed or even wired or bolted to the display in order to prevent theft. • Placement of Goods
Considering the Profit Value of Goods Generally, staple goods and basic (lower value) goods tend to make lower profits for retailers than other more occasional and more luxurious goods. For instance, sugar, flour and eggs when sold separately would not make as high a percentage profit (or margin) as decorative cakes, for example. Also, nails and wood may not attract the same percentage margins as a finished wooden cabinet. Guiding the Customer to Higher Margin Products For this reason retailers tend to display these occasional/luxurious (higher value) goods amongst – or en route to - lower value items. This can be particularly advantageous to a self-service store where customers who are looking for lower value goods are guided past higher value items. This aspect of merchandising can make a significant contribution to higher profits. This principle is also used in printed catalogues and internet shopping sites. Shoplifting
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Retail Management Whilst the above principles will improve profitability, consideration must be given to product security otherwise shoplifting could wipe out any increased profits.
When displaying goods in a store, appropriate support material will be required in order to inform the customer about the products and to satisfy legal requirements. • Point of Sale Support Material
POS Media Point of Sale (POS) support material can also be used to re-enforce a product’s qualities and may include extra information on shelf labelling, posters and moving images. There may even be an offering of samples of the product, either through free self-service or dispensed by a sales person. Product Linkage Point of sale can also be used to link the sales of one product to another product. For instance: buy product a and get product b free (reference: Price Deals)
? Window Display
The window display will generally reflect: - the products for sale - the nature and style of the shop - special offers and promotions
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Retail Management
Occasionally shops will use their window displays for other purposes, such as promoting a local event or a charity or to commemorate a national or international occasion.
Types There are various types of window display configuration: - Closed back display area - Open back display area - No display area (just a glass reveal) Window displays can benefit from having an uninterrupted view with a minimum of window frames. They may be parallel to the street, or may be angled as part of a recessed entrance (arcade style). Corner windows may face two streets. Occasionally stores will have a window specially built into an external wall (shadow boxes). Some stores, particularly those with shutters, may have a display where there is no window at all. This type of display can produce a market stall affect. Types of window display used will depend on the space available, the volume and profile of people that will pass the window and the design of the building. Generally, fashion stores, gift stores and department stores will have a window display area, often with a closed back. Window displays for these types of store will often consist of 3 dimensional scenes consisting of props and perhaps some supporting media. Some stores employ staff whose sole job is to plan and execute window displays. Often a store will employ a specialist company to do 37
Retail Management this work. Some department stores are famous for their window displays, especially at Christmas. Food shops are more likely to have no window display area but will have posters displayed on the glass for outside passers by to view.
Scenes The types of scenes displayed range from a 3-dimensional scene using props, through to a display of various media, such as posters and moving images or a mix of these elements. The window display scene may consists any of the following: - Single product promotion - Product Group - Large range of products - Corporate theme - Community theme Any mix and match of the above items may be found in a window display. Changing Scenes Most shops will change or refresh heir window displays regularly to reflect changes in their product range or promotional activity. Typically, fashion stores will completely change their display at least each season.
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Retail Management
? Community Theme
A window display may not be directly connected to any commercial attribute of the retailer, but may be a promotion of a charitable event or a community cause or event. Such promotions may have a commercial benefit to the company through improved customer and staff goodwill. Some retailers may, in fact, promote such causes for purely benevolent reasons. The window display is designed to attract potential customers into the store and to promote the retailer and/or its products. A retailer could achieve these aims by featuring a corporate theme in its window display(s).Such a theme may be to reinforce a wider campaign. Rather than be specific to any product, it may highlight certain attributes of the company, such as high quality, good value, good customer service, or perhaps areas such as hygiene or ethical credentials.
? Large Product Range The window display is designed to attract potential customers into the store and to promote the retailer and/or its products. A retailer could achieve these aims by featuring a large range of products in its window display(s). Variety and Availability
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Retail Management Although uncommon, this method of window display not only symbolises the variety of goods available but also, in many cases, shows the goods that are available for purchase. This may be particularly true of smaller shops, where the window display is an important sales area as well as a display area. A customer may point to a product in the window display that they wish to buy.
Freshness For retailers selling fresh foods, a window display featuring a large range of products can also attract customers and denote freshness. For instance, a large range of fresh fruit and vegetables may show a wide range of colors and look vibrant. This vibrancy can translate to freshness in the eyes of a passing shopper. Discount Stores A wide range of goods in the window display may also be appropriate for those shops that sell discounted goods and end-of-line goods. Such a display may symbolise cheapness and low prices. ? Product Group The window display is designed to attract potential customers into the store and to promote the retailer and/or it products. A retailer could achieve these aims by featuring a group of like products in its window display(s). Rotation of Product Groups This kind of window display is often used by stores that sell a wide range of goods such as department stores. A common approach is for a product group to
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Retail Management be featured in the window display in order to remind customers that the store sells the given range of products. Such a display may last for a few weeks and be accompanied by other promotional activity. Then another group of products will be displayed and promoted. By rotating window displays around the calendar, over time customers are given an impression of the choice of products available. The product groups that are displayed are commonly timed to coincide with wider events and seasons. For example, beachwear just before summer and toys and games just before Christmas. Single Product: Window display is designed to attract potential customers into the store and to promote the retailer and/or it products. A retailer could achieve these aims by featuring just one product in its window display(s). Impact By featuring one product, the retailer will be creating an overwhelming message extolling the virtues of the product and elevating its importance to the highest possible level. This approach is often used where: - the store has exclusive sales rights to the product - the product is known to be in very high demand and the store has plenty in stock - the store is running a promotion on the product - the window display area has limited space
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Retail Management
The Supply Chain
In order to retail any product, the product needs to be obtained. This can range from a simple process of purchasing and collecting from a wholesaler to planning and executing the whole process from raw materials through to retailing to the end customer.
Producer
Producers are the makers of goods that are retailed. They may be factories or farms. Role in the Supply Chain Large retailers will often procure goods directly from producers. Small retailers are more likely to procure goods from wholesalers (who buy from producers or even other wholesalers). There are some small retailers, however, who will purchase goods directly from small producers such as local farmers. Sometimes the producer is the retailer. They may have started as the producer
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Retail Management and decided to sell their own goods or they may even have started as retailers and decided to produce some or all of their goods.
Importer
Specialization Most importers specialize in one product area and know their products well. Usually they will have representation in the source country or countries in order to ensure that the products being shipped are of the correct specification. Other importers, however, purchase all types of goods and act more as a clearing station for imports – often cheap goods from low cost countries. Some of these general importers will even purchase container loads speculatively without any detailed knowledge of what the container is carrying. Multi-Skill Importing can be a very complicated business, involving many skills and contacts with a wide range of external functions such as shipping companies, state authorities, banks and insurance companies. Importers must be aware of currencies, shipping routes and rates and have a good knowledge of the import/export laws of many countries and trading blocs. They must also have good negotiation skills, be multi-lingual, have good math, logistics and planning abilities. Importers will often employ specialist companies to liaise with shipping companies, carry out customs clearance, and deal with cargo forwarding and insurance claims. Although importing is complicated and specialized, some larger retailers take on imports themselves. Role in the Supply Chain
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Retail Management Importers can supply any part of the supply chain: they may supply parts to producers or even supply them with finished goods to supplement their range. They will also supply wholesalers and large retailers.
Packaging Supplier
Packaging Categories Most retailed products will be packaged. There are three general categories of packaging: - Primary – the immediate packaging around the finished product - Secondary – the container in which several finished packs would be distributed (and sometimes displayed in) - Tertiary – the carrier for the secondary packaging. This may be a pallet or large crate Role in the Supply Chain Packaging suppliers would generally sell their packaging to the goods producers. The involvement of packaging suppliers can range from simply taking orders for packaging items to having detailed involvement with the logistics, marketing, specification, cost and legal aspects of the packaging. Although packaging suppliers will directly supply the producer, they may have a working relationship with other partners in the supply chain. For instance, they may agree primary packaging designs with the retailer, rather than with the producer. The retailer would then write the agreed packaging design into the producer’s product specification. The retailer may even negotiate a global price for packaging with the packaging supplier, leaving the producer to simply order and pay for the packaging at the pre-agreed price (this is subject to restrictive
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Retail Management practice legislation that may be in force in any given territory). Some packaging suppliers may even work directly with consumers in order to obtain feedback on primary packaging designs. The packaging supplier may also work closely with other supply chain partners when designing secondary and tertiary packaging. For instance, they may design tertiary packaging in collaboration with the shipper and secondary packaging in collaboration with the wholesaler. They would still need to take into account the requirements of the retailer and producer, as all of these parties will be affected by secondary and tertiary packaging designs. Generally, although packaging suppliers sell to the producers directly, they will usually take heed of the requirements of the whole supply chain, especially the dominant partner, whose approval would be critical.
Wholesaler
Wholesalers purchase and store large volumes of goods, usually from producers, but occasionally from other types of business, including other wholesalers. (e.g., Vastra outlet in Rajouri in New Delhi) Breaking Bulk Purchases into Smaller Lots A producer would usually need to make goods in large production runs, in order to make the products economically. Many retailers, especially smaller ones, would not have the financial resources or storage to purchase these large volumes. Instead, a wholesaler will purchase these goods from the producer and store and sell them in smaller lots. Specialization
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Retail Management Wholesalers generally specialise in just one or two product areas. There are some, however, that sell a wide range of goods and aim to supply all requirements to small general stores and even to some specialist stores. These wholesalers are attractive to retailers who prefer not to buy their goods from multiple locations. Large Retailers Large retailers will often purchase directly from producers but they may also top up their stocks using wholesalers. Other retailers – the very largest – have virtually no trading relationship with wholesalers, apart from those covering specialist product groups or low volume imports.
Shipper
Shipping Modes The supply chain will use a variety of different shipping modes in order to move goods through the supply chain. Although trucks (lorries or rigs) are the main method used, other methods include sea- and air-freight. All loads must be secured, often with the use of pallets, slip sheets and pallet shrouds in order to achieve this. Shipping Capacity of Supply Chain Partners Most partners in a retail supply chain will have their own means of shipping goods. Some may carry out most of the onward (downstream) distribution - they may even collect goods from upstream locations. Others may only have sparse transport capacity or even none at all. Dedicated Shippers
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Retail Management There are some companies whose sole function is to ship goods. There are various English language names for them such as shippers, hauliers, couriers, transporters or distributors. The service they provide may just involve occasional spot deliveries for companies that have an unscheduled need or have suffered a temporary shortfall in transport capacity; or they may regularly supplement delivery capacity for given routes and/or given days. They may even provide a dedicated and exclusive service providing all shipping needs for one company or even for a complete supply chain. Although their core function may be to move goods, some shipping companies have expanded into other services such as reverse logistics, warehousing and regional consolidation (or hub distribution). Some have even branched into finishing goods. This service is useful for retailers and wholesalers who buy, and take delivery of, bulk quantities of goods without knowing the final destinations. Once these destinations are known, the shipper will apply packaging and labelling or reconfigure goods, so that they are appropriate for each destination.
Retailer
Retailers purchase goods from a variety of sources. Smaller general stores will typically buy from a local wholesaler. Larger outlets will often buy fast selling goods directly from producers but still purchase slower selling and specialist lines from wholesalers and importers.
Customer
The customer (or shopper) is the person who purchases finished goods in order to use them or pass them to a consumer . They can be children or adults of any age.
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Retail Management Customer Habits ustomers tend to purchase staple goods on a regular basis. These staple goods are those that are used very often and generally comprise of food items. Staple goods vary from culture to culture and according to climate and availability. Some common staple goods are milk, bread and rice. In industrial and developed societies most goods are purchased. In other societies, although many goods are still purchased, other goods may be produced at home or through a collective arrangement locally. Non-staple goods may also be purchased on an occasional basis. Such goods may include luxury items or gifts.
The frequency with which customers use retail outlets can vary according to the society they are in, their personal circumstances and their distance from the retail outlet. The products that they buy can depend on consumer tastes, product quality/reputation and the price of goods. Where there is a choice of retail outlets selling similar goods, customers will usually make efforts to visit all or most of them in order to get the best deal. Payment Generally, goods are exchanged for cash, although some societies may barter and swap goods without money being involved or may use other goods as payment, supplemented with cash as necessary
Consumer:
The consumer is the user of goods and is at the end of the retail supply chain.
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Retail Management Consumer v Customer For those on the operational side of the retail trade, the consumer and customer will be synonymous. Those concerned with retail marketing, however, will be aware that the customer will often purchase for more than one consumer. For instance, it would be very common for a housewife to purchase goods for her immediate family and some other family members and friends.
Consumer Requirements
Consumers can be any age and goods that are consumed can vary from basic foodstuffs to luxury goods. As the supply chain is geared to the requirements of the consumer, a great deal of attention is paid by the retail trade to these requirements, whether they be lifestyles, habits, and tastes
TYPES OF RETAIL OUTLET
A specialist store or a small local store may have a very intimate relationship with its customers, with transactions being made on a face-to-face, first name basis. At the other end of the scale, goods may be retailed across the globe, with no physical contact being made at all.
• Clothing and Accessory Store
Products Clothing and accessory stores sell apparel for all members of the family, as well as luggage, leather goods, lingerie, jewellery, uniforms, and bridal gowns. Stores in this sector may sell all of the above items or concentrate on a few. Expertise Clothing and accessory stores are often staffed with knowledgeable salespersons who can help in the selection of sizes, styles, and accessories 49
Retail Management
• Department Store
Department stores sell a wide selection of merchandise with no one line predominating. These stores generally are arranged into departments with a manager heading each department. Products Departments stores may sell apparel, furniture, appliances, home furnishings, cosmetics, jewellery, paint, hardware, electronics, and sporting goods. They may also sell food and services such as optical, photography, pharmacy, insurance, travel brokerage and funerals. They are the ultimate one-stop shop. Discount Department Stores Discount department stores typically have fewer sales workers, relying more on self-service features, and have centrally located cashiers. Department stores that sell bulk items, like major appliances, usually provide delivery and installation services. Upscale department stores may offer tailoring for their clothing lines and more personal service.
• Distance Retailing
Rather than visiting a store to make a purchase, a customer may order products from a remote location. This may be done by mail, telephone, internet/email or other digital device such as interactive television and even from a refrigerator. Physical Stores v Virtual Stores
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Retail Management Retailers that practice distance retailing may also have physical stores, such as Wal-Mart. Others may not, such as Amazon and Arkay Hygiene Products All manner of products can be sold in this way, from food groceries and large items like beds, that are usually delivered by dedicated vehicles, to many smaller non-food items that tend to be delivered by a courier or by parcel mail, such as fly killers. The range of products on offer is only limited by the budget of the customer and the shipping infrastructure available in a given region.
Advantages of Distance Retailing to the Customer The customer does not need to travel to the store in order to purchase goods, saving time and travel costs. Browsing through different catalogues or on the internet or mobile phone can also save a lot of time compared with traveling from store to store.
Disadvantages of Distance Retailing to the Customer There are certain products that customers prefer to touch, feel and even try out before they purchase. An example of this is clothing. There is, however, a distinction to be made between different types of distance selling. For example, music can be sampled on the internet or some mobile phones but this cannot be done with printed catalogues. Some customers are uncomfortable purchasing goods at a distance if the seller isn't known to them. Whilst local stores will develop a word-of-mouth reputation in the community, it is harder to poll opinions for stores that are far away.
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Retail Management
• Door-to-Door Retailing
This kind of retailing is as old as retailing itself and is still very common, although less so in recent times. A door-to-door salesperson may be self-employed or employed by a company and will usually specialize in a particular product group, often household items. Although it is common for them to visit houses, they may also sell to businesses.
Area of Coverage Door-to-door salespeople can be split into two main groups. The first group are those that stay in one locality, selling to regular customers. Greengrocery or fresh meat sales are typically made by these local salespeople. They will have regular “rounds” and will try to time their visit so that they appear at a given location at the same time each week (or day or month). This way, customers may come to depend on them. The local door-to-door salesperson may also try to extend their round to take in more customers. The second group are travelling salespeople. They may procure goods in a more opportunist way, taking advantage of a bargain when it comes along, or buying goods to coincide with environmental changes or particular events in the calendar. For instance, such a salesperson may sell warm clothes at the onset of cold weather but also sell gifts at festive times. Once they have sold their goods, or reached the point where they have few customers left to sell to, they will move to another area and repeat the process. As well as buying goods to sell on, they may also sell goods that they have made themselves or that their family or
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Retail Management community have made. They also may provide services to customers, such as mending, sewing, light maintenance, knife sharpening etc. Advantages One advantage of being a door-to-door salesperson is that the overheads are relatively low. Some door-to-door salespeople will carry all of their stock on a vehicle but others may store it in their homes or a small warehouse (sometimes known as a “lock up”). They can also be flexible in the range that they can carry. This can allow them to be very up-to-date with the products that they can offer.
Disadvantages Disadvantages include the lack of security in travelling door-to-door whilst carrying a high value of stock or money (some door-to-door salespeople can take card payments, thus reducing the risk of carrying a lot of money). Another disadvantage is that where a shop’s customers come to the shop, door-to-door salespeople spend a lot of valuable time and often transport costs visiting their customers - and there is no guarantee of a sale.
• Chains
If a store is successful, this will often encourage the owner or owners to attempt to repeat the success and open a similar store elsewhere. Thus, a chain of stores is established. Where a store chain comprises a few stores, it is very common for members of an extended family to run them. 1. Non-Franchised Chain 53
Retail Management 2. Franchise Store Chain 1. Non-Franchised Chain Structure Each store in a chain (or multiple store) is called a branch. The original store, or the most important store, may double as the head office. Very large chains may have a completely separate building as their head office. The way chain stores are managed can vary from a centrally controlled operation at one extreme where virtually all decisions are made by the head office, to the other extreme where each store can be run as a mini business and simply return a profit to the centre. It is very common for chain store management arrangements to be somewhere in between these extremes, where smaller scale and local decisions are made by the branches and decisions affecting the whole chain are made by the head office. Economies of Scale As the chain grows in size and total sales volumes increase, the company managing the chain is able to purchase goods for the stores at terms that are more favourable. They can also exert more influence over the attributes of the goods they buy and sell such as the sourcing, the products' features, the packaging they come in and even the distribution and logistics involved in getting them to the stores. Other benefits also arise, such as rationalising some management tasks across the whole chain and having uniform procedures and systems common to all of the stores. They can also rationalise marketing across the chain. This not only is more efficient, it also allows marketing messages to be more potent. An example of a non-franchised chain is Wal-Mart.
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Retail Management 2. Franchise Store Chain Some companies will concentrate their resources on marketing their brand rather than developing a chain of stores. The marketing creates demand for the brand, which may be a group of unique products or may be a unique sales format. The founding company will then franchise others to open their own stores and to sell the brand. The company that establishes the franchise operation is the franchisor. The storekeeper is the franchisee.
Symbiotic Arrangement This can be a symbiotic arrangement because the franchisor has a sales outlet for its brand and the franchisee benefits from the marketing and/or partexclusivity of selling a unique brand. Exclusivity Often the franchisee is restricted to purchasing the brand exclusively from the franchisor. Franchisor Control The purchase of point of sale material and shop fixtures will also be under the direction of the franchisor in many cases, and the design of the store and the methods and procedures carried out by the staff may also be under the franchisor's instruction.. Some franchises are so valuable that the franchisor can charge money just for a license to open a franchise outlet before any trading has taken place. 55
Retail Management
•
Party and Event Retailing
This is usually a form of franchising where the retailer invites people from the locality to a common location. The event or the party will be a mix of socializing and retailing, usually themed around the products on offer. Most commonly, the retailer will be a franchisee to a wider organisation. Products Although party and event selling can involve a variety of goods, it is very common that cosmetics, small household goods, clothing and sex-aids are sold. Low Cost Party selling is common throughout the world and can be a low cost way of retailing for both the franchisor and franchisee. Samples Often the franchisor will supply samples and a small selection of goods to the franchisee so that their potential customers at the event can try the products out. Recruitment These parties can also be used to recruit new franchisees.
• Single Independent Non-Franchised Store
A single independent store may be run an individual, but is more typically run by a family. (Chanakya Sweet Shop near Hazratganj in Lucknow)
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Retail Management Decline In highly industrialized regions, these types of outlets have decreased in number, in favour of franchise operations or chains. Products and Catchment They may be general stores, catering to a limited geographical range or may sell specialised products to a wider area.
Pros and Cons The advantages of single independent stores are that they can be tailored to their customers needs and offer a more personal service. One of the main disadvantages is that the running costs may not be as favourable as with a chain or franchise. If the store is selling general goods, the costs of purchasing stock will also be higher.
•
Street Market
The tradition of selling from market stalls goes back to the early days of retailing where traders could gather in one area to sell their wares.
Location Street markets, or open-air markets, are common around the world and are particularly popular in temperate or warm climates. Regulation
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Retail Management In many countries, street trading has been increasingly regulated through history. In England, towns were given rights by the King or Queen of the day to hold a market. These charters specified the nature of the market and laid down the days when it could operate. Some towns had a permanent market while others were permitted to hold their market just one or two days in the week (or even less frequently). Many of these arrangements continue to this day. Types of Street Market Retailer Street market traders can be put into two categories, (i) those that sell goods opportunistically, taking advantages of low cost goods that come available, or environmental and other conditions that temporarily increase demand for particular products; (ii) those that regularly sell one product type to regular customers. Governance The way that street markets are operated and governed vary. The following variations are possible, including a mix of some of them: 1. No formal governance. Traders will simply share a space along a road (or an off-street area) and trade as separate businesses. This type of arrangement has little or no bureaucracy and can be very efficient for the traders. Often traders will not pay any rent for their space (or "pitch"). Many traders will keep their pitch for many years, even handing their "right" to this space from generation to generation. Although it can be advantageous to the incumbent stall holders, this can lead to a lowering of competition as new stall holders find it difficult to come onto the market. Occasionally this informal arrangement can lead to gangsterism and even violence between stall holders and with potential stall holders. It could also give rise to protection rackets and other illegal activity.
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Retail Management 2. Council Run Street markets are commonly run by local councils, who set the regulations and, where appropriate charge rental fees. The regulations can range from informal arrangements involving the allocation of street area only to very strict regulations with an enforcement regime where traders may be inspected regularly for health and safety and other legal requirements and may be restricted to selling certain types of goods. As well as renting plots of land, some councils may even rent the stalls themselves, which may be permanent fixtures on a street (or off-street area).
3. Run by a Company A company may own or rent a street (or an off-street area) and, in turn, rent small plots of land to stallholders. They may also impose regulations in a similar way that councils do. Some companies such as large retailers, may have a street market on their forecourt or other area that they own. Good street markets can attract many shoppers. A retailer may find that having a market outside their bricks and mortar store may be good for their trade. They may charge a low rent or no rent at all in order to encourage stall holders to trade on their land and to keep their prices low, thereby attracting more customers. They, may, however, restrict stall holders to selling goods that do not compete with their own products, subject to competition laws that may exist in the jurisdiction. 4. Run by a Co-operative (Co-op) The stallholders themselves may own or rent the land on which their stalls are trading. They may contribute towards the costs of maintaining or paying for the site by each paying an amount of money. The amount paid may simply be commensurate with the amount of stalls they own, or may be linked to the amount of turnover they can achieve or may be negotiated on a stallholder-by-
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Retail Management stallholder basis. It is common for street trader co-ops to have regulations that are binding on each member. Once again, these regulations may range from a few informal rules to detailed and specific rules. Many co-ops will operate a democratic system whereby they may elect a leader, or a council (or both) to run the co-op, or may even vote on every decision. {mother diary} Pros and Cons The advantages of street market retailing are that it has relatively low overheads and allows flexibility. The disadvantages are that sales can be adversely affected in inclement weather and the stall (usually) needs to be set up each day, which can take a considerable amount of time and effort. There also needs to be an area for goods to be stored when the stall is not being used. •
Supermarket
A supermarket is defined in the Webster Dictionary as "a large self-service grocery store selling groceries and dairy products and household goods". It was also defined in a court ruling at the State of New York Court of Appeals in 1971 as "a retail market that sells foods, convenience goods, and household merchandise arranged in open mass display." History Neither of these definitions gives information on what size a store would be before it could be termed a "Supermarket". In addition the word "supermarket" means different things to different countries around the world, as global supermarket chains have discovered recently. However, it is certainly a fact that supermarkets began in the U.S. From the beginnings of the retail trade there has been a trend for general stores to increase in size and for specialist stores to combine (so called "combination stores"). It is believed that store chains have existed from as early as 2,200 years 60
Retail Management ago; the first self-service store was first introduced in 1916 in the U.S. So, all the elements of the supermarket were in place. In the absence of a universal definition for the supermarket there can be no authoritative reference point in history that marks the shift from small general stores to supermarkets. There are, however, important milestones, such as the growth of The Great Atlantic & Pacific Tea Company, which, in 1910 opened the Economy Store format, selling basic dry groceries such as tea, coffee and tinned foods. These items were sold in relatively high volume at low margin, another hallmark of the supermarket. They also only traded in ready cash and generally did not allow credit nor delivery to customers. This "cash and carry" concept grew rapidly over the coming years. After the introduction of self-service in 1916, and despite the recession that followed in the 1920's, many stores continued to consolidate and increase their sales volumes, thus improving their efficiency and buying power. The next two milestone were the introduction of faster means of transport, especially the motor vehicle, and the rapid take-up of home refrigerators. These two elements allowed more affluent consumers to require larger quantities of food in one shopping trip. As this one-stop-shop tendency spread throughout the U.S., shopkeeper and store chains became increasingly aware of the critical need to attract these customers to their stores. This resulted in the lower prices, but also drove these companies to try new ideas such as the Drive-In store. As these stores were specifically for car users, they did not need to be situated in the expensive centre of town but instead were typically found in lower rent neighbourhoods on the outskirts. Although the drive-in concept was short-lived, the idea of accommodating cars may have been the final piece of the jigsaw. By combining car-parking, selfservice, low prices with high volumes, the supermarket concept began in earnest in the 1930's in the U.S..All these elements were brought together in the mind of
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Retail Management Michael J. Cullen who suggested to his employers, Mutual Grocery and Kroger Stores, that they open a very large store on the outskirts of town selling national brands at low margin. His idea wasn't taken up by his bosses, so he decided to open his own store in a vacant garage in Jamaica Avenue, Long Island, Queens in New York. Its sheer size prompted customers to call it a "warehouse grocery store". To make this a true one-stop shop, Cullen had concessionaires retailing those goods that the store wouldn't ordinarily sell. This store, and the chain that followed, was enormously successful and was soon followed by many others. These stores not only attracted affluent car owners. The U.S. was in a recession and the low prices on offer attracted many poorer customers who would travel the extra distance in order to benefit from the savings they made on basic goods and the chance to buy items they otherwise could not afford.
•
Van Retailing
This is a cross between door-to-door sales and store sales. The retailer will typically keep 1 day’s stock in their van and visit an area where they will service regular customers. They may occasionally visit an area that they do not usually go to in order to attract new customers. Van sales are common in rural areas and in less developed economies.
Static v Roving There are two types of van sales. One is where the van is parked in a common area and is visited by customers; ices and snacks are often sold this way. The other type of van sales is, in effect, the same as door-to-door selling. This is where the retailer uses the van to travel from house to house, selling to customers on their doorstep and using the van as a means to hold and carry stock. Products
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Retail Management The kinds of products sold from vans tend to be everyday items such as cleaning products. Snack foods and ices may also be sold from vans. Vans specifically designed to work at a very low temperature may specialize in frozen food sales. Regulation In some states, the area that van sales can cover and the products that can be sold may be subject to regulations and may require licensing. "Van Wars" Occasionally there are disputes between van sales competitors especially when they are competing in the same area. •
Warehouse Club
Warehouse club stores and super centers sell a mix of products (and services) in fixed quantities at low prices.
Products These stores typically include an assortment of food items, often sold in bulk, along with an array of household and automotive goods, clothing, and services that may vary over time. Membership These stores often require that customers purchase a membership to the store that entitles them to shop there. They offer minimum service and usually require the customer to take home their purchases.
Retail outlets are also classified as follows:
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Retail Management Conceptual classification of a business unit provides the marketers with strategic guidelines, useful in the design of retailing strategy. Besides, retail businesses are extremely diverse and there are quite a few types of retail units. Therefore, retail units are classified on multiple of ownership, geographical locations, kind of customer interaction level of services provided etc.
I. Retailers Classified on the Basis of Ownership
One of the first decisions that the retailer has to make as a business owner is how the company should be structured. This decision is likely to have long-term implications, so it is important to consult with an accountant and attorney to help one select preferred ownership structure. There are four basic legal forms of ownership for retailers: 1. Sole proprietorship: The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has the day-to-day responsibility for running the business. 2. Partnership: -
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Retail Management A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. In a partnership, two or more people share ownership of a single business. 3. Joint venture: A joint venture is not well defined in the law. Unless incorporated or established as a firm as evidenced by a deed, joint ventures may be taxed like association of persons, sometimes at maximum marginal rates. It acts like a general partnership, but is clearly for a limited period of time or a single project. 4. Limited liability Company (public and private):The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. II. Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure. Operational structure defines the key strategic decision of retail entity, whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs. Retail firms can be classified into five heads on the basis of their respective operational structures: 1. Independent retail unit: The total number of retailers in India is estimated to be over 5 million in 2003. About 78% of these are small family businesses utilizing only household labour. An independent retailer owns one retail unit. 2. Retail Chain: -
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Retail Management A chain retailer operates multiple outlets (store units) under common ownership; it usually engages in some level of centralized (or coordinated) purchasing and decision making. 3. Franchising: Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer, a wholesaler, or a service sponsor) and a retail franchisee, which allows the franchisee to conduct a given form of business under and establishments name and according to a given pattern of business. 4. Leased Department or Shop-in-shop:It refers to department in a retail store that are rented to an outside party. Usually this is done in case of department and speciality stores and also at times, in discount stores. 5. Co-operative Outlets: Co-operative outlets are generally owned and managed by co-operative societies. In this context the example of Kendriya Bhandar in India is the best suitable.
III. Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location. Retailers can locate their stores in an isolated place and attract the customers to the store on their own strength—such as a small grocery store or paan shop in a colony, which attracts the customers staying close by. Classification of retailers on the basis of location is discussed below: 1. Retailers in a free-standing location:Retailers located at a site which is not connected to other retailers depend
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Retail Management entirely on their sore’s drawing power and on the various promotional tools to attract customers. This type of location has several advantages including no competition, low rent, better visibility from the road, easy parking and lower property costs. For example, the Haldiram’s outlet on the Delhi- Jaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway. 2. Retailers in a Business-associated Location:In this case, a retailer locates his store in a place where a group o retail outlets, offering a variety of merchandise, work together to attract customers to their retail area, and also compete against each other for the same customers.
3. Retailers in Specialized Markets: Besides the above location-based classification, we also have in India-retailers who prefer specialized markets, particularly traditional independent retailers or chain stores. In India, most of the cities have specialized markets famous for a particular product category. For example, in Chennai, Godown Street is famous for clothes, Bunder treet for stationery products, Usman street for jewellery, T Nagar for ready-made garments, Govindappan naicleen street for grocery, Poo Kadia for food and vegetables. 4. Airport Retailing: For quite some time, duty-free shops and newsstands dominated the small amount of commercial space provided at airports. Lately, serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space. The key features of airport retailing are:
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Retail Management • • • • • • • Large groups of prospective shoppers ?Captive audience ?Strong sales per square foot of retail space ?Strong sales of gift and travel items ?Difficulty in replenishment ?Longer operating hours ?Duty-free shopping possible.`
CATEGORIZING RETAILERS
Categorizing retailers helps in understanding the competition and the frequent chang1\es that occur in retailing. There is no universally accepted method of classifying a retail outlet, although many categorization schemes have been proposed. Some of these include classifying on the basis of • • • • Number of outlets Margin Vs Turnover ?Location ?Size
Number of Outlets: The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. Generally, a greater number of outlets add strength to the firm because it is able to spread fixed costs, such as advertising
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Retail Management and managers’ salaries, over a greater number of stores in addition to acquiring economies of purchase. While any retailer operating more than one store can be technically classified as a chain owner, for practical purposes a chain store refers to a retail firm which has more than 11 units. In the United States, for example, chain stores account for nearly 95% of general merchandise stores. Margin V/S Turnover: Small chains can use economies of scale while tailoring merchandise to local needs. Big chains operating on a national scale can save costs by a centralized system of buying and accounting. A chain store could have either a standard stock list ensuring that the same merchandise is stocked in every retail outlet or an optional stock list giving the outlets the advantage of changing the merchandise according to customer needs in the area. Because of their size, chain stores are often channel captains of the marketing channel—captains can influence other channel partners, such as wholesalers, to carry out activities they might not otherwise engage in, such as extended payment terms and special package sizes. Location: Big stores focus on large markets where their customers live and work. They use technology to learn more about their customers and target them with point-ofsale machines interactive kiosks, and sophisticated forecasting and inventory systems. They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products. Branding is important to them. Pricing is often a key area of focus for these retailers. Big stores have much strength, including regional or national reputation, huge buying power, vast inventory and hassle-free return and exchange policies. Their prime locations, the consistency in their products and services, the fact that they are open when people can and want to shop and the clear consistent image and identity they develop and maintain challenge the abilities and resources of many small
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Retail Management retailers. Perhaps their biggest advantage is their knowledge in every aspect of their business, from inventory selection to store layout. Size Large retailers are not perfect. They have competitive weaknesses that small retailers can exploit. Most offer the same standardized assortments of products nationally. Local managers have little say in inventory selection. Often, sales staff has minimal product knowledge. Staff turnover is extremely high. Most large retailers have little connection with the community they serve. They usually do not offer special services. Larger companies are often slow to recognize and react to changes in their local markets. Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market. The niche should be developed on the basis of new or unusual product offerings, superior service and overall quality. While value is important, price may be less important. Efficient operations, including precise buying practices, are a must. Customer contact within the niche market must be characterized by ‘hightouch’ service. The key factor is innovation: stores that do not change will perish. The road to success for the independent retailer lies in doing all the things those big chain stores can not or will not do.
The successful independent retailers embrace the following principles: • • • • • • • • ?Be prepared for change. ?Move to a narrower niche market and stop competing directly with the big retailers. Learn more about customers and include best customers in a database. ?Invest appropriately in advertising and promotion. ?Charge regular prices and avoid discounting (ensure requisite mark-up). ?Buy with precision and search out speciality suppliers. ?Maintain essential inventory. ?Focus on profit instead of volume (be ready to lose an occasional sale). 70
Retail Management • • • ?Provide extraordinary service. ?Employ the best possible staff. ?Understand the significance of the Internet.
CHARACTERISTICS OF RETAILING
Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways: ? ?There is direct end-user interaction in retailing. ? ?In is the only point in the value chain to provide a platform for promotions. ? ?Sales at the retail level are generally in smaller unit sizes. ? ?Location is a critical factor in retail business. ? ?In most retail businesses services are as important as core products.
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Retail Management ? ?There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.
FUNCTIONS OF RETAILING
Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and consumers. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services.
• SORTING
Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to reduce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and
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Retail Management usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units. The above process is referred to as the sorting process. Through this process, retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are able to choose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers would have to visit several stores to complete their shopping. While all retailers offer an assortment, they specialize in types of assortment offered and the market to which the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers’ Stop targets the elite urban class, while Pantaloons is targeted at the middle class.
• BREAKING BULK
Breaking bulk is another function performed by retailing. The word retailing is derived from the French word retailler, meaning ‘to cut a piece off’. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.
• HOLDING STOCK
Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the
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Retail Management manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs.
• ADDITIONAL SERVICES
Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay foe it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.
• CHANNEL OF COMMUNICATION
Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.
• TRANSPORT AND ADVERTISING FUNCTIONS
Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the
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Retail Management other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits.
As a result of these functions, retailers are required to perform the following activities:
ACTIVITIES PERFORMED BY RETAILERS
Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. Retailers provide convenient location, stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers. The four major activities carried out by retailers are: 1. Arrange for assortment of offerings 2. Breaking quantity 75
Retail Management 3. Holding stock 4. Extending services
•
ARRANGING ASSORTMENT
An assortment is a retailer’s selection of merchandise. It includes both the depth and breadth of products carried. Retailers have to select the combination of assortments from various categories. The assortments must include substitutable items of multiple brands and price points. They should be distinguished on account of physical dimensions and attributes e.g., colour or flavour. The small retailer takes assortment decision on the basis of his experience; on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections. Retailers need to consider certain factors while devising assortment plans for their stores: profitability associated with particular merchandise mix, store image, layout and the level of compatibility between the existing merchandise. For example, FoodWorld, a leading food supermarket positioned as a one-stop shopping centre, deals in multiple product categories along with all possible variants of brands, stock keeping units, and physical attributes in order to meet the expectations of their consumers and survive in the business. Whereas, Subhiksha, a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. Their assortment plan is governed by location, size and store image of their stores.
•
BREAKING BULK
Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. Normally, retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. This entire function of the retailers adds value to the offerings
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Retail Management not only for the end customers but also for the suppliers in the value chain. Even in the earlier days of generic and commodity-based trading most of the retailers used to perform this important function in the value chain. This function receives negligible attention from the retailers now due the introduction of new product categories, such as FMCG and ready-to- wear apparel. • HOLDING STOCK
To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. Consumers normally depend on the retailers directly to replenish their stocks at home. Therefore, retailers, on periodic basis, maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand. Retailers need to maintain equilibrium between the range or variety carried and the sales which it gives rise to. Retailers have to face the negative consequences of holding unwanted levels of stock—for instance, too little stock will hamper the sales volume, whereas, too much stock will increase the retailer’s cost of operation. Generally, in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods. Some are so small that they have to stock only on the shop floor. Retailers in the organized sector, to a certain extent, are using effective software packages for maintaining adequate levels of inventory. At the same time, retailers avail of just-in-time deliveries with the help of efficient consumer response systems, which reduces the burden of maintaining high levels of stocks. • EXTENDING SERVICES
Retailing provides multiple services to immediate customers and other members of the value chain. The set of services extended by particular retailers may be part of their core product offerings or it may be ‘add on’ to their product or service. Retailers offer credit, home delivery, after-sales services and information regarding new products to their customers, thereby making the shopping experience convenient and enjoyable. At the same time, they provide stocking place, reach to the ultimate customers, and information about the concerned
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Retail Management target segment to the suppliers. For example, Time Zone, the first organized retail chain of wristwatches in India, started by leading watch manufacturers Titan, set up in all its stores, service centres with proper equipment and trained manpower. This has not only diluted the relevance of service providers in the unorganized sector but has also enhanced the confidence of the customers in the retai9l services provided by the particular retail chain, as after-sales service is considered to be an integral ingredient of the watch purchase.
CURRENT SCENARIO IN INDIA
The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26.7%. Retail is India’s largest industry after Agriculture with around 20% of the economically active population engaged in it and generating 10% of our country’s GDP. The growth of the efficient small store culture can be attributed to the 6 million Villages distributed across the length and breadth of the country. The 12 million retail outlets in India are the highest in the world, and cater to the purchase need of its poll. It is interesting to note, that the Urban Population although just 25% of
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Retail Management the total, is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. The main driver of growth in the retail sector has been the consumer, with the spending power increasing at an average of 11% per annum. The Core and the Lower middle have increased their share in the Growth. The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores), Kiosks, street vendors, weekly bazaars and high-street shops for consumer durables and luxury goods. To cater to this, each city developed its own identity and shopping cluster. For instance in Pune there is MG Road, Bangalore has Brigade Road and Commercial Street, Delhi has Connaught Place, Karol Bagh and South Extension. India will have 358 shopping malls by 2007. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs, organized parking lots and other public amenities, according to a study by fashion magazine Image. At present ( survey done on September 23, 2005), In India we have 96 malls, covering an area of 21.6 million sq ft. And by year end the count will shoot up to 158 malls. It will cover 34 million sq ft area. • • • • • • • • • Currently estimated at $205 billion to grow to $400-500 million, over the next 2-3years. Smaller cities will have about 12.8 million sq ft of mall space by 2007. ?Ludhiana to account for 2.5 million sq ft. ?Ahmedabad about 3.4 million sq ft. ?Delhi and Mumbai now have maximum number of shopping centres. ?Gurgoan saw the largest development in terms of retail outlet. ?North region has 39% of India’s retail share. ?East region has 10% of India’s retail share. West region has 33% of India’s retail share.
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Retail Management • • ?South region has 18% of India’s retail share. Government and co-operative sector is also making their steps in retailing. For example, Kendriya Bhandar, Apna Bazar, Mother Dairy, Super Bazar etc.
MAJOR RETAILER SPACE HOLDERS IN INDIA
ORGANIZATION Bata RPG Raymond Pantaloon/Big Bazaar Metro cash-n-carry Spencer LifeStyle Shoppers Stop Trent Globus Piramyd Area Sq. ft 10,00,000 6,00,000 5,42,000 5,00,000 3,00,000 2,80,000 2,50,000 2,00,000 2,00,000 1,75,000 1,50,000
SWOT ANALYSIS OF THE RETAIL MARKET IN INDIA
STRENGTH
1. Organized retailing at US$ 3.31 billion, growing at 8%. 2. 2nd largest contributor to GDP after agriculture at 20%. 3. Pattern of consumption changing along with shopping trends. 4. A Growing population will translate to move consumers. 5. Consumer spending increasing at 11% annually. 6. Almost 25 million sq. ft. retail space available. 7. Paradigm shift in shopping experience for consumers pulling in more people.
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Retail Management 8. Most of the entrants to organized retail come from 3 main categories, and have ventured into retail as their business extension. • • • Real Estate Developers Corporate Houses Manufacturers/Exporters
WEAKNESSES
1. Shortage of quality retail spaces at affordable rates. 2. Government regulations on development of real estate (Urban Land Ceiling Act) 3. Need to provide Value for Money-squeezing margins 4. Lack of industry status. 5. Retail revolution restricted to 250 million people due to monolithic urban-rural divide. 6. Footfalls not a clear indicator of sales as actual consumers lower in number. 7. Lack of huge investments for expansion.
OPPORTUNITIES
1. Increasing urban population-more participants in retail revolution. 2. Increase in consuming middle class population. 3. Social factors like dual household income has enhanced spending power. 4. Spending power is moving towards lifestyle products and esteem enhancing products. 5. Availability of old industrial lands-prime real estate locked in sick industrial units.
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Retail Management 6. Average grocery spends at 42% of monthly spends-presents a huge opportunity. 7. Increase in use of credit cards.
THREATS
1. Rising lease/rental costs affecting project viability 2. FDI restrictions in the retail sector 3. Poor monsoons and low GDP Growth could affect consumer spending drastically. 4. Archaic labour laws are a hindrance to providing 24/7 shopping experience 5. Personalized service offered by Mom-&-Pop stores. 6. Unavailability of qualified personnel to support exponential growth in retail. 7. Differentiate taxation laws hindering expansion.
RETAIL VIABILITY As per the CII McKinsey report, based on a GDP growth rate of 6-7% per annum, by 2010 the retail sector is expected to be US $ 300 Billion industry. Some of the major factors hindering the growth of this sector are as follows: I. ?The non-industry structure and status II. The lack of adequate infrastructure III. FDI restrictions in this sector IV. The huge investments required in expanding their markets, V. Problems associated with working Capital funding from lending Institutions.
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Retail Management
BIG BAZAAR: THE INDIAN WAL-MART
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Retail Management
Pantaloon Retail (India) Limited is today recognized as one of the pioneers in the business of organized retailing in the country with a turnover of over RS 400 crores in the financial year ending June 2003. The company is headquartered in Mumbai with zonal offices at Kolkata, Bangalore and Gurgaon (Delhi). It has 4 kinds of stores; 14 Pantaloon Family Stores, 7 Big Bazaar discount hypermarkets, 6 Food Bazaar Stores with over 6.5 lakh sq ft retail space across Kolkata, Mumbai, Thane Pune, Hyderabad, Bangalore, Bagpur, Ahmedabad, Kanpur, Chennai and Gurgaon (Delhi). Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr Kishore Biyani. It has been one of the pioneers in organized retailing in India. It began its retailing operations in India way back in 1987. Currently, it manufactures and sells ready-made garments through its own retail outlets and two discounting stores. The company plans to diversify into the business of discounting in a big way, which is targeted at the growing middle class segment. It has one of India’s largest retail chain with 17 retail outlets and two discounting stores branded as Big Bazaars across the country at an estimated retail space of 4,01,300 sq. ft. The company plans to double its retail space in the next couple of years. 84
Retail Management Pantaloon has come up with an excellent revenue model, focusing on ‘value for money’ segment. Pantaloon plans to target the upper middle and the middle class segment, which forms the large chunk of Indian population. This segment is very price conscious and always looks out for value for money. Pantaloon successfully launched its discount store chain, which targets the large and growing upper-middle and middle class of Indian society. This is totally in contrast to the other organized retail players, which focus on high net-worth of individuals. Big Bazaar has strong own brand names in its portfolio across product categories. The brands include Pantaloon, John Miller and Bare. Higher percentage of ‘own brand’ sales improves margins, thus reducing the breakeven level of sales. Big Bazaar has diversified from apparels to household items in its discount stores. This has enabled them to enlarge their basket of offerings.
DRIVERS OF CHANGE IN RETAILING
• • Changing demographics and industry structure Expanding computer technology
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Retail Management • • • • • Emphasis on lower costs and prices Emphasis on convenience and service Focus on productivity Added experimentation Continuing growth of non-store retailing.
In today’s competitive environment retailers have redefined their role in general, and in the value chain in particular. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. As a result, they have a strong say in the success of the product or service launched by a business firm. A product manager of household appliances claimed, ‘Marketers have to sell a new product several times, first within the company, then to the retailer and finally to the user of the product.’ It is a well-established fact that manufacturers need to sell their products through retail formats that are compatible with their business strategy, brand image, and market profile in order to ensure a competitive edge. The role of retailers in the present competitive environment has gained attention from manufacturers because external parties such as market intermediaries and supplying partners are becoming increasingly powerful. It is necessary for marketers of consumer products to identify the need and motivations of their partners in the marketing channel. This is especially true in the case or new products. The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries. Retailers want of optimize sales within the limited shelf space, governed by their individual sales philosophy. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. Retailers have to make optimum selection of goods to be sold given the following major concerns:
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Retail Management ? ?Selling space available is relatively fixed and must return maximum profits. If such space is occupied by merchandise that is not moving, it will not result in profit. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. ? ?There is always the risk of non-performance in terms of quality, supplies etc., which in turn harms the image of the retail outlet. Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology. Retail formats and companies that were unknown three decades ago are now major forces in the economy. Therefore, the challenges for retail managers the world over are increasing---they must take decisions ranging from setting the price of a bag of rice to setting up multimillion dollar stores in malls. Selecting target markets, determining what merchandise and services to offer, negotiating with suppliers, training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. The world over retail business is dominated by smaller family run chain stores and regionally targeted stores but gradually more and more markets in the western world are being taken over by billion dollar multinational conglomerates, such as Wal-Mart, Sears, McDonald’s, Marks and Spencer. The larger retailers have managed to set up huge supply/distribution chains, inventory management systems, financing pacts and wide-scale marketing plans. In the backdrop of globalization, liberalization and highly aware customers, a retailer is required to make a conscious effort to position himself distinctively to face the competition. This is determined to a great extent by the retail mix strategy followed by a company to sell its products.
FACTS ABOUT THE RETAIL INDUSTRY
GLOBAL RETAIL-INDUSTRY-RELATED FACTS ? Worldwide retail sales are estimated at US $7 trillion. 87
Retail Management ? ?The top 200 largest retailers account for 30% of the worldwide demand. ? ?The money spent on household consumption worldwide increased by 68% between 1980 and 1998. ? Retail sales are generally driven by people’s ability (disposable income) and willingness ( consumer confidence ) to buy. ? ?The 1998 UNDP Human Development Report points to the fact that global expenditures on advertising are ( including in developing countries ) increasing faster than the world economy, suggesting that the sector is becoming one of the major players in the development process.
REGIONAL FACTS ? Retail industry in India has emerged as one of the most dynamic and fast paced industries with several players entering the market. The Indian retail sector has been dominated by small independent players such as traditional, neighborhood grocery stores. ? In the 1990s, organized, multi-outlet retail gained momentum, which has since accelerated. ? The retail sector in India is on a veritable take-off stage and organized retailing, which currently accounts for about $6 billion, is expected to touch $17 billion by 2010, according to a recently released study by the Associated Chambers of Commerce & Industry (ASSOCHAM). ? In 2006 itself, the organized retail industry is expected to grow to $8 billion. Overall, the sector is likely to grow into a $200-280 billion enterprise by 2010. ? India's retail industry generates 10% of the country's gross domestic product (GDP. Multi-brand stores, malls, and franchises are currently estimated to be only 3% of the total retailing business in India.
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Retail Management ? Organized retail, however, is now poised for an exponential growth. It's expected to log 25-30% growth per annum until at least 2010.
Growth in retail outlets (millions) Year 1978 Urban 0.58 Rural 1.76 Total 2.35
1984 1990
0.75 0.94
2.02 2.42
2.77 3.36
1996
1.80
3.33
5.13
Source: indiainfoline
Composition of urban outlets Retail Outlet Composition
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Retail Management Grocers Cosmetic stores Chemist Food stores General stores Tobacco, pan stores others 34.7% 4.0% 6.3% 6.6% 14.4% 17.0% 17.0%
Source: indiainfoline
Composition of rural outlets Retail Outlet Grocers General stores Chemists Others Composition 55.6% 13.5% 3.3% 27.6%
Source: Indiainfoline
RETAIL CUSTOMER BEHAVIOUR
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Retail Management Consumer buying behaviour refers to the buying behaviour of the ultimate consumer. Consumer behaviour is the study of how consumers make decisions to use their respective resources such as time, money and effort for buying, using and disposing goods and services. The behaviour of humans as consumers is complex. Marketers’ understanding of the drivers of consumers’ buying behaviour will help them to serve their customers effectively and efficiently and attract new customers. In the retailing context marketers are required to understand customers’ shopping behaviour, which includes decision variables regarding, among other things, brand selection, shopping timing and choice of retail format and store. Consumers’ shopping behaviour can be understood by analyzing the factors that affect behaviour. These factors could be demographic, psychological, environmental or related to the lifestyle of the customer. It is equally important for the retailer to identify the various stages in the consumer decision-making process and the major influences at each stage. This would make possible an effective retail marketing strategy.
WHY DO PEOPLE SHOP?
It has been suggested that consumer shopping activities are influenced by personal and social motives. Consumers’ motives are important and positively related to their pleasure and satisfaction while shopping in terms of retail choices. a) Personal Motives • Role playing—shopping activities are learned behaviours and are expected or accepted as part of one’s position or role, such as mother or housewife. • Diversion—shopping may be motivated not by the expected utility of consuming, by the utility of their buying process itself. Thus, emotional states or moods may explain why or when someone goes shopping.
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Retail Management • Learning about new trends—shopping provides consumers with information about trends and movements and product symbols reflecting attitudes and lifestyle. • • Physical activity—it involves considerable amount of exercise. Sensory stimulation—shopping can provide sensory benefits such as looking at and handling merchandise, listening to the sounds and smelling scents.
b) Social Motives ? ?Social experience outside home—shopping can provide opportunities for seeking new acquaintances, encounters with friends or just ‘people watching’. ? ?Communication with other similar interests—it provides opportunity for interactions with other customers or sales people. ? ?Peer group attraction—certain stores provide a meeting place where members of peer group may gather. ? ?Status and authority—shopping may provide an opportunity to attain status and power by being waited. ? ?Pleasure Bargaining—shopping may offer the enjoyment of gaining a lower price through bargaining comparison shopping or visiting special sales.
Having understood why people shop it is important to analyze the factors that affect the consumers’ decision making process regarding what, when and from where to shop.
FACTORS AFFECTING CONSUMER DECISION-MAKING
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Retail Management A consumer’s purchase decision tends to be affected by the following four factors: 1. Demographic 2. Psychological 3. Environmental 4. LifeStyle DEMOGRAPHIC FACTORS Demographic factors are unique to a particular person. They are objective, quantifiable and easily identifiable population data. It also involves identification of who is responsible for the decision-making or buying and who is the ultimate consumer. The following points come under demographic factors: • • • • • • Gender Age Occupation Education Family size Income
PSYCHOLOGICAL FACTORS Psychological factors refer to the intrinsic or inner aspects of the individual. An understanding of consumers’ psychology guides the marketers’ segmentation strategy. The following interpret psychological factors: • • • • • Intuitive Perception Learning Attitude Personality
ENVIRONMENTAL FACTORS
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Retail Management Environmental factors cover all the physical and social characteristics of a consumer’s external world, including physical objects, spatial relationships, the social factors, co-customers, reference groups, social class. The environmental factors influence consumers’ wants, learning, motives, which in turn influence effective and cognitive responses and among other things the shopping behaviour of the individual. • • Physical Environment Social Environment—culture, social class
LIFESTYLE Lifestyle refers to an individual’s mode of living as identified by his or her activities, interests and opinions. Lifestyle variables have been measured by identifying a consumer’s day-to-day activities and interests. Lifestyle is considered to be highly correlated with consumer’s values and personality. An individual’s lifestyle is influenced by, among other things, the social group he belongs to and his occupation. For example, double-income-no-kids (DINKS) families in metros shop very regularly at the super malls because of the limited time at their disposal and they also look for entertainment while shopping on weekends. At the same time, they are higher spenders than, for e.g., singleincome families. • • Activities and interests Nature of occupation
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Retail Management A study by imagesfashion.com highlights that Indian working women have to balance their wardrobe collection based on requirements of different occasions related to professional workplace or family gathering.
Dress working women prefer for different occasions Occasions In Office At Home To Party While Shopping During Festivals Family Occasions While Travelling Western wear 66.7 77.8 69.7 85.9 3.1 17.2 89.9 Ethnic wear 31.3 20.2 30.3 11.1 93.9 80.8 10.1 Total 100 100 100 100 100 100 100
Source: imagesfashion.com Men-The Major Decision-Maker In India consumption-related family decision-making in all areas—ranging from which cars to buy to what cloth manufacturers to patronize—is dictated by men when it comes to the most upscale market segment in India.
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WHO DECIDES? Decision Buying a house Child’s marriage Own marriage Child’s education Taking a loan Fixing monthly Budget Buying entertainment Durables, such as TVs Buying durables such as washing machines Deciding on holiday destinations 23.6% 6.1% 28.4% 31.8% 4.5% 5.6% 19.3% 20.6% 21.4% 10.7% 8.2% 33.3% 33.4% 26.2% 26.7% 8.2% 1.6% 1% Self 25% 7.7% 20.4% 15.1% 31.4% 24.2% Spous e 5.8% 5.9% 2.5% 6.6% 5% 10.3% Joint 20.8% 21.8% 6.2% 34% 24.3% 33.3% Family 30.1% 18.7% 22.4% 12.5% 18.1% 18.5% Elder s 14% 11.5% 29.7% 5.6% 9.2% 11.2% Children 0.4% 4% 0.9% 4.6% 0.6% 0.6%
CONSUMERS’ IMAGE OF RETAIL STORES
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Retail Management A consumer’s image of a store is the summation of his attitudes towards various aspects of that store. Retail marketers have provided considerable importance to consumers’ attitude and images in store selection and rejection. Every retail store possesses an individuality that differentiates it from its competitors. A retailer must devise a strategy to communicate its individuality or personality across to its target segments to build their confidence in its merchandise and services. Consumer decision-making is a process of matching self-imaged with the image of relevant retail store to meet their specific needs. It is argued that where there is some degree of congruity of individual’s self-image and his image of a store or brand, there is a strong possibility of positive behaviour towards that particular store or shopping centre. The measurement of consumers’ images of the store and measurement of consumers’ self-images aid retailers in segmenting the consumer population into groups by demographic characteristics or patronage practices based on differences in the image of the retail store or shopping centre.
RETAIL IMAGE DIMENSION
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Retail Management To measure the image of a retail store or shopping centre, it is essential to identify and aggregate the relevant consumer attitudes. Lot of work on factors influencing consumers’ attitudes towards sores in terms of shopping practices and in terms of store characteristics has been done in the West but it is an emerging field in the developing countries. The most comprehensive presentation is Fisk’s ‘conceptual model’ in which he summarizes store qualities as cognitive dimension. These dimensions can be used to identify relevant attitudes and assist in the development of measurement instruments for a particular retail store. These dimensions do not constitute an exhaustive list of retail store characteristics for every tore to measure the store image. One has to revise the list in respect of the product category they are in the retail format they have adopted and the competition they are facing along with characteristics of their target segment.
Dimension Determinants
1. Locational convenience o Access route o Traffic barrier o Travelling time o Parking availability 2. Merchandise suitability • • • • • Number of brands stocked Quality of line Breadth of assortment Depth of assortment Number of outstanding departments in the store.
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Retail Management 3. Value for price • • • • Price of a particular item in a particular store. Price of same item in another store Price of same item in a substitute store Trading stamps and discounts • • • • • • • 5. Congeniality • • • • • • • • • Store layout Store décor Merchandise displays Class of customers Store traffic and congestion 6. Post-transaction satisfaction Satisfaction with good in use Satisfaction with returns and adjustments Satisfaction with price paid Satisfaction with accessibility to store Courtesy of sales clerks Helpfulness of sales clerks Reliability and usefulness of advertising Billing procedures Adequacy of credit arrangements Delivery promptness and care Eating facilities
4. Sales effort and store services
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SAMPLE OF A CUSTOMER PROFILE AND ANALYSIS
Customer research helps a retailer in defining the customer segment he can and should serve and how he can serve them more effectively and profitably. A useful customer research would like to find answers to the following questions. ? ?When do customers like to shop? ? ?How do customers like to pay? ? What quality of merchandise do customers usually prefer? ? ?What type of store has the maximum appeal for my customers? ? ?How do customers handle servicing of the mechanical products purchased by them? ? Who does most of the buying in the homes of my customers? ? ?What is the income level of my average customer? ? ?What is the general attitude of my customer towards his community? ? ?How does my customer react to new and different merchandise or promotional activities? ? What major changes has my customer made in the last two years? Based on the above customer profile, retailers will have a good idea of how to serve the needs of the target market. This would also enable the retailer to suitably tailor the advertising to appeal to the target market. Advertising in various local publications could then be a good way to reach this segment. Depending on the product or service, the customer profile study should include information relevant to the target market. Many companies seek out information on a potential user’s lifestyle, loyalty and spending habits. Businesses that advertise heavily want to know the media habits of potential customers as well. All the information that will help the retailer to promote and sell his product better should be included in the customer profile study. An understanding of consumer behaviour is important in order to formulate and Implement effective retail marketing strategies. Consumer behaviour in turn is affected by various factors specific to the consumer and the external
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Retail Management environment. These factors could be classified as intrinsic and extrinsic; the former deals with motives, perceptions and attitudes of the consumers and the latter deals with influences such as family, social class, culture and economic environment. Marketers usually identify niches by dividing a segment into sub-segments. For example, the retailer may divide the segment of working women into tow subsegments, those with children and those without children.
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THE 5 P’S OF RETAIL MARKETING
1. PROCESS:SEGMENTING, TARGETING AND POSITIONING Market segmentation is the process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants. Each of these smaller groups possesses somewhat homogeneous characteristics. As in case of marketers in other businesses, marketers in the business of retiling may also seek the benefits of market segmentation depending on his unique market and business context. A retailer may divide women customers into two segments, working women and housewife, if it finds that these two groups have different sets of needs. Segmenting is thus an aggregating process—clustering people with similar needs into a market segment. A segment is a relatively homogeneous group and hence responds to a marketing mix in a similar way. Different groups or segments require different promotional strategies and marketing mixes because they have different wants and needs. A niche is a more narrowly defined group seeking a distinctive mix of benefits. Retail marketers are required to recognize the three stages of market segmentation: segmenting, targeting and positioning. According to this approach, the segmentation process begins with the aggregation of customers into groups to maximize homogeneity within and heterogeneity between segments. Once the market segments are identified, detailed profiles of customers in each segment should be developed. Such profiles would include demographic information on age, income level, education etc., on psychographic variables such as motives, attitudes, perceptions, values and beliers, which help to understand customers’ lifestyle and behavioural information such as customers’ shopping and consumption habits including product usage, frequency of purchase. Customer profiles help the retailers in understanding the behaviour of target markets.
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Stages in marketing segmentation The retailers should also be constantly looking for the emergence of new segments and search new dimensions on which the markets can be segmented. After the markets are segmented and profiled, the retailers have to decide which segments to target and focus on and how many segments to target. The retailers have to evaluate the attractiveness of each segment by estimating its size, rate of growth etc. Before selecting the target segments it should also ensure that needs of the target segments match with retailer’s business model—its product range, promotional programmed. After the target segments are identified and chosen, the retailer has to develop it positioning strategy. For effective positioning, a detailed understanding of the needs of the target segment is necessary. Market research may be carried out to get such an understanding. Finally, an appropriate marketing strategy has to be developed to create positive perceptions in a customer’s mind and achieve the desired market positioning. Market segmentation helps the retailer in understanding customer requirements and in developing an appropriate marketing mix. It helps the retailer in merchandising decision—deciding what to stock and in what quantities. Understanding requirements of target segments also helps in developing an effective promotional programme
Segmentation 1. Choose variable for segmenting market 2. State a profile of segment 3. Verify prospective segment
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Retail Management Targeting 1. Decide on targeting 2. Identify which segments will be targeted 3. How many segments should be targeted? Positioning 1. Understanding the target segment 2. Place offering in the mind of the target segment 3. Evolve marketing mix
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Retail Management 2. PLACE:RETAIL LOCATION STRATEGY
Location is the most important ingredient for any business that relies on customers. It’s also one of the most difficult to plan for completely. Location decisions can be complex, costs can be quite high, there is often little flexibility once a location has been chosen and the attributes of location have a strong impact on a retailer’s overall strategy. In India, most retailers prefer to own the property rather than avail of the desired property through lease or rental. This makes the location decision even more critical. Choosing the wrong site can lead poor results and in some cases insolvency and closure. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. Location is a major cost factor because it i. ii. iii. ?Involves large capital investment ?Affects transportation costs Affects human resources cost, e.g., salaries
Location is a major revenue factor because it i. ii. ?Affects the amount of customer traffic Affects the volume of business
The traditional inclination of Indian retailers to own property further increases capital investment and this along with the penchant of Indian retailers to continue their business at the same location makes the location decision even more important. The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. ‘Location’ is a broader concept, which denotes the store and its trading area from where a majority of its customers
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Retail Management originate, while a site refers to the specific building or part of the building where a store is located. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising, operations and customer service characteristics. For example, designers men’s sore located in an up market shopping centre or a mall near posh residential colonies, housed in an attractive building with adequate parking facilities. LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision, basing on three aspects: 1. Selection of a city 2. Selection of an area or type of location within a city 3. Identification of a specific site The factors which influence these decisions are discussed below:
Selection of a City
The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business: • ?Size of the city’s trading area:
A city’s trading area is the geographic region from which customers come to the city for shopping. A city’s trading area would comprise its suburbs as well as neighbouring cities and towns. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns.
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Retail Management • ?Population of population growth in the trading area:
The larger the population of the trading area, the greater the potential of the city as a shopping location. A high growth n population in the trading area can also increase the retail potential. • Total purchasing power and its distribution:
The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area. Cities with a large population of affluent and upper middle-class customers can be an attractive location for stores selling high-priced products such as designer men’s wear. The fast growth in purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India. • ?Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities Moradabad has become an important retail location for brassware products whip Mysore is famous for silk saris. • ?Number, size and quality of competition:
The retailer also considers the number, size and quality of competition before selecting a city. • ?Development cost:
The cost of land, rental value and other related cost.
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Selection of an Area or Type of Location within a City
In the selection of a particular area or type of location within a city, evaluation of the following factors is required.
? ?Customer attraction power of a shopping district or a particular store: Major shopping centre like Chandni Chowk in Delhi, Colaba in Mumbai and Commercial Street in Bangalore attracts customers from far off; while small shopping centre located in colonies attract customers from immediate neighbourhood. ? Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores, number of stores in the area, etc. before selecting the area. ? ?Availability of access routes: The area or shopping centre should provide easy access routes. There should not be traffic jams and congestion MG Road inBangalore provides easy access from different t parts of the city and hence has become popular. ? Nature of zoning regulations: The retailer should also consider the zoning regulations in the city. ? Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location.
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Selection of a Specific Site
The choice of a specific site is particularly important. In central and secondary shopping centre, non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. The large stores in turn depend on attracting customers from the existing flow of traffic. Where sales depend on nearby settlements, selecting the trading area is even more important than picking the specific site.
TYPES OF RETAIL LOCATION
A retailer has to choose among alternate types of retail locations available. It may locate in an isolated place and pull the customer to the store on its own strength, such as asmall grocery store or paan shop in a colony which attracts the customers staying close by. Or, it may locate in a business district where ther3 are a large number of retail establishments. If it decides to locate its store in a business district, it may have a choice ranging for, the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. The various options available to a retailer in India are shown below: Free-standing Location Where there are no other retail outlets in the vicinity of the store and therefore, thestore depends on its own pulling power and promotion to attract customers. This type oflocation has several advantages including no competition, low rent, and often better visibilityfrom the road, easy parking and lower property costs. Neighbourhood Stores Neighbourhood stores are located in residential neighbourhoods and serve a small locality. They sell convenience products like groceries. Now, even the large organized sector stores, which pull customers from across the city, are also coming up in suburbs or away from major markets as free-standing locations. For 109
Retail Management example, Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. Highway Stores Highway sores are located along highways or at the intersections of two highways and attract customers passing through the highways. Business-associated Location These are locations where a group of retail outlets offering a variety of merchandise work together to attract customers to their retail area, but also compete against each other for the same customers. This type of location can be further classified as: Unplanned Business Districts/Centres: An unplanned business district is a type of retail location where two or more retail stores locate together on individual considerations rather than on the basis of any long-range collective planning. Thus, we may find four to five shoe stores, three to four medical stores in a cluster but no grocery store. An unplanned district generally provides certain advantages like availability of a variety of goods, services and prices; access to public transport; nearness to commercial and social facilities; and pedestrian traffic. ?Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores, designed and operated as a unit, based on balanced tenancy and surrounded by parking facilities. Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres often they are anchored by two or more major department store, have enclosed malls, serve a large trading area, and have high rents.
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Retail Management They attract customers from across the city and suburbs. Major regional shopping centres or malls in India include Crossroads in Mumbai, Ansal Plaza in Delhi, Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon.
SITE SELECTION ANALYSIS
With the advent of new retail formats in India such as planned shopping centes and malls, emergence of free-standing department stores, hypermarkets, etc., and further development of traditional business districts and other unplanned shopping locations, a retailer is presented with a wider choice of locations. Consideration of all the options keeping in view the product mix, customer profile and overall business model presents an enormous challenge. A retailer has to consider the following factors while selecting a site: ? Kind of products sold ? Cost factor ? Competitor’s location ? Ease of traffic flow and accessibility ? Parking and major thoroughfares ? Market trends ? Visibility Kind of Products Sold For stores dealing in convenience goods, the quantity of traffic is most important. The corner of an intersection, which offers two distinct traffic streams and a large window display area is usually a better site than the middle of a block. Convenience goods are often purchased on impulse from easily accessible stores. For stores dealing in shopping goods, the quality of the traffic is more important. The emergence of several apparel factory outlets within a short stretch
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Retail Management on the Delhi-Jaipur highway, at Mahipalpur market in Delhi, is driven by this factor. Cost Factor in Location Decision Location decision on cost considerations alone is risky. Space cost is a combination of rent or mortgage payment, utilities, leasehold improvements, general decoration, security, insurance and all related costs having a place to conduct business operations. Traditionally, the retail community placed great importance on owning the place since this was considered prestigious in the business community. However, there are many periodic retail markets in Indian which operate on particular days of the week. The retailers operating in these periodic markets keep shifting from place to place and do not own any property; instead they pay a small rental for their set-up in each market. This supports their model of selling goods at very low margins. Competitor’s Location The type and number of competitors is another important factor. The presence of major retail centres, industrial parks, franchisee chains and department stores should be noted. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. If one is not able to offer better quality and competitively priced products, one might reconsider that particular location. An excellent location may be next or close to parallel or complementary businesses that will help to attract customers. Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others. Consider the nature of the business you are planning to open and your potential customers. Retailers selling convenience goods must attract business from the existing flow of traffic. Studying the flow of traffic, noting one-way streets, street widths and parking lots, is hence important.
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Retail Management The following factors have to be considered: parking availability, distance from residential areas or other business areas, traffic congestion, side of street, width of street, part of the block and neighbours. Evaluate how accessible the site is for walk-in or drive-by traffic as well as the amount of pedestrian traffic and automobile traffic that goes by the proposed location.
Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. When evaluating the parking that exists at a retail site, there are two considerations: parking capacity (the number of cars that can be parked), and parking configuration (the way the parking lot is laid out, the direction of the travel lanes and spaces, landscaping, etc.). There are several ratios that are generally used to determine the adequacy of a parking lot. While different ratios exist for different types of retailers or service providers, the ideal ratio for food stores is in the magnitude of 7-8 cars per 1,000 square feet of food store. Market Trends Evaluate the community from a broad, futuristic perspective. Local newspapers are a good source of information. Discussions with business owners and officials in the area can also help. Make use of information available through the Chamber of commerce. Visibility Visibility has a varied impact on a store’s sales potential. It is important when a shopper is trying to find the sore for the first or second time. Once the shopper has become a regular customer, visibility no longer matters. But consider this
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Retail Management fact: one in five families’ moves every year, which means that some part of a community’s population may be ‘shopping’ in a new store.
NEW RETAILING—THE THANE EXPERIENCE
Thane is a city in the western Maharashtra state. It lies on the Thane river in the north Konkan coastal lowland, on the mainland of the Deccan Plateau. Located about 30 km from the central business district of Mumbai, Thane has developed as one of Mumbai’s suburbs. Industries in Thane manufacture a wide variety of products, including woolen fabrics, dyestuffs, drugs, pencils, glassware, cotton textiles and handloomed fabrics. Major rail lines and a national highway link Thane with Mumbai and other cities and towns. The nearest airport is in Mumbai. According to the 1991 Census, the population of the district was 52.49 lakhs. During 1981 to 1991, this population increased by 56.59%. This increase in population was the highest in the State for this period. According to the 1991 Population Census, the total working population in the district was 1,961,704 persons, which was 37.37% of the total population of the district. Out of the total workforce, 30.75% were engaged in agriculture and allied activities, 1.19% in manufacturing service and cottage industries and remaining 30.69% in other activities. Women constituted 22.89% of the workforce in the district. Infrastructural facilities are the main source of industrial development in the district. Thane district is ranked third in the list of industrially developed districts in the state. More than 50% of the economic and social development of the district is on account of its progress in industrialization. The MIDC has developed 10 industrial estates in the district. The city is experiencing a growth in many things. Thane has emerged as one of the major shopping destinations. It is experiencing a large-scale development of 114
Retail Management shopping malls and multiplex theatres. Recently, leading brands across product categories established their outlets in Thane, such as McDonald’s, Pantaloons, Planet Fashion, Crocodile, Lee, Dominoes, Lee Cooper, Arrow and Reebok. The advents of national retail chains, across product categories are driving the changing face of the retail formats of Thane city. The high rate of development in the district is due to its proximity to Mumbai and its port, the transportation and subsidy facilities provide by the state government and also the uninterrupted power supply by the atomic energy plant at Tarapur in the Palghar taluka of the district.
STORE SPACE MANAGEMENT
Space and inventory are the two most important resources of the retail firm. The best possible allocation of the store space to departments, product categories, storage space and customer space is a major challenge for the owners and managers of the store. Retailers acknowledge the importance of space management for the success of business. It has a two way bearing on retail business—it not only attracts business by ensuring convenience to customers but also places the merchandise in accordance with the salespersons’ work allocation. The key objectives of retail space management are: • To obtain a high return on investment by increasing the productivity of retail space, this requires effective utilization of space for merchandise display and customer movement. • To ensure a compatible, exciting and rational interface between the customer, merchandise and sales people, Space, as a retail input, is fixed in supply with the retailer and is not easy to expand as it involves huge investments. Therefore, the allocation of the internal space among various heads is a challenging task for the retailer. He has to clearly nnel space and customer space.
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Retail Management Effective ALLOTMENT OF the available space to provide the selling space, merchandise spacerequires a sound understanding of the following factors: • • • The nature of offerings, suppliers and departments within the store The quantity of merchandise the store wants to carry and display The location and proportion of space allotted to different types of merchandise Issues related to the nature of offerings, suppliers and departments within the store are very important in the retail management. The quantity of merchandise and space allotted to respective merchandise depends on the sales productivity of the particular merchandise and brand positioning of the retailer. Retailers’ decision regarding the proportion of space to be allocated to specific merchandise is further guided by the following factors: • • • • Profitability of merchandise Merchandise display Placement of merchandise within the store Seasonal considerations
The space management decision also has an important influence on subdecisions like: i. ii. iii. iv. Location of various departments Arrangements between departments within the shop floor Selection of layout with customer behaviour in mind Planned traffic flow of customers
For better store layout, retail space can be expanded, keeping in mind other factors, by including the first floor or a basement as part of the retail area to be accessed from the ground floor by an internal staircase.
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3. PRODUCT
RODUCT AND BRAND MANAGEMENT Product and merchandise management is a key activity in the management of retail business. It drives the business strategy of the retailer and has immense cost and profit implications. A related issue is also the management of retail brands and the decision to offer retailer’s private labels along with or instead of national and local brands. While product management deals with issues related to the kind of products sold by the retailer, merchandise management concerns itself with the selection of the right quantity of the product and ensuring its availability at the right place and time. This involves a careful planning of merchandise mix and its financial implications are reflected in the merchandise budget. PRODUCT MANAGEMENT Products are critical to a retail firm’s existence and profitability. They constitute the basis of exchange transactions between retailers and customers. Products, in a retailing context, are defined as anything sold and purchased in a retail transaction. Hence, it could constitute goods, services, places, events, ideas. A product could be tangible or intangible. Product management, in the context of retailing, may be defined as a se of decisions related to the selection and removal of products from the retailers’ portfolio, along with the related product and market analysis. Product management is critical to the success o retail business. Identification of the products to be retailed forms the core component of the retailer’s business plan. Hence, it determines business profitability to a large extent. There are different cost implications in sourcing various kinds of products. Besides, there are varied demand patterns and competitive factors for different product categories.
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BRAND MANAGEMENT AND RETAILING Of the top ten strongest brands in the world, five are retail brands. Brand management poses several challenges to the retailer. The key issues in retail branding are: ? Brand management of the retail outlet; and ? Deciding whether or not to opt for the strategy of self own branding. Retailers may also choose to adopt a multi-pronged strategy. A strong retail brand and a strong private label strategy can be an effective tool to differentiate the stores and the shopping experience. Strong retail brands have a sharper definition of their brand identity in terms of the following criteria: ? Who am I? ? What do I do? ? How am I different from others? ? Why buy me? The sharper this focus, the stronger is the retail brand. A retailer’s brand is valuable since it enhances reach and endurance with the consumer and ensures a more focused strategic plan. In many cases ‘store’ as a brand is stronger than the ‘brand’ stored within. In the retail boom that India is going through, many manufacturing brands are losing their identity to retail brands. The ten strongest brands in the world are given below:
• • • • • • •
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• • •
Levi’s Gap Amazon
4. PRICE:RETAIL PRICING Setting the right price can influence the quantities of various products or services that consumers will buy, which in turn determines the total revenue and the profit of the retail store, IN the end, the right price for the product or service is the price that the consume is willing to pay for it. Therefore, sound pricing decisions are important to successful retail business. Systematic and informed decisions regarding pricing strategies must be made while considering a wide range of issues. Profitability of retail unit is subject to selling of merchandise for more than it has cost a retailer. The difference between the cost of the merchandise and the retail price is called the mark-up. Profitability is a prime objective of any retail firm. Profitability covers the cost of buying merchandise, costs of running business (rent, salary, maintenance cost), and finally the cost of investment for further expansion of the retail business. Profitability of retail business is influenced by two factors: one, the profit margin on the offerings that are sold and second, the cost involved in the selling of merchandise. These two factors directly influence the pricing of the merchandise sore, which in turn influences the profitability of the store. EXTERNAL INFLUENCES ON RETAIL PRICING STRATEGY Apart from internal factors like costs, desired profit margin etc., the price fixed by a retailer is also influenced by a number of external factors. Pricing Strategy Competitors Suppliers Customer
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Competitors
Suppliers
Pricing strategy
Government
Customer
Using Porte’s model to analyze these factors for strategic pricing, they can be broadly segregated into four ‘force’—customers, suppliers (manufacturers, wholesalers and other suppliers), competitors and government. These four factors or ‘forces’ have to be considered while determining the pricing strategy. In some cases, their influence may be inconsequential, while in others, the retailer may be totally constrained, as in the case of government regulations. The extent of influence may vary from industry to industry. Customers
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Retail Management A retailer needs to understand the price sensitivity of customers that form his target segment. The price sensitivity of customers is based on various personal, social or geographical factors and presents a major challenge for retailers while setting prices. Suppliers It may happen that retailers and manufacturers have different objectives, which leads to conflict between the two. Generally, the cause of this conflict is the final prices set by the retailer. Both the retailer and the supplier (manufacturer) like to have control and want to price the product or services according to their own image, goals, and objectives. With the advent of Internet, manufacturers are selling their goods directly to the final customer. Competitors In most cases, competitors are the most influential factor in determining the price. The competitive environment affects the freedom of a retailer to fix prices to a great extent. Competition can range from being perfect competition to a monopoly. A perfectly competitive market is the most competitive market imaginable.
Government In the Indian context, various government agencies exercise a strong influence on the price levels through legal and policy directives. RETAIL PRICING OBJECTIVE Retail pricing objectives or goals provide direction to the whole pricing process. Retailers are supposed to determine their objectives as the first step in pricing. When deciding on pricing objectives a retailer need to consider:
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Retail Management ? The overall financial, marketing and strategic objective of the retail business ? The characteristics of product or brand ? Consumer price elasticity and price points ? The resources available. Broadly, there could be various pricing objectives such as market penetration, market skimming, return on investment and early recovery of investments. Within these broad objectives a retailer may also try to fulfill the following specific objectives. ? PROFIT OBJECTIVE The retail store may price its product with the objective of maximizing profits in the short run or long run or both. The objective of profit maximization must be studied carefully because it may lead to unethical practices such as overcharging or deceiving the customers. At other times, the marketer may price his products with the objective of obtaining only a target rate of return on his investment. This particularly so with products in the mature stage of the product life cycle.
? MARKET SHARE OBJECTIVE The retailer or marketer may also price his product with the intention of increasing his market share or stabilizing his market share. He can set the price of his product lower than that of his competitors.
? COMPETITOR-ORIENTED OBJECTIVE
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Retail Management The retailer or marketer may price his product to counter any existing or prospective move by his competitors. A retailer may deliberately price its merchandise low to: ? Discourage potential retailers from entering the market, ? Expedite the exit of the potential competitors from the market, ? Hasten the exit of the marginal firms, and ? Spoil the market of retail competitors with an eye on getting future benefits. With a low price, the marketer can prevent price-cutting by range. ? BUYER-ORENTED OBJECTIVE Another pricing objective adopted by a retailer may be buyer-oriented. The aim of such pricing is to maintain socially acceptable prices and be fair to customers. The prices of goods at super bazaars such as Margin Free can be considered. ? GOVERNMENT-ORIENTED OBJECTIVES The pricing of some products may be constrained by the existing laws or may be influenced by government action. The prices of petrol, grocery items and vegetables in India are, to a large extent, controlled and influenced by government action. ? PRODUCT-ORIENTED OBJECTIVES The retailers or marketers, at times, make their offerings more ‘visible’ by means of pricing. Customers are usually attracted by the advertisements in newspapers highlighting special offers and discount. This is especially true in an inflationary economy, which has made many people very price-conscious. With a lower price, the retail store can therefore catch the attention of buyers and this will help him to introduce new offerings, increase the sale of weak products or reduce his stock at the end of a season. Many of the retail stores in India such as Big Bazaar are using these pricing techniques. Products can also be made visible by means of a high price. This 123
Retail Management was practiced in the cosmetics and jewellery trade, where people tend to associate high prices with better quality products and a higher status or image.
5. RETAIL PROMOTION STRATEGY
Retail promotion is broadly defined as all communication that informs, persuades and reminds the target market or the prospective segment about marketing mix of the retail firm. The retailers seek to communicate with customers to achieve a number of objectives. These objectives include increasing store traffic by encouraging new shoppers to visit the store, increasing share-of-wallet for all shoppers of specific groups among them, increasing sale of a given product or category and developing the store image or the retail brand. The retailers communicate with customers through many vehicles: advertising, sales promotion, publicity and personal selling. The promotion mix is managed by the retail firm’s marketing and advertising department. Such kind of structure is common in the case of multi-chain department stores or company-owned retail chains in case of small independent retailers, small retail chains and franchisees, manufacturer in terms of material, ideas and funds. In some cases, retailers and manufacturers pool in resources for effective promotional strategy. Advertising, sales promotions, and personal selling are example of paid impersonal communications. The responsibility of personal selling predominantly lies with the sales personnel and in case of small retail outlets, with the owner himself. Personal selling is the cornerstone of the promotion strategy for the Indian retail industry, especially in the unorganized sector. The key advantage with the retail sector is the opportunity of face-to-face interaction with customers. Hence, it has the advantage of utilizing various facets of personal selling to personalize the promotion efforts. Advertising is a form of paid communication and it uses impersonal mass media like newspapers, magazines, TV, radio, direct mail, etc. 124
Retail Management A sales promotion is another form of paid impersonal communication, which offers additional value and incentives to the customer. It not only encourages the customers to visit the stores buy also promotes trial and repeat purchases. Some of the popular sales promotion activities are special events in-store demonstration, coupons and contests. Publicity is an un-paid form of communication that provides information about the retailer through the media. POPULAR MEDIA VEHICLES USED IN THE INDIAN RETAIL SECTOR There is a whole range of vehicles for promotion available to the retailers to choose from. While selecting a particular set of materials for the publicity, retailers have to consider factors such as cost of the selected material, compatibility with their objective and the rest of the communication strategy. ? Leaflets of Flyers:Retailers to promote specific activities and events use leaflets or flyers. They have a short shelf life, so they are most useful for marketing specific activities such as opening of a new outlet or off-season sale. ? Posters/Calendars: Retailers use posters to promote specific activities and events or as free gift to other channel members, especially their loyal customers. ? Booklets:Retailers from the organized sector can afford this costly mode of communication. It is effective in case of products or services which are intense on information, such as banking, real estate practitioners, fashion designers and insurance services. ? Direct mail:-
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Retail Management Retailers can opt to send out regular, targeted letters as part of their communication strategy. Direct mail advertising includes postcards, catalogues, brochures, email and single letters. This technique is considered to be effective at the time of introducing new product and informing about prospective sales and or special discounts. ? Magazines:Magazines are considered to be and effective medium to advertise to the target segment. For example, a retailer selling baby products could put an ad in Parenting or Health and Nutrition. ? Local Cable Channels:With the advent of the local cable TV channels, most of the small retailers, basically located in central business districts, use this medium to communicate about their offerings and promotions to their target segment more effectively.
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CONCLUSION
The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future. Organized retail of late has seen a tremendous boom and is attracting more people to the malls. What is to be seen is how organized retail can duplicate the same level of personalized customer service levels offered by the unorganized sector to have a higher conversion ratio. The target audience for both the organized and unorganized retail formats remains relatively the same. When shopping in malls, people value the experience related to the trip the most and return most frequently for the same. Besides, while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently.
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Retail Management
EXECUTIVE SUMMARY
Retailing consists of all activities involved in selling goods and services to consumers for their personal, family or household use. It covers sales of goods ranging from automobiles to apparel and food products and services ranging from hair cutting to air travel and computer education. Sales of goods to intermediaries who resell to retailers or sales to manufacturers are not considered as retail activity. Retailing can be examined from many perspectives. A manufacturer of goods like washing machines and refrigerators has many options to reach out to consumers. It can sell through dealers, the company showrooms (Sony World, Videocon Plaza) or hypermarkets (Big Bazaar). The retail sector in India is highly fragmented with organized retail contributing to only 2% of total retail sales. The retail sector in developed countries was also highly fragmented at the beginning of the last century but the emergence of large chains like Wal Mart, Sears, and Mc Donald’s led to rapid growth of organized retail and growing consolidation of the retail industry in these countries. Today, in India we see a rise in the purchasing power and growth of a middle class which follows the western lifestyle. Hence, conditions are conducive for the rapid growth of organized retail in India. Organized retail is growing rapidly and we see the emergence of large organized retail chains like Shoppers’ Stop, LifeStyle and Westside. We also find retail malls mushrooming all over the country. The opportunities in retail industry in India will increase since Indian retailing is on the threshold of a major change. However, with the rapid growth in organized retail and increased emphasis of manufacturers on understanding sales at the retail level, the study of retailing has become increasingly relevant.
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Retail Management
OBJECTIVE OF PROJECT
• • • • • • • •
To understand the concept of retailing. To understand the origin of retailing To understand the essential factors concerning retail marketing. To identify the supply chain in the retail industry. To identify the different types of retail outlets and retailers To identify the activities and functions associated with retailing. To understand the role and relevance of retailing in India. To understand the operational structures associated with retail
organizations • • • Understanding consumer behaviour in retailing Understanding the importance of store location for a retailer To understand the nature of pricing in retail.
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Retail Management
METHODOLOGY
This project is the mixture of theoretical as well as practical knowledge. Also it contains ideas and information imparted by the guide. The secondary data required for the project was collected from various websites and books of reputed authors. The project started with sorting all the raw data and arranging them in perfect order. To add value to the project and to understand the practicality of retailing business, I have visited various stores who are the best in retailing business. Further, to understand the consumers better, a field survey was also conducted to find out the tastes and preferences, purchasing habits, expectations of the consumers etc. Analysis of this primary data has been done to actually understand the survey in a better way.
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Retail Management
DEFINITIONS OF RETAIL
Retailers are at the end of the supply chain. Retail, according to Concise Oxford English Dictionary, is "the sale of goods to the public for use or consumption rather than for resale" Retail is "to sell in small quantities directly to the ultimate consumer," defines Merriam-Webster Online Dictionary. Retail is `not wholesale,' says Encarta. As a transitive and intransitive verb, the word means `sell goods'. Retail is to sell in small quantities, such as "by the single yard, pound, gallon, and so on," explains Webster Dictionary, 1913. "Retailing consists of the sale of goods/merchandise for personal or household consumption either from a fixed location such as a department store or away from a fixed location and related subordinated services," states Wikipedia. An obsolete meaning is "to sell at second hand". Retail at/for is used when talking about what is sold at a particular price, as in the example, "This model of computer is retailing at Rs.650," that Cambridge Advanced Learner's Dictionary offers. Retailer is "a distributor that sells goods or services to consumers," defines Oxford Dictionary of Business. There are three categories of retailers, it explains: "multiple shops, cooperative retailers, and independent retailers."
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Retail Management Usually, a retailer buys goods or products in large quantities from manufacturers or importers, either directly or through a wholesaler, and then sells individual items or small quantities to the general public or end user customers, usually in a shop, also called store, explains Wikipedia. Thus, "retailers are at the end of the supply chain." Retail credit is what is granted to consumers `for the purchase of goods or services'. Retail price is "the total price charged for a product sold to a customer, which includes the manufacturer's cost plus a retail margin." Apart from this pricing, which involves adding a margin to cost, there is also the `suggested list pricing' of manufacturers. The Free Encyclopedia explains, "This simply involves charging the amount suggested by the manufacturer and usually printed on the product by the manufacturer." At times retail prices can be psychological prices or odd prices, such as `a little less than a round number, e.g., Rs.16.95'. Retail price index or RPI is an index of the price of goods, more like our consumer price index. "The RPI is inclusive of VAT, and other taxes, and as such can change as a result of changes in taxation levels," explains www.lse.co.uk. On http://encarta.msn.com, with `retail anthropology', a phrase that focuses on the behaviour of shoppers to learn what motivates them. One such behaviour is `retail therapy', a humorous phrase to mean "the practice of shopping in order to make oneself feel more cheerful," as Concise Oxford English Dictionary notes. The one who pays for the therapy will surely feel the pinch, though. Current twist in the retail tale, however, is more about the shock therapy that retail gets from antagonists who are averse to multinational retailers dipping into the booming market pie.
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Retail Management
THEORIES AND MODELS OF RETAILING
1. DIALECTIC PROCESS: An evolutionary theory based on the premise that retail institutions evolve. The theory suggests that new retail formats emerge by adopting characteristics from other forms of retailers in much the same way that a child is the product of the pooled genes of two different individuals.
2. LAW OF RETAIL GRAVITATION: -William J. Reilly's Law of Retail Gravitation, as explained on www.appletmagic.com/reilly.htm, has this formula to explain the purchases by residents of county A in the businesses of county B: "kPopulationAxPopulationB/ (DistAB) 2." William J. Reilly of the University of Texas in Austin had access to data on the location of purchases by the residents of the various counties in Texas. He knew that generally the farther away two counties were from each other, the fewer transactions would take place between them. On the other hand, if a county had a big city with a lot of bigger retail stores it would act as a magnet attracting the shopping by residents of surrounding and even distant counties. Also a county that had a larger number of residents would have more transactions with a given county than one with a smaller number of residents. The 1931 formula is "analogous to Isaac Newton's Law of Gravitation that says that two bodies attract each other with a force that is proportional to the product of their masses and inversely proportional to the square of the distance between them."
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Retail Management
3. RETAIL ACCORDION THEORY:A theory of retail institutional changes that suggests that retail institutions go from outlets with wide assortments to specialized, narrow, line store merchants and then back again to the more general, wide-assortment institution. It is also referred to as the general-specific-general theory. Dictionary of Marketing Terms on www.marketingpower.com. 4. RE TAIL LIFECYCLE THEORY:A theory of retail competition that states that retailing institutions, like the products they distribute, pass through and identifiable cycle. This cycle can be partitioned into four distinct stages: i. Innovation, ii. Accelerated development, iii. Maturity, and iv. Decline.
5. WHEEL OF RETAILING THEORY: `Wheel of Retailing' is another cyclical theory, which states that retail evolution process has three phases, viz. entry phase, trade-up phase, and vulnerable phase. It is a theory to explain the institutional changes that take place when innovators enter the retail arena. For example, the maturing or more traditional retail institutions provide facilities, such as rest rooms, carts, wide aisles, food courts and resting areas, and promise services, such as more variety in products, advertisements, delivery, and provision of credit.
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Retail Management
ORIGIN OF RETAILING
Beginnings of Retail Trade:
Early Trade When man started to cultivate and harvest the land, he would occasionally find himself with a surplus of goods. Once the needs of his family and local community were met, he would attempt to trade his goods for different goods produced elsewhere. Thus markets were formed. These early efforts to swap goods developed into more formal gatherings. When a producer who had a surplus could not find another producer with suitable products to swap, he may have allowed others to owe him goods. Thus early credit terms would have been developed. This would have led to symbolic representations of such debts in the form of valuable items (such as gemstones or beads), and eventually money.
Early Markets Over time, producers would have seen value in deliberately over-producing in order to profit from selling these goods. Merchants would also have begun to appear. They would travel from village to village, purchasing these goods and selling them for a profit. Over time, both producers and merchants would regularly take their goods to one selling place in the centre of the community. Thus, regular markets appeared.
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Retail Management
The First Shops Eventually, markets would become permanent fixtures i.e. shops. These shops along with the logistics required to get the goods to them were, the start of the Retail Trade
Origins of Retail Chains It is likely that, as markets became more permanent fixtures they evolved into shops. Although advantageous in many respects, this removed the mobility that a peddler or traveling merchant may still have enjoyed. For some shopkeepers, it made sense to obtain extra stock and open up another shop, most probably operated by another family member. This would recover business from peddlers, create new business and the greater volume would allow the shopkeeper to strike a better deal with suppliers. Thus the Retail Chain would have started. It is thought that this process was started in China over 2200 years ago with a chain of shops owned by a trader called Lo Kass. Excavations reveal that shops in ancient Rome were, in many respects, much like small shops are today, so it is most likely that retailer chains existed then.
From Family Business to Formal Structure Although retail chains would have been mostly run by families, as some chains grew, they would have needed to employ people from outside of their family. This was a limiting factor as there would have been a limit to the amount of trusted non family members available to help run the chain. Another, even more definite limiting factor was the distance the furthest shop would have been from the
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Retail Management original shop. The greater the distance, the more time and effort would have been needed to effectively manage outpost shops and to service them with goods. There was, therefore, a natural barrier to expansion. That was the case until transport and communications became faster and more reliable. When this happened towards the end of the 19th century, chains became much bigger and more widespread. Many of these businesses became more structured and formalized, leading to the retail chains that we see today.
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Retail Management
History of Self-Service Stores
Background Up until the introduction of self-service stores, customers would simply ask the shopkeeper for their goods. The shopkeeper would price them (weighing them if necessary), pack them in a bag or other container (often supplied by the customer), total up the bill and receive payment. There was a personal one-toone relationship between customer and shopkeeper. The First self service Store This all changed in 1915 when Albert Gerrard opened the Groceteria in Los Angeles, the first documented self-service store. This was soon followed a year later by the Piggly Wiggly® self-service store, founded by Clarence Saunders in Tennessee in the U.S. Efficiency These entrepreneurs noticed that their staff had to spend a great deal of time taking grocery orders from customers. The groceries were stacked on shelves 11
Retail Management allowing customers to walk around and browse, collecting their shopping in a basket that was supplied. The shopkeeper would only need to total up the final bill at the end of the process and transfer the goods from the basket to the customer and receive payment. Growth This new type of shopping was more efficient and many customers preferred it. Although personal service stores remain to this day, this new concept started a rapid growth of self-service stores in the United States. Other countries were slow to take up the idea, but there has been a steady rise in the global amount of self-service stores ever since.
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Retail Management
The Birth of Distance Retailing
Definition
Defined here as sales of goods between two distant parties where the deliverer has no direct interest in the transaction, the earliest instances of distance retailing probably coincided with the first regular delivery or postal services. Such services would have started once man had learned how to ride a camel, horse etc.
The reason for distance retailing:
When individuals or groups left their community and settled elsewhere, some missed foodstuffs and other goods that were only available in their birthplace. They arranged for some of these goods to be sent to them. Others in their newly adopted community enjoyed these goods and the demand grew. Similarly, new settlers discovered goods in their new surroundings that they dispatched back to their birthplace, and once again, demand grew. This soon turned into a regular trade. Although such trading routes expanded mainly through the growth of travelling salesmen and then wholesalers, there were still instances where individuals purchased goods at long distance for their own use. A second reason why distance selling increased was through war. As armies marched through territories, they laid down communication lines stretching from their home base to the front. As well as gathering goods from whichever locality they found themselves in, they would have also taken advantage of the lines of communication to order goods from home.
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Retail Management
RETAIL MARKETING
In its simplest form, the retail trade sells goods to end users {customer} of those goods. In order to maximize sales and profits retailers will usually enhance the way they present their goods, their retail outlets and their company. This enhancement is retail marketing. For the success of retail outlets the following is to be taken into consideration: I. Décor II. News Management III. Price Deals IV. Staff Presentation V. Merchandising
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Retail Management
I.
Décor
The way a retail outlet looks will usually inform customers and potential customers about the type of store and type of products it sells. i. Design A store that sells high class goods will usually have high class décor. By contrast, a store that sells basic goods may have basic décor. Retailers will typically want their stores to be different from their competitors. This distinction allows the store to offer a shopping "experience". A store offering distinct décor can score points over their competitors. This dimension is important as it reduces the burden on product versus product and price versus price competition. This ultimately feeds in to the value of the products on offer and helps to maintain margins. A balance needs to strike between this need to be different with the need to make customers feel welcome. Surroundings can be distinct, innovative and even edgy but must not alienate the customer. ii. Frequency of Redecoration Stores that sell fashion goods will often change their décor regularly to reflect the changing nature of their products. For some well established stores, their décor may be synonymous with their business and their product offer. Such stores may seldom change their décor or only change it in minor ways. Some stores offer a mixture of both – they may be well established and have traditional décor, but will also adapt it in order to highlight the changing fashions of their product offer. iii. Lighting Food stores are usually well lit. This re-enforces an impression of hygiene and honesty. It also allows customers to read labels and signs, some of which may
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Retail Management be legally required. The lighting in clothes and some specialist goods stores may vary across the store, according to the products being lit. Such lighting may range from soft, or even dull, to bright and occasionally colored. Very similar factors affect stores that are on the internet. For example, this online store that sells fly killers is mainly white and bright in order to symbolise hygiene. The web site that sells fashion is more colorful.
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Retail Management
II.
News Management
Retailers tend to be quite labor intensive and therefore employ a high number of staff relative to other businesses. The products they sell and the prices that they charge have obvious significance to the populace. These factors mean that what happens at a retailer, especially a large one, can have an impact on many people’s lives. The prices they charge can have a direct effect on the local economy or even the national economy, especially as the inflation rate calculation for a region or country usually includes a high proportion retail price data. a. Free Advertising All of this means that press statements and press conferences by retailers are often run by local and sometimes national media outlets. Many retailers will use this interest to keep their business in the public eye. News stories tend to have more authority than advertising and are virtually free. b. Store Openings A new store opening will often be reported locally. A number of simultaneous openings may gain regional or even national coverage. Even bad news can be used as a promotional tool. For instance, the store chain retailer may also participate in media coverage of store closures, stressing the availability of products in alternative stores that are still open. c. Interviews Interviews given directly to the media by retailers may allow the spokesperson to expand the subject matter being discussed to a promotion of the company and its 17
Retail Management products and services. The retailer spokesperson may have more freedom when giving live broadcast interviews.
d. "Price War" Another way of gaining media attention is to announce a substantial program of price every cost effective deductions and encourage the notion that a “price war” has been started. While this may or may not be the case, having such publicity will be seen by many retailers as positive and compared to paid advertising. e. Character Promotion Much free publicity can be gained by having a famous character affiliated to the retailer. Such individuals often have a flair for gaining publicity. This can occasionally backfire but if it is managed well can be a significant source of promotion. Occasionally the person who owns, or is the chief executive of the company may be good at self-publicity, which will reflect back to the company.
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III.
Price Deals
$. Deal-Making as a Marketing Tool Making deals with customers, such as two for the price of one, for example, is an age-old method of retailing. Whereas deal-making has traditionally been a two-way affair between an individual customer and the retailer - and often still is in small retailers - it has in recent times been used as a marketing tool by the larger chains. $. Technology As technology has advanced, it has been possible for some retail outlets to offer complicated price deals based on various factors such as the amount of goods purchased, or what combination of goods have been purchased. This is possible because the computer system is able to calculate the permutations that arise.
The cash register is, in effect, a terminal to the main computer system and provides its operator and the customer information on the cost of the goods that are being purchased. An example of a price deal is where a store offers money off if a customer buys two packs of a given product. When the first pack’s information is entered into the terminal, the system will calculate the full price. When the second pack is entered it will automatically subtract the discount.
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Retail Management
IV.
Staff Presentation
The way that staff appears to customers and potential customers can have a significant bearing on how a retail store is perceived. Appropriate Appearance of Staff Personal hygiene and cleanliness of staff is important for all retailers and even more so for stores selling food products or drugs. Staff in stores that sell hardware products will often wear overalls. Apart from protecting their own clothes, overalls can give the staff, and therefore the store, a professional appearance and reinforce the practical nature of their products. Staff in a fashion store may be encouraged to wear fashionable clothes themselves. Some stores will provide clothes to staff from their own stock as a way of promoting specific items. Stores that sell information technology equipment, modern gadgets or recorded music may be encouraged to dress very casually so that their predominantly young market will not feel intimidated or alienated by formal dress. Retailers that sell high value goods, or goods that are perceived as high value, may ask their staff to dress formally. Examples are high-class clothes stores and jewelers. Dress codes will mainly apply to larger retailers. With the exception of food and drug stores, it is very common for small retailers to have no dress code at all. Trust
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Retail Management Many stores will ask their management staff to wear dress that is more formal than the rest of the staff, even in some cases where staff are being encouraged to dress fashionably or casually. This contrast may be preferred by stores that wish to make staff appear welcoming while giving the impression that the store is run professionally and can be trusted. Attractive Appearance Some retail stores will recruit staff who they perceive as being good looking. This is especially true of fashion outlets. This practice is rarely an official company policy and is often a subconscious decision. Selection filtering that uses facial or bodily attributes may be considered unlawful in some jurisdictions where it could be considered as discrimination on grounds of race, gender or even age .
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V. Merchandising
The way that products are displayed – or “merchandised” - can have a significant affect on retail sales. For example, sales of fruit and vegetables tend to increase when displays are full and bold. In self-service stores, staple products tend to be merchandised strategically so that customers looking for these items are required to walk past higher profit items such as luxury goods. This can often result in higher sales and higher profits. Merchandising consists of the following elements: - Correct strategic placement in the store - Eye-catching and appealing display - Appropriate point of sale support media (e.g. labels, signs) - Legal requirements are satisfied
? Display Fixtures
Many styles of display fixture may be used, ranging from a simple desk or shelf to very complicated designs. Fixtures may be purpose-built or purchased as standard units. Some may have integral lighting and temperature control. The type of fixture to be used will depend on the products that are to be sold from the unit, the type of store and the available budget.
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Retail Management In recent times there has been a shift away from heavy built-in fixtures towards flexible fixtures that can be moved and adapted with minimal effort. This allows retailers to change merchandising layout or refit their shops more efficiently.
? Magazine Rack:
Configuration Most magazines are made so that they have the integrity to stand near-vertically, resting against a support. Displaying magazines in this way allows the cover to be as fully displayed as possible. Newspapers tend to be laid on their side or are kept in bins. Stores would tend to keep the same newspaper in the same position for the convenience of customers and to avoid an incorrect purchase. Front Cover Exposure Modern magazine racking is designed to expose as much of the front cover as possible. Because of this, many magazine racks have a low front barrier made from transparent acrylic or similar material.
Orientation and Location A typical magazine rack will slope slightly, with the widest sales area at the bottom for fast sellers and newspapers, and with the narrowest space at the top for specialized magazines and those not suitable for children. Although magazine racking is usually found against a wall, it may occasionally be found on a standalone.
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Retail Management
? Pegboard Fixtures
Method of Display Some products can be displayed as hanging items packaged in blister packs or polythene bags. These bags will have a slot or hole punched through them so that they can hang on a rod. Rather than having the rod as a permanent fixture on a display, some stores prefer to use a pegboard. This is an upright panel that is perforated, allowing the rods - called peg hooks - to be placed in a multitude of positions. There are many varieties of peg hook that can be attached to a peg board. Some will have one prong, some two. Baskets can also be attached to peg boards. These may require several peg hooks. One can see these hooks on the street shoe displays.This method of merchandising is relatively low cost but can be very versatile.
? Hanging Fixtures:
Wires The ceiling of a shop can be used to hang various point of sale material and some products. A low cost method of doing this is to have taut wires running the length of the ceiling on which hooks can placed. By using S-hooks or another wire, a poster or other light item can be hung below.
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Retail Management By using high strength thin gauge wire, the customer can be given the impression that the items being hung are almost free-floating, allowing them to have more focus, with less attention being given to fixtures.
Swivel Hooks A product can be attached to the ceiling to a swivel hook. It is a standard hook, except that it will allow a product to fully twist. Hanging Heavy Items Some stores will have sturdier hanging points built into ceilings. These may be made of steel or strong plastic and will be primarily used for hanging heavier items. Hanging fixtures that are directly selling goods to the public will need to be very sturdy and will usually be purposely built into the fabric of the building.
? Display Ring
This is simply a ring, either made from steel or plastic (or both). Products that can be displayed on it will have holes, loops, chains or hooks through which the ring can be threaded. Display rings have an opening point so that products can be threaded onto or off of the ring. Diameter The display ring can vary in diameter, according the size of the products being displayed. A small ring of, say 5 inches in diameter, may, for example, be used to display novelty name tags or other small items with a chain. Larger rings may be
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Retail Management used to hold belts or umbrellas, for instance. Generally the ring will be positioned at a high position so that the products can hang from it and be more noticeable. Security of High Value products Often there is a lock at the opening point. This is useful if high value products are to be displayed on the ring, as long as the ring itself is secured.
? Clothes Hanger
This familiar household item is used extensively in most clothes shops. There are many varieties and their quality can vary widely. Life of the Clothes Hanger Some clothes hangers are designed to minimum specifications. Their main job is to hang the products in store (or in storage) and to last until the customer gets the product home. Excessive re-hanging and general use would eventually cause this low cost hanger to fail. Typically they are made of recycled black plastic. Their design life does not extend to prolonged use by the consumer. More sturdy hangers are available. These may be more appropriate in stores that move stock regularly. Retailers using this type of hanger may also view the hanger itself as an enhancement to the product offer or would feel that it would add to the store's image in the eyes of the customer. These hangers' design life would extend to reasonable use by the consumer. A high class clothes store would often prefer to use wooden hangers with a metal hook. There are also very sturdy hangers that have a closed hook. These are designed to withstand the rigours of regular use within a store and are not taken away by the customer. They can also be used by clothes producers, shippers, wholesalers and garment processors, such as steamers. Materials Used 26
Retail Management There are various basic material variations:
• • • • •
All plastic All Galvanized Metal Mix of plastic and metal (usually a plastic body and metal hook) Wood and metal mix (usually a wooden body and metal hook) There may also be cardboard or foam covers on the bar (and elsewhere) to prevent creasing There may also be clips on the bar with foam protection
•
Varieties There are a wide variety of clothes hanger designs in order to reflect the image of the retailer and to make them appropriate and fit for a particular use. Some examples are:
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Hanger with no bar used for upper garments only Hanger with bar used for upper garments and pants/slacks Small hangers for children and babies Many color variations, especially when made of plastic Bathing suit hanger Attachment Hanger with two hooks on the bar. The hooks may be fixed or may be moveable horizontally and may be lockable so that they maintain their position
• •
Hanger with the bar attached using springs Hanger with notches cut into the sloping sides. This can be used for garments that have hanging hooks Straight hangers designed for pants/slacks/skirts Various styles and types of cushioning may be placed at some or all parts of the hanger Hangers can be wishbone shaped, curved or bell shaped. The bell shape can compliment certain collar designs
• •
•
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Some hangers are made with rubber, foam or flexible plastic extensions in order to yield to the garment's shape Scarf Hanger - a standard hanger but with an open-ended bar Shoe Hanger - a small bar-less hanger with two hooks either side Tie Hook - a small hanger with a very small open-ended bar Blanker Hanger - a very wide and heavy-duty hanger Many hangers can be designed to accept the retailer's logo or message A polyhook bag contains a small plastic hanger as an integral part of the top of the bag. The hook is used so that these packs can be displayed on rods.
• • • • • •
? Jewellery Stand
Because jewellery tends to be small and delicate, it is often displayed on small stands. This allows re-arrangements of displays to be efficient because rather than moving individual pieces one-by-one, the displays can be moved in groups. Depending on the products being displayed, jewellery stands tend to hold a limited amount of related products. Some stands come with security features for high value items. Angled Jewellery Stand or Tray Angled stands are pitched at anywhere between 30 and 90 degrees. These stands are often held in glass counter cabinets or in glass cupboard displays. As such, it is convenient to pull out the tray of products if a customer wants to view them. This allows the customer to see a choice of products, adding to the chances of completing a sale. Stud Earring Stand
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Retail Management This type of stand may typically be 5 inches x 5 inches and hold 8 or 9 pieces. A stud earring stand would either have very small holes to take the earring pins or would have a plain cushion into which the earring pins would be pushed. Ladder Earring Stand A ladder earring stand is a small stand that can be made of wood or plastic that has vertical two posts with several horizontal bars spaced evenly between the posts. The horizontal bars will have hooks, spikes or slits so that the earrings can be attached. Ring Stand Rings may be held in an angled stand, but this time with the rings pushed into slits. Valuable rings may be held in small lidded boxes that are propped up in order to achieve an angled display and are opened when the store is trading. These boxes may have locks. Rings may also be displayed on a stand that is shaped to a lady's hand - either 3D or 2-D. It may be made of plastic, wood or even porcelain or glass, and would be used hold rings on one or more of the fingers. Necklace Stand A necklace stand would typically stand 15 inches high and consist of a central vertical post with right angled posts protruding from the top and possibly lower down the vertical post. Necklaces would hang from the horizontal posts.
Bangle Stand This is similar to a necklace stand but shorter.
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Retail Management Necklace and Choker Bust Display Necklaces (and chokers) can also be displayed on representations of the human bust around which the necklace can be draped. This may be a 3-D dummy of a head and shoulders, a 3-D dummy of just the neck and shoulders or a 2-D cut out of the shape of the neck and shoulders.
Jewellery Showcase Showcases are typically made of transparent plastic or glass and with a variety of possible designs. A typical design is a tower with two or three stories, with each compartment containing items of jewellery. Showcases with high value items may be come with locks and even intruder alarms.
? Hooks and Clips
Stores - especially clothes and hardware stores - will often require hooks and clips in order to display items in a particular position or configuration or to replace hooks or clips that are missing from the product packaging. Range of Items
• • • • • •
Clips for pants and slacks Hanger connector clips and joins Tie Hooks Hooks for dispensing user bags Spring Clips Hook Attachments that are attached to tags using a tagging gun
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Euroslot hang tabs - these are cut outs of euro slots that are basically slits in the top of bags. Occasionally they are required to replace broken slots. 30
Retail Management
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Swivel Pegs - these can be attached to a hanging product, allowing the product to freely swivel through unlimited turns
• •
Tie Hooks Scarf Clips
? Garment Cover
Clothes - especially when they are high value, will sometimes be kept in garment covers. These may be heavy duty zipped covers, sometimes with a window to allow viewing, or may be disposable thinner, usually transparent, covers. As well as protecting the clothes from dust and other contaminants, they can add to the appeal of the product as they will show that the garments have been taken care of by the retailer and, if sold with the product, can add to its value and appeal.
? Greeting Card Rack
Sloping Tiered Cabinet This type of fixture consists of a series of stepped shelves, usually with a front to each tier. These types of greeting card cabinets may come with large drawers at the base in order to carry extra stock. Sloping cabinets may be made of solid material such as plastic or wood, or may be wired with polyester or similar coating. Sloping tiered cabinets will typically be used in outlets where greeting card sales volume is high. Mini cabinets are also available as counter mounted units.
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Retail Management Spinning Rack A spinning rack (or carousel) may be used where space is limited or where sales are more modest. These racks are easy to move and may be set on castor wheels. Some will have a holder at the top in which point of sale material can be placed. Spinning greeting card racks are designed to stand on the shop floor. Shorter counter mounted ones are also available.
? Point of Sale
• Product Display
Retailers will ensure that fixture displays will bring out the best in products. The optimum way any given product group is displayed can vary widely. Many products benefit from bold and full displays while some other products will benefit from a neat and orderly presentation.
Eye-Catching Displays The way that goods are arranged in a store can make a significant difference to sales. Products that are appealing to the eye will attract customers. Dull or shoddy displays will be ignored by many customers. Research There has been a great deal of research into customers’ preferences when shopping in a self-service store. It is known that when displays are full, sales tend to be higher. This is especially true of fresh foods, and particularly fruit and vegetables. It is also known that products arranged in neat rows, with all labels facing the same way can represent cleanliness and superior quality in the minds
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Retail Management of many customers. Products with a higher profit margin would benefit from such a well-ordered display. Goods that are jumbled in a large container, or display bin, would tend to signify a bargain. Fast selling or reduced-to-clear goods may be appropriate for this kind of display.
Lighting Lighting plays a very important part in store displays. The general lighting used will reflect the type of store. A food store would usually have very bright lights that will be as close to natural light as possible. Dull lighting may give the impression of lack of hygiene. Lights that are too biased away from natural light may change certain colors. For instance, blue tinted strip lights may make fresh red meat appear to be bad. The same aspects are considered for any lighting on the display fixture itself. These lights may be strategically placed to highlight certain aspects of products and could be used to create a particular mood. Lighting in fashion boutiques may include multiple colors in order to bring added glamour to the shop and its products. In a high-class furnishings store, lighting may be softer and light intensity, and even color, may vary across different parts of the sales floor.
•
Legal Requirements
Before any commercial requirements are met, the merchandising of goods must meet all legal requirements. Tobacco and Alcohol
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Retail Management Many states have laws governing the placement of sensitive goods such as tobacco and alcohol. Some states stipulate that these items can only be sold from behind a counter. Labelling There are often many regulations covering the labelling of goods. For instance many states forbid any misrepresentation of the goods being labelled. Regulation may prescribe merchandising and labelling requirements while others may forbid certain things. Codes of Practice As well as statuary regulations, there may also be trade or company codes of practice that the retailer may follow. • Considering Security
When retail stores merchandise their goods they will take into account the risk of stock being stolen from display shelves ("shoplifting"). This is especially true of self-service stores where there is less personal supervision of customers’ activity. Goods at Risk Those goods that are most at risk are:
• • •
High value goods Small or slim packs Potentially addictive products
A combination of any two or three of the above would mean that the product in question is at a very high risk of being stolen. Reducing Temptation
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Retail Management Retail stores usually merchandise the at-risk products away from exit doors to reduce temptation and improve the chances of identifying or apprehending the thief. Very high-risk products are often sold over a counter. For many of these products there may already be statutes that require that they be sold this way. Securing Products Some products may be alarmed or even wired or bolted to the display in order to prevent theft. • Placement of Goods
Considering the Profit Value of Goods Generally, staple goods and basic (lower value) goods tend to make lower profits for retailers than other more occasional and more luxurious goods. For instance, sugar, flour and eggs when sold separately would not make as high a percentage profit (or margin) as decorative cakes, for example. Also, nails and wood may not attract the same percentage margins as a finished wooden cabinet. Guiding the Customer to Higher Margin Products For this reason retailers tend to display these occasional/luxurious (higher value) goods amongst – or en route to - lower value items. This can be particularly advantageous to a self-service store where customers who are looking for lower value goods are guided past higher value items. This aspect of merchandising can make a significant contribution to higher profits. This principle is also used in printed catalogues and internet shopping sites. Shoplifting
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Retail Management Whilst the above principles will improve profitability, consideration must be given to product security otherwise shoplifting could wipe out any increased profits.
When displaying goods in a store, appropriate support material will be required in order to inform the customer about the products and to satisfy legal requirements. • Point of Sale Support Material
POS Media Point of Sale (POS) support material can also be used to re-enforce a product’s qualities and may include extra information on shelf labelling, posters and moving images. There may even be an offering of samples of the product, either through free self-service or dispensed by a sales person. Product Linkage Point of sale can also be used to link the sales of one product to another product. For instance: buy product a and get product b free (reference: Price Deals)
? Window Display
The window display will generally reflect: - the products for sale - the nature and style of the shop - special offers and promotions
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Retail Management
Occasionally shops will use their window displays for other purposes, such as promoting a local event or a charity or to commemorate a national or international occasion.
Types There are various types of window display configuration: - Closed back display area - Open back display area - No display area (just a glass reveal) Window displays can benefit from having an uninterrupted view with a minimum of window frames. They may be parallel to the street, or may be angled as part of a recessed entrance (arcade style). Corner windows may face two streets. Occasionally stores will have a window specially built into an external wall (shadow boxes). Some stores, particularly those with shutters, may have a display where there is no window at all. This type of display can produce a market stall affect. Types of window display used will depend on the space available, the volume and profile of people that will pass the window and the design of the building. Generally, fashion stores, gift stores and department stores will have a window display area, often with a closed back. Window displays for these types of store will often consist of 3 dimensional scenes consisting of props and perhaps some supporting media. Some stores employ staff whose sole job is to plan and execute window displays. Often a store will employ a specialist company to do 37
Retail Management this work. Some department stores are famous for their window displays, especially at Christmas. Food shops are more likely to have no window display area but will have posters displayed on the glass for outside passers by to view.
Scenes The types of scenes displayed range from a 3-dimensional scene using props, through to a display of various media, such as posters and moving images or a mix of these elements. The window display scene may consists any of the following: - Single product promotion - Product Group - Large range of products - Corporate theme - Community theme Any mix and match of the above items may be found in a window display. Changing Scenes Most shops will change or refresh heir window displays regularly to reflect changes in their product range or promotional activity. Typically, fashion stores will completely change their display at least each season.
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Retail Management
? Community Theme
A window display may not be directly connected to any commercial attribute of the retailer, but may be a promotion of a charitable event or a community cause or event. Such promotions may have a commercial benefit to the company through improved customer and staff goodwill. Some retailers may, in fact, promote such causes for purely benevolent reasons. The window display is designed to attract potential customers into the store and to promote the retailer and/or its products. A retailer could achieve these aims by featuring a corporate theme in its window display(s).Such a theme may be to reinforce a wider campaign. Rather than be specific to any product, it may highlight certain attributes of the company, such as high quality, good value, good customer service, or perhaps areas such as hygiene or ethical credentials.
? Large Product Range The window display is designed to attract potential customers into the store and to promote the retailer and/or its products. A retailer could achieve these aims by featuring a large range of products in its window display(s). Variety and Availability
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Retail Management Although uncommon, this method of window display not only symbolises the variety of goods available but also, in many cases, shows the goods that are available for purchase. This may be particularly true of smaller shops, where the window display is an important sales area as well as a display area. A customer may point to a product in the window display that they wish to buy.
Freshness For retailers selling fresh foods, a window display featuring a large range of products can also attract customers and denote freshness. For instance, a large range of fresh fruit and vegetables may show a wide range of colors and look vibrant. This vibrancy can translate to freshness in the eyes of a passing shopper. Discount Stores A wide range of goods in the window display may also be appropriate for those shops that sell discounted goods and end-of-line goods. Such a display may symbolise cheapness and low prices. ? Product Group The window display is designed to attract potential customers into the store and to promote the retailer and/or it products. A retailer could achieve these aims by featuring a group of like products in its window display(s). Rotation of Product Groups This kind of window display is often used by stores that sell a wide range of goods such as department stores. A common approach is for a product group to
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Retail Management be featured in the window display in order to remind customers that the store sells the given range of products. Such a display may last for a few weeks and be accompanied by other promotional activity. Then another group of products will be displayed and promoted. By rotating window displays around the calendar, over time customers are given an impression of the choice of products available. The product groups that are displayed are commonly timed to coincide with wider events and seasons. For example, beachwear just before summer and toys and games just before Christmas. Single Product: Window display is designed to attract potential customers into the store and to promote the retailer and/or it products. A retailer could achieve these aims by featuring just one product in its window display(s). Impact By featuring one product, the retailer will be creating an overwhelming message extolling the virtues of the product and elevating its importance to the highest possible level. This approach is often used where: - the store has exclusive sales rights to the product - the product is known to be in very high demand and the store has plenty in stock - the store is running a promotion on the product - the window display area has limited space
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Retail Management
The Supply Chain
In order to retail any product, the product needs to be obtained. This can range from a simple process of purchasing and collecting from a wholesaler to planning and executing the whole process from raw materials through to retailing to the end customer.
Producer
Producers are the makers of goods that are retailed. They may be factories or farms. Role in the Supply Chain Large retailers will often procure goods directly from producers. Small retailers are more likely to procure goods from wholesalers (who buy from producers or even other wholesalers). There are some small retailers, however, who will purchase goods directly from small producers such as local farmers. Sometimes the producer is the retailer. They may have started as the producer
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Retail Management and decided to sell their own goods or they may even have started as retailers and decided to produce some or all of their goods.
Importer
Specialization Most importers specialize in one product area and know their products well. Usually they will have representation in the source country or countries in order to ensure that the products being shipped are of the correct specification. Other importers, however, purchase all types of goods and act more as a clearing station for imports – often cheap goods from low cost countries. Some of these general importers will even purchase container loads speculatively without any detailed knowledge of what the container is carrying. Multi-Skill Importing can be a very complicated business, involving many skills and contacts with a wide range of external functions such as shipping companies, state authorities, banks and insurance companies. Importers must be aware of currencies, shipping routes and rates and have a good knowledge of the import/export laws of many countries and trading blocs. They must also have good negotiation skills, be multi-lingual, have good math, logistics and planning abilities. Importers will often employ specialist companies to liaise with shipping companies, carry out customs clearance, and deal with cargo forwarding and insurance claims. Although importing is complicated and specialized, some larger retailers take on imports themselves. Role in the Supply Chain
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Retail Management Importers can supply any part of the supply chain: they may supply parts to producers or even supply them with finished goods to supplement their range. They will also supply wholesalers and large retailers.
Packaging Supplier
Packaging Categories Most retailed products will be packaged. There are three general categories of packaging: - Primary – the immediate packaging around the finished product - Secondary – the container in which several finished packs would be distributed (and sometimes displayed in) - Tertiary – the carrier for the secondary packaging. This may be a pallet or large crate Role in the Supply Chain Packaging suppliers would generally sell their packaging to the goods producers. The involvement of packaging suppliers can range from simply taking orders for packaging items to having detailed involvement with the logistics, marketing, specification, cost and legal aspects of the packaging. Although packaging suppliers will directly supply the producer, they may have a working relationship with other partners in the supply chain. For instance, they may agree primary packaging designs with the retailer, rather than with the producer. The retailer would then write the agreed packaging design into the producer’s product specification. The retailer may even negotiate a global price for packaging with the packaging supplier, leaving the producer to simply order and pay for the packaging at the pre-agreed price (this is subject to restrictive
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Retail Management practice legislation that may be in force in any given territory). Some packaging suppliers may even work directly with consumers in order to obtain feedback on primary packaging designs. The packaging supplier may also work closely with other supply chain partners when designing secondary and tertiary packaging. For instance, they may design tertiary packaging in collaboration with the shipper and secondary packaging in collaboration with the wholesaler. They would still need to take into account the requirements of the retailer and producer, as all of these parties will be affected by secondary and tertiary packaging designs. Generally, although packaging suppliers sell to the producers directly, they will usually take heed of the requirements of the whole supply chain, especially the dominant partner, whose approval would be critical.
Wholesaler
Wholesalers purchase and store large volumes of goods, usually from producers, but occasionally from other types of business, including other wholesalers. (e.g., Vastra outlet in Rajouri in New Delhi) Breaking Bulk Purchases into Smaller Lots A producer would usually need to make goods in large production runs, in order to make the products economically. Many retailers, especially smaller ones, would not have the financial resources or storage to purchase these large volumes. Instead, a wholesaler will purchase these goods from the producer and store and sell them in smaller lots. Specialization
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Retail Management Wholesalers generally specialise in just one or two product areas. There are some, however, that sell a wide range of goods and aim to supply all requirements to small general stores and even to some specialist stores. These wholesalers are attractive to retailers who prefer not to buy their goods from multiple locations. Large Retailers Large retailers will often purchase directly from producers but they may also top up their stocks using wholesalers. Other retailers – the very largest – have virtually no trading relationship with wholesalers, apart from those covering specialist product groups or low volume imports.
Shipper
Shipping Modes The supply chain will use a variety of different shipping modes in order to move goods through the supply chain. Although trucks (lorries or rigs) are the main method used, other methods include sea- and air-freight. All loads must be secured, often with the use of pallets, slip sheets and pallet shrouds in order to achieve this. Shipping Capacity of Supply Chain Partners Most partners in a retail supply chain will have their own means of shipping goods. Some may carry out most of the onward (downstream) distribution - they may even collect goods from upstream locations. Others may only have sparse transport capacity or even none at all. Dedicated Shippers
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Retail Management There are some companies whose sole function is to ship goods. There are various English language names for them such as shippers, hauliers, couriers, transporters or distributors. The service they provide may just involve occasional spot deliveries for companies that have an unscheduled need or have suffered a temporary shortfall in transport capacity; or they may regularly supplement delivery capacity for given routes and/or given days. They may even provide a dedicated and exclusive service providing all shipping needs for one company or even for a complete supply chain. Although their core function may be to move goods, some shipping companies have expanded into other services such as reverse logistics, warehousing and regional consolidation (or hub distribution). Some have even branched into finishing goods. This service is useful for retailers and wholesalers who buy, and take delivery of, bulk quantities of goods without knowing the final destinations. Once these destinations are known, the shipper will apply packaging and labelling or reconfigure goods, so that they are appropriate for each destination.
Retailer
Retailers purchase goods from a variety of sources. Smaller general stores will typically buy from a local wholesaler. Larger outlets will often buy fast selling goods directly from producers but still purchase slower selling and specialist lines from wholesalers and importers.
Customer
The customer (or shopper) is the person who purchases finished goods in order to use them or pass them to a consumer . They can be children or adults of any age.
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Retail Management Customer Habits ustomers tend to purchase staple goods on a regular basis. These staple goods are those that are used very often and generally comprise of food items. Staple goods vary from culture to culture and according to climate and availability. Some common staple goods are milk, bread and rice. In industrial and developed societies most goods are purchased. In other societies, although many goods are still purchased, other goods may be produced at home or through a collective arrangement locally. Non-staple goods may also be purchased on an occasional basis. Such goods may include luxury items or gifts.
The frequency with which customers use retail outlets can vary according to the society they are in, their personal circumstances and their distance from the retail outlet. The products that they buy can depend on consumer tastes, product quality/reputation and the price of goods. Where there is a choice of retail outlets selling similar goods, customers will usually make efforts to visit all or most of them in order to get the best deal. Payment Generally, goods are exchanged for cash, although some societies may barter and swap goods without money being involved or may use other goods as payment, supplemented with cash as necessary
Consumer:
The consumer is the user of goods and is at the end of the retail supply chain.
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Retail Management Consumer v Customer For those on the operational side of the retail trade, the consumer and customer will be synonymous. Those concerned with retail marketing, however, will be aware that the customer will often purchase for more than one consumer. For instance, it would be very common for a housewife to purchase goods for her immediate family and some other family members and friends.
Consumer Requirements
Consumers can be any age and goods that are consumed can vary from basic foodstuffs to luxury goods. As the supply chain is geared to the requirements of the consumer, a great deal of attention is paid by the retail trade to these requirements, whether they be lifestyles, habits, and tastes
TYPES OF RETAIL OUTLET
A specialist store or a small local store may have a very intimate relationship with its customers, with transactions being made on a face-to-face, first name basis. At the other end of the scale, goods may be retailed across the globe, with no physical contact being made at all.
• Clothing and Accessory Store
Products Clothing and accessory stores sell apparel for all members of the family, as well as luggage, leather goods, lingerie, jewellery, uniforms, and bridal gowns. Stores in this sector may sell all of the above items or concentrate on a few. Expertise Clothing and accessory stores are often staffed with knowledgeable salespersons who can help in the selection of sizes, styles, and accessories 49
Retail Management
• Department Store
Department stores sell a wide selection of merchandise with no one line predominating. These stores generally are arranged into departments with a manager heading each department. Products Departments stores may sell apparel, furniture, appliances, home furnishings, cosmetics, jewellery, paint, hardware, electronics, and sporting goods. They may also sell food and services such as optical, photography, pharmacy, insurance, travel brokerage and funerals. They are the ultimate one-stop shop. Discount Department Stores Discount department stores typically have fewer sales workers, relying more on self-service features, and have centrally located cashiers. Department stores that sell bulk items, like major appliances, usually provide delivery and installation services. Upscale department stores may offer tailoring for their clothing lines and more personal service.
• Distance Retailing
Rather than visiting a store to make a purchase, a customer may order products from a remote location. This may be done by mail, telephone, internet/email or other digital device such as interactive television and even from a refrigerator. Physical Stores v Virtual Stores
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Retail Management Retailers that practice distance retailing may also have physical stores, such as Wal-Mart. Others may not, such as Amazon and Arkay Hygiene Products All manner of products can be sold in this way, from food groceries and large items like beds, that are usually delivered by dedicated vehicles, to many smaller non-food items that tend to be delivered by a courier or by parcel mail, such as fly killers. The range of products on offer is only limited by the budget of the customer and the shipping infrastructure available in a given region.
Advantages of Distance Retailing to the Customer The customer does not need to travel to the store in order to purchase goods, saving time and travel costs. Browsing through different catalogues or on the internet or mobile phone can also save a lot of time compared with traveling from store to store.
Disadvantages of Distance Retailing to the Customer There are certain products that customers prefer to touch, feel and even try out before they purchase. An example of this is clothing. There is, however, a distinction to be made between different types of distance selling. For example, music can be sampled on the internet or some mobile phones but this cannot be done with printed catalogues. Some customers are uncomfortable purchasing goods at a distance if the seller isn't known to them. Whilst local stores will develop a word-of-mouth reputation in the community, it is harder to poll opinions for stores that are far away.
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Retail Management
• Door-to-Door Retailing
This kind of retailing is as old as retailing itself and is still very common, although less so in recent times. A door-to-door salesperson may be self-employed or employed by a company and will usually specialize in a particular product group, often household items. Although it is common for them to visit houses, they may also sell to businesses.
Area of Coverage Door-to-door salespeople can be split into two main groups. The first group are those that stay in one locality, selling to regular customers. Greengrocery or fresh meat sales are typically made by these local salespeople. They will have regular “rounds” and will try to time their visit so that they appear at a given location at the same time each week (or day or month). This way, customers may come to depend on them. The local door-to-door salesperson may also try to extend their round to take in more customers. The second group are travelling salespeople. They may procure goods in a more opportunist way, taking advantage of a bargain when it comes along, or buying goods to coincide with environmental changes or particular events in the calendar. For instance, such a salesperson may sell warm clothes at the onset of cold weather but also sell gifts at festive times. Once they have sold their goods, or reached the point where they have few customers left to sell to, they will move to another area and repeat the process. As well as buying goods to sell on, they may also sell goods that they have made themselves or that their family or
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Retail Management community have made. They also may provide services to customers, such as mending, sewing, light maintenance, knife sharpening etc. Advantages One advantage of being a door-to-door salesperson is that the overheads are relatively low. Some door-to-door salespeople will carry all of their stock on a vehicle but others may store it in their homes or a small warehouse (sometimes known as a “lock up”). They can also be flexible in the range that they can carry. This can allow them to be very up-to-date with the products that they can offer.
Disadvantages Disadvantages include the lack of security in travelling door-to-door whilst carrying a high value of stock or money (some door-to-door salespeople can take card payments, thus reducing the risk of carrying a lot of money). Another disadvantage is that where a shop’s customers come to the shop, door-to-door salespeople spend a lot of valuable time and often transport costs visiting their customers - and there is no guarantee of a sale.
• Chains
If a store is successful, this will often encourage the owner or owners to attempt to repeat the success and open a similar store elsewhere. Thus, a chain of stores is established. Where a store chain comprises a few stores, it is very common for members of an extended family to run them. 1. Non-Franchised Chain 53
Retail Management 2. Franchise Store Chain 1. Non-Franchised Chain Structure Each store in a chain (or multiple store) is called a branch. The original store, or the most important store, may double as the head office. Very large chains may have a completely separate building as their head office. The way chain stores are managed can vary from a centrally controlled operation at one extreme where virtually all decisions are made by the head office, to the other extreme where each store can be run as a mini business and simply return a profit to the centre. It is very common for chain store management arrangements to be somewhere in between these extremes, where smaller scale and local decisions are made by the branches and decisions affecting the whole chain are made by the head office. Economies of Scale As the chain grows in size and total sales volumes increase, the company managing the chain is able to purchase goods for the stores at terms that are more favourable. They can also exert more influence over the attributes of the goods they buy and sell such as the sourcing, the products' features, the packaging they come in and even the distribution and logistics involved in getting them to the stores. Other benefits also arise, such as rationalising some management tasks across the whole chain and having uniform procedures and systems common to all of the stores. They can also rationalise marketing across the chain. This not only is more efficient, it also allows marketing messages to be more potent. An example of a non-franchised chain is Wal-Mart.
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Retail Management 2. Franchise Store Chain Some companies will concentrate their resources on marketing their brand rather than developing a chain of stores. The marketing creates demand for the brand, which may be a group of unique products or may be a unique sales format. The founding company will then franchise others to open their own stores and to sell the brand. The company that establishes the franchise operation is the franchisor. The storekeeper is the franchisee.
Symbiotic Arrangement This can be a symbiotic arrangement because the franchisor has a sales outlet for its brand and the franchisee benefits from the marketing and/or partexclusivity of selling a unique brand. Exclusivity Often the franchisee is restricted to purchasing the brand exclusively from the franchisor. Franchisor Control The purchase of point of sale material and shop fixtures will also be under the direction of the franchisor in many cases, and the design of the store and the methods and procedures carried out by the staff may also be under the franchisor's instruction.. Some franchises are so valuable that the franchisor can charge money just for a license to open a franchise outlet before any trading has taken place. 55
Retail Management
•
Party and Event Retailing
This is usually a form of franchising where the retailer invites people from the locality to a common location. The event or the party will be a mix of socializing and retailing, usually themed around the products on offer. Most commonly, the retailer will be a franchisee to a wider organisation. Products Although party and event selling can involve a variety of goods, it is very common that cosmetics, small household goods, clothing and sex-aids are sold. Low Cost Party selling is common throughout the world and can be a low cost way of retailing for both the franchisor and franchisee. Samples Often the franchisor will supply samples and a small selection of goods to the franchisee so that their potential customers at the event can try the products out. Recruitment These parties can also be used to recruit new franchisees.
• Single Independent Non-Franchised Store
A single independent store may be run an individual, but is more typically run by a family. (Chanakya Sweet Shop near Hazratganj in Lucknow)
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Retail Management Decline In highly industrialized regions, these types of outlets have decreased in number, in favour of franchise operations or chains. Products and Catchment They may be general stores, catering to a limited geographical range or may sell specialised products to a wider area.
Pros and Cons The advantages of single independent stores are that they can be tailored to their customers needs and offer a more personal service. One of the main disadvantages is that the running costs may not be as favourable as with a chain or franchise. If the store is selling general goods, the costs of purchasing stock will also be higher.
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Street Market
The tradition of selling from market stalls goes back to the early days of retailing where traders could gather in one area to sell their wares.
Location Street markets, or open-air markets, are common around the world and are particularly popular in temperate or warm climates. Regulation
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Retail Management In many countries, street trading has been increasingly regulated through history. In England, towns were given rights by the King or Queen of the day to hold a market. These charters specified the nature of the market and laid down the days when it could operate. Some towns had a permanent market while others were permitted to hold their market just one or two days in the week (or even less frequently). Many of these arrangements continue to this day. Types of Street Market Retailer Street market traders can be put into two categories, (i) those that sell goods opportunistically, taking advantages of low cost goods that come available, or environmental and other conditions that temporarily increase demand for particular products; (ii) those that regularly sell one product type to regular customers. Governance The way that street markets are operated and governed vary. The following variations are possible, including a mix of some of them: 1. No formal governance. Traders will simply share a space along a road (or an off-street area) and trade as separate businesses. This type of arrangement has little or no bureaucracy and can be very efficient for the traders. Often traders will not pay any rent for their space (or "pitch"). Many traders will keep their pitch for many years, even handing their "right" to this space from generation to generation. Although it can be advantageous to the incumbent stall holders, this can lead to a lowering of competition as new stall holders find it difficult to come onto the market. Occasionally this informal arrangement can lead to gangsterism and even violence between stall holders and with potential stall holders. It could also give rise to protection rackets and other illegal activity.
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Retail Management 2. Council Run Street markets are commonly run by local councils, who set the regulations and, where appropriate charge rental fees. The regulations can range from informal arrangements involving the allocation of street area only to very strict regulations with an enforcement regime where traders may be inspected regularly for health and safety and other legal requirements and may be restricted to selling certain types of goods. As well as renting plots of land, some councils may even rent the stalls themselves, which may be permanent fixtures on a street (or off-street area).
3. Run by a Company A company may own or rent a street (or an off-street area) and, in turn, rent small plots of land to stallholders. They may also impose regulations in a similar way that councils do. Some companies such as large retailers, may have a street market on their forecourt or other area that they own. Good street markets can attract many shoppers. A retailer may find that having a market outside their bricks and mortar store may be good for their trade. They may charge a low rent or no rent at all in order to encourage stall holders to trade on their land and to keep their prices low, thereby attracting more customers. They, may, however, restrict stall holders to selling goods that do not compete with their own products, subject to competition laws that may exist in the jurisdiction. 4. Run by a Co-operative (Co-op) The stallholders themselves may own or rent the land on which their stalls are trading. They may contribute towards the costs of maintaining or paying for the site by each paying an amount of money. The amount paid may simply be commensurate with the amount of stalls they own, or may be linked to the amount of turnover they can achieve or may be negotiated on a stallholder-by-
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Retail Management stallholder basis. It is common for street trader co-ops to have regulations that are binding on each member. Once again, these regulations may range from a few informal rules to detailed and specific rules. Many co-ops will operate a democratic system whereby they may elect a leader, or a council (or both) to run the co-op, or may even vote on every decision. {mother diary} Pros and Cons The advantages of street market retailing are that it has relatively low overheads and allows flexibility. The disadvantages are that sales can be adversely affected in inclement weather and the stall (usually) needs to be set up each day, which can take a considerable amount of time and effort. There also needs to be an area for goods to be stored when the stall is not being used. •
Supermarket
A supermarket is defined in the Webster Dictionary as "a large self-service grocery store selling groceries and dairy products and household goods". It was also defined in a court ruling at the State of New York Court of Appeals in 1971 as "a retail market that sells foods, convenience goods, and household merchandise arranged in open mass display." History Neither of these definitions gives information on what size a store would be before it could be termed a "Supermarket". In addition the word "supermarket" means different things to different countries around the world, as global supermarket chains have discovered recently. However, it is certainly a fact that supermarkets began in the U.S. From the beginnings of the retail trade there has been a trend for general stores to increase in size and for specialist stores to combine (so called "combination stores"). It is believed that store chains have existed from as early as 2,200 years 60
Retail Management ago; the first self-service store was first introduced in 1916 in the U.S. So, all the elements of the supermarket were in place. In the absence of a universal definition for the supermarket there can be no authoritative reference point in history that marks the shift from small general stores to supermarkets. There are, however, important milestones, such as the growth of The Great Atlantic & Pacific Tea Company, which, in 1910 opened the Economy Store format, selling basic dry groceries such as tea, coffee and tinned foods. These items were sold in relatively high volume at low margin, another hallmark of the supermarket. They also only traded in ready cash and generally did not allow credit nor delivery to customers. This "cash and carry" concept grew rapidly over the coming years. After the introduction of self-service in 1916, and despite the recession that followed in the 1920's, many stores continued to consolidate and increase their sales volumes, thus improving their efficiency and buying power. The next two milestone were the introduction of faster means of transport, especially the motor vehicle, and the rapid take-up of home refrigerators. These two elements allowed more affluent consumers to require larger quantities of food in one shopping trip. As this one-stop-shop tendency spread throughout the U.S., shopkeeper and store chains became increasingly aware of the critical need to attract these customers to their stores. This resulted in the lower prices, but also drove these companies to try new ideas such as the Drive-In store. As these stores were specifically for car users, they did not need to be situated in the expensive centre of town but instead were typically found in lower rent neighbourhoods on the outskirts. Although the drive-in concept was short-lived, the idea of accommodating cars may have been the final piece of the jigsaw. By combining car-parking, selfservice, low prices with high volumes, the supermarket concept began in earnest in the 1930's in the U.S..All these elements were brought together in the mind of
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Retail Management Michael J. Cullen who suggested to his employers, Mutual Grocery and Kroger Stores, that they open a very large store on the outskirts of town selling national brands at low margin. His idea wasn't taken up by his bosses, so he decided to open his own store in a vacant garage in Jamaica Avenue, Long Island, Queens in New York. Its sheer size prompted customers to call it a "warehouse grocery store". To make this a true one-stop shop, Cullen had concessionaires retailing those goods that the store wouldn't ordinarily sell. This store, and the chain that followed, was enormously successful and was soon followed by many others. These stores not only attracted affluent car owners. The U.S. was in a recession and the low prices on offer attracted many poorer customers who would travel the extra distance in order to benefit from the savings they made on basic goods and the chance to buy items they otherwise could not afford.
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Van Retailing
This is a cross between door-to-door sales and store sales. The retailer will typically keep 1 day’s stock in their van and visit an area where they will service regular customers. They may occasionally visit an area that they do not usually go to in order to attract new customers. Van sales are common in rural areas and in less developed economies.
Static v Roving There are two types of van sales. One is where the van is parked in a common area and is visited by customers; ices and snacks are often sold this way. The other type of van sales is, in effect, the same as door-to-door selling. This is where the retailer uses the van to travel from house to house, selling to customers on their doorstep and using the van as a means to hold and carry stock. Products
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Retail Management The kinds of products sold from vans tend to be everyday items such as cleaning products. Snack foods and ices may also be sold from vans. Vans specifically designed to work at a very low temperature may specialize in frozen food sales. Regulation In some states, the area that van sales can cover and the products that can be sold may be subject to regulations and may require licensing. "Van Wars" Occasionally there are disputes between van sales competitors especially when they are competing in the same area. •
Warehouse Club
Warehouse club stores and super centers sell a mix of products (and services) in fixed quantities at low prices.
Products These stores typically include an assortment of food items, often sold in bulk, along with an array of household and automotive goods, clothing, and services that may vary over time. Membership These stores often require that customers purchase a membership to the store that entitles them to shop there. They offer minimum service and usually require the customer to take home their purchases.
Retail outlets are also classified as follows:
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Retail Management Conceptual classification of a business unit provides the marketers with strategic guidelines, useful in the design of retailing strategy. Besides, retail businesses are extremely diverse and there are quite a few types of retail units. Therefore, retail units are classified on multiple of ownership, geographical locations, kind of customer interaction level of services provided etc.
I. Retailers Classified on the Basis of Ownership
One of the first decisions that the retailer has to make as a business owner is how the company should be structured. This decision is likely to have long-term implications, so it is important to consult with an accountant and attorney to help one select preferred ownership structure. There are four basic legal forms of ownership for retailers: 1. Sole proprietorship: The vast majority of small businesses start out as sole proprietorships. These firms are owned by one person, usually the individual who has the day-to-day responsibility for running the business. 2. Partnership: -
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Retail Management A partnership is a common format in India for carrying out business activities (particularly trading) on a small or medium scale. In a partnership, two or more people share ownership of a single business. 3. Joint venture: A joint venture is not well defined in the law. Unless incorporated or established as a firm as evidenced by a deed, joint ventures may be taxed like association of persons, sometimes at maximum marginal rates. It acts like a general partnership, but is clearly for a limited period of time or a single project. 4. Limited liability Company (public and private):The Limited Liability Company (LLC) is a relatively new type of hybrid business structure that is now permissible in most states. The owners are members, and the duration of the LLC is usually determined when the organization papers are filed. II. Classification of Retailers on the basis of Operational Structure Retail businesses are classified on the basis of their operational and organizational structure. Operational structure defines the key strategic decision of retail entity, whether to hire employees and manage the distributed sales function internally or to reach customers though franchised outlets owned and operated by local entrepreneurs. Retail firms can be classified into five heads on the basis of their respective operational structures: 1. Independent retail unit: The total number of retailers in India is estimated to be over 5 million in 2003. About 78% of these are small family businesses utilizing only household labour. An independent retailer owns one retail unit. 2. Retail Chain: -
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Retail Management A chain retailer operates multiple outlets (store units) under common ownership; it usually engages in some level of centralized (or coordinated) purchasing and decision making. 3. Franchising: Franchising involves a contractual arrangement between a franchiser (which may be a manufacturer, a wholesaler, or a service sponsor) and a retail franchisee, which allows the franchisee to conduct a given form of business under and establishments name and according to a given pattern of business. 4. Leased Department or Shop-in-shop:It refers to department in a retail store that are rented to an outside party. Usually this is done in case of department and speciality stores and also at times, in discount stores. 5. Co-operative Outlets: Co-operative outlets are generally owned and managed by co-operative societies. In this context the example of Kendriya Bhandar in India is the best suitable.
III. Classification of Retailers on the basis or Retail Location Retailers have also been also been classified according to their store location. Retailers can locate their stores in an isolated place and attract the customers to the store on their own strength—such as a small grocery store or paan shop in a colony, which attracts the customers staying close by. Classification of retailers on the basis of location is discussed below: 1. Retailers in a free-standing location:Retailers located at a site which is not connected to other retailers depend
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Retail Management entirely on their sore’s drawing power and on the various promotional tools to attract customers. This type of location has several advantages including no competition, low rent, better visibility from the road, easy parking and lower property costs. For example, the Haldiram’s outlet on the Delhi- Jaipur highway and the McDonald’s outlet on Delhi-Ludhiana highway. 2. Retailers in a Business-associated Location:In this case, a retailer locates his store in a place where a group o retail outlets, offering a variety of merchandise, work together to attract customers to their retail area, and also compete against each other for the same customers.
3. Retailers in Specialized Markets: Besides the above location-based classification, we also have in India-retailers who prefer specialized markets, particularly traditional independent retailers or chain stores. In India, most of the cities have specialized markets famous for a particular product category. For example, in Chennai, Godown Street is famous for clothes, Bunder treet for stationery products, Usman street for jewellery, T Nagar for ready-made garments, Govindappan naicleen street for grocery, Poo Kadia for food and vegetables. 4. Airport Retailing: For quite some time, duty-free shops and newsstands dominated the small amount of commercial space provided at airports. Lately, serious efforts are being made to design new airport facilities in order to incorporate substantial amounts of retail space. The key features of airport retailing are:
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Retail Management • • • • • • • Large groups of prospective shoppers ?Captive audience ?Strong sales per square foot of retail space ?Strong sales of gift and travel items ?Difficulty in replenishment ?Longer operating hours ?Duty-free shopping possible.`
CATEGORIZING RETAILERS
Categorizing retailers helps in understanding the competition and the frequent chang1\es that occur in retailing. There is no universally accepted method of classifying a retail outlet, although many categorization schemes have been proposed. Some of these include classifying on the basis of • • • • Number of outlets Margin Vs Turnover ?Location ?Size
Number of Outlets: The number of outlets operated by a retailer can have a significant impact on the competitiveness of a retail firm. Generally, a greater number of outlets add strength to the firm because it is able to spread fixed costs, such as advertising
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Retail Management and managers’ salaries, over a greater number of stores in addition to acquiring economies of purchase. While any retailer operating more than one store can be technically classified as a chain owner, for practical purposes a chain store refers to a retail firm which has more than 11 units. In the United States, for example, chain stores account for nearly 95% of general merchandise stores. Margin V/S Turnover: Small chains can use economies of scale while tailoring merchandise to local needs. Big chains operating on a national scale can save costs by a centralized system of buying and accounting. A chain store could have either a standard stock list ensuring that the same merchandise is stocked in every retail outlet or an optional stock list giving the outlets the advantage of changing the merchandise according to customer needs in the area. Because of their size, chain stores are often channel captains of the marketing channel—captains can influence other channel partners, such as wholesalers, to carry out activities they might not otherwise engage in, such as extended payment terms and special package sizes. Location: Big stores focus on large markets where their customers live and work. They use technology to learn more about their customers and target them with point-ofsale machines interactive kiosks, and sophisticated forecasting and inventory systems. They tend to stock a narrow range of inventory that sells well and maintain an extensive inventory of the fast selling products. Branding is important to them. Pricing is often a key area of focus for these retailers. Big stores have much strength, including regional or national reputation, huge buying power, vast inventory and hassle-free return and exchange policies. Their prime locations, the consistency in their products and services, the fact that they are open when people can and want to shop and the clear consistent image and identity they develop and maintain challenge the abilities and resources of many small
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Retail Management retailers. Perhaps their biggest advantage is their knowledge in every aspect of their business, from inventory selection to store layout. Size Large retailers are not perfect. They have competitive weaknesses that small retailers can exploit. Most offer the same standardized assortments of products nationally. Local managers have little say in inventory selection. Often, sales staff has minimal product knowledge. Staff turnover is extremely high. Most large retailers have little connection with the community they serve. They usually do not offer special services. Larger companies are often slow to recognize and react to changes in their local markets. Independent retailers can co-exist and flourish in the shadow of the big chains by developing a niche within the diverse market. The niche should be developed on the basis of new or unusual product offerings, superior service and overall quality. While value is important, price may be less important. Efficient operations, including precise buying practices, are a must. Customer contact within the niche market must be characterized by ‘hightouch’ service. The key factor is innovation: stores that do not change will perish. The road to success for the independent retailer lies in doing all the things those big chain stores can not or will not do.
The successful independent retailers embrace the following principles: • • • • • • • • ?Be prepared for change. ?Move to a narrower niche market and stop competing directly with the big retailers. Learn more about customers and include best customers in a database. ?Invest appropriately in advertising and promotion. ?Charge regular prices and avoid discounting (ensure requisite mark-up). ?Buy with precision and search out speciality suppliers. ?Maintain essential inventory. ?Focus on profit instead of volume (be ready to lose an occasional sale). 70
Retail Management • • • ?Provide extraordinary service. ?Employ the best possible staff. ?Understand the significance of the Internet.
CHARACTERISTICS OF RETAILING
Retailing can be distinguished in various ways from other businesses such as manufacturing. Retailing differs from manufacturing in the following ways: ? ?There is direct end-user interaction in retailing. ? ?In is the only point in the value chain to provide a platform for promotions. ? ?Sales at the retail level are generally in smaller unit sizes. ? ?Location is a critical factor in retail business. ? ?In most retail businesses services are as important as core products.
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Retail Management ? ?There are a larger number of retail units compared to other members of the value chain. This occurs primarily to meet the requirements of geographical coverage and population density.
FUNCTIONS OF RETAILING
Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and consumers. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services.
• SORTING
Manufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to reduce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and
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Retail Management usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units. The above process is referred to as the sorting process. Through this process, retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are able to choose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers would have to visit several stores to complete their shopping. While all retailers offer an assortment, they specialize in types of assortment offered and the market to which the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers’ Stop targets the elite urban class, while Pantaloons is targeted at the middle class.
• BREAKING BULK
Breaking bulk is another function performed by retailing. The word retailing is derived from the French word retailler, meaning ‘to cut a piece off’. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.
• HOLDING STOCK
Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the
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Retail Management manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs.
• ADDITIONAL SERVICES
Retailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay foe it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.
• CHANNEL OF COMMUNICATION
Retailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.
• TRANSPORT AND ADVERTISING FUNCTIONS
Small manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the
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Retail Management other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits.
As a result of these functions, retailers are required to perform the following activities:
ACTIVITIES PERFORMED BY RETAILERS
Retailers undertake various business activities and perform functions that add value to the offerings they make to their target segments. Retailers provide convenient location, stock and appropriate mix of merchandise in suitable packages in accordance with the needs of customers. The four major activities carried out by retailers are: 1. Arrange for assortment of offerings 2. Breaking quantity 75
Retail Management 3. Holding stock 4. Extending services
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ARRANGING ASSORTMENT
An assortment is a retailer’s selection of merchandise. It includes both the depth and breadth of products carried. Retailers have to select the combination of assortments from various categories. The assortments must include substitutable items of multiple brands and price points. They should be distinguished on account of physical dimensions and attributes e.g., colour or flavour. The small retailer takes assortment decision on the basis of his experience; on the other hand retailers from organized retailing depend on a detailed study of past trends and future projections. Retailers need to consider certain factors while devising assortment plans for their stores: profitability associated with particular merchandise mix, store image, layout and the level of compatibility between the existing merchandise. For example, FoodWorld, a leading food supermarket positioned as a one-stop shopping centre, deals in multiple product categories along with all possible variants of brands, stock keeping units, and physical attributes in order to meet the expectations of their consumers and survive in the business. Whereas, Subhiksha, a grocery chain in south India has impressive assortments of only the fast moving brands rather than all available variants in the market. Their assortment plan is governed by location, size and store image of their stores.
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BREAKING BULK
Breaking bulk means physical repackaging of the products by retailers in small unit sizes according to customer’s convenience and stocking requirements. Normally, retailers receive large quantities of sacks and cases of merchandise from suppliers to reduce their transportation costs. In order to meet their customers’ requirements retailers have to break or arrange the bulk into convenient units. This entire function of the retailers adds value to the offerings
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Retail Management not only for the end customers but also for the suppliers in the value chain. Even in the earlier days of generic and commodity-based trading most of the retailers used to perform this important function in the value chain. This function receives negligible attention from the retailers now due the introduction of new product categories, such as FMCG and ready-to- wear apparel. • HOLDING STOCK
To ensure the regular availability of the offerings retailers maintain appropriate levels of inventory. Consumers normally depend on the retailers directly to replenish their stocks at home. Therefore, retailers, on periodic basis, maintain the required levels of stock to meet the regular or seasonal fluctuations in the demand. Retailers need to maintain equilibrium between the range or variety carried and the sales which it gives rise to. Retailers have to face the negative consequences of holding unwanted levels of stock—for instance, too little stock will hamper the sales volume, whereas, too much stock will increase the retailer’s cost of operation. Generally, in small towns of India most retailers have arrangements with the nearby warehouses to stock the goods. Some are so small that they have to stock only on the shop floor. Retailers in the organized sector, to a certain extent, are using effective software packages for maintaining adequate levels of inventory. At the same time, retailers avail of just-in-time deliveries with the help of efficient consumer response systems, which reduces the burden of maintaining high levels of stocks. • EXTENDING SERVICES
Retailing provides multiple services to immediate customers and other members of the value chain. The set of services extended by particular retailers may be part of their core product offerings or it may be ‘add on’ to their product or service. Retailers offer credit, home delivery, after-sales services and information regarding new products to their customers, thereby making the shopping experience convenient and enjoyable. At the same time, they provide stocking place, reach to the ultimate customers, and information about the concerned
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Retail Management target segment to the suppliers. For example, Time Zone, the first organized retail chain of wristwatches in India, started by leading watch manufacturers Titan, set up in all its stores, service centres with proper equipment and trained manpower. This has not only diluted the relevance of service providers in the unorganized sector but has also enhanced the confidence of the customers in the retai9l services provided by the particular retail chain, as after-sales service is considered to be an integral ingredient of the watch purchase.
CURRENT SCENARIO IN INDIA
The Indian population is whooping 1 billion with 75% of the people living in villages and small towns. It is only natural that the agricultural sector is the biggest employer with its contribution to GDP pegged at 26.7%. Retail is India’s largest industry after Agriculture with around 20% of the economically active population engaged in it and generating 10% of our country’s GDP. The growth of the efficient small store culture can be attributed to the 6 million Villages distributed across the length and breadth of the country. The 12 million retail outlets in India are the highest in the world, and cater to the purchase need of its poll. It is interesting to note, that the Urban Population although just 25% of
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Retail Management the total, is an astounding 250 million in size and is growing at a healthy rate of 7% per annum. The main driver of growth in the retail sector has been the consumer, with the spending power increasing at an average of 11% per annum. The Core and the Lower middle have increased their share in the Growth. The Indian consumer’s shopping needs are and traditionally have been fulfilled by Kirana sores (corner stores), Kiosks, street vendors, weekly bazaars and high-street shops for consumer durables and luxury goods. To cater to this, each city developed its own identity and shopping cluster. For instance in Pune there is MG Road, Bangalore has Brigade Road and Commercial Street, Delhi has Connaught Place, Karol Bagh and South Extension. India will have 358 shopping malls by 2007. Droves of middle-class Indians have broken off their love of traditional stand-alone shops that have no ACs, organized parking lots and other public amenities, according to a study by fashion magazine Image. At present ( survey done on September 23, 2005), In India we have 96 malls, covering an area of 21.6 million sq ft. And by year end the count will shoot up to 158 malls. It will cover 34 million sq ft area. • • • • • • • • • Currently estimated at $205 billion to grow to $400-500 million, over the next 2-3years. Smaller cities will have about 12.8 million sq ft of mall space by 2007. ?Ludhiana to account for 2.5 million sq ft. ?Ahmedabad about 3.4 million sq ft. ?Delhi and Mumbai now have maximum number of shopping centres. ?Gurgoan saw the largest development in terms of retail outlet. ?North region has 39% of India’s retail share. ?East region has 10% of India’s retail share. West region has 33% of India’s retail share.
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Retail Management • • ?South region has 18% of India’s retail share. Government and co-operative sector is also making their steps in retailing. For example, Kendriya Bhandar, Apna Bazar, Mother Dairy, Super Bazar etc.
MAJOR RETAILER SPACE HOLDERS IN INDIA
ORGANIZATION Bata RPG Raymond Pantaloon/Big Bazaar Metro cash-n-carry Spencer LifeStyle Shoppers Stop Trent Globus Piramyd Area Sq. ft 10,00,000 6,00,000 5,42,000 5,00,000 3,00,000 2,80,000 2,50,000 2,00,000 2,00,000 1,75,000 1,50,000
SWOT ANALYSIS OF THE RETAIL MARKET IN INDIA
STRENGTH
1. Organized retailing at US$ 3.31 billion, growing at 8%. 2. 2nd largest contributor to GDP after agriculture at 20%. 3. Pattern of consumption changing along with shopping trends. 4. A Growing population will translate to move consumers. 5. Consumer spending increasing at 11% annually. 6. Almost 25 million sq. ft. retail space available. 7. Paradigm shift in shopping experience for consumers pulling in more people.
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Retail Management 8. Most of the entrants to organized retail come from 3 main categories, and have ventured into retail as their business extension. • • • Real Estate Developers Corporate Houses Manufacturers/Exporters
WEAKNESSES
1. Shortage of quality retail spaces at affordable rates. 2. Government regulations on development of real estate (Urban Land Ceiling Act) 3. Need to provide Value for Money-squeezing margins 4. Lack of industry status. 5. Retail revolution restricted to 250 million people due to monolithic urban-rural divide. 6. Footfalls not a clear indicator of sales as actual consumers lower in number. 7. Lack of huge investments for expansion.
OPPORTUNITIES
1. Increasing urban population-more participants in retail revolution. 2. Increase in consuming middle class population. 3. Social factors like dual household income has enhanced spending power. 4. Spending power is moving towards lifestyle products and esteem enhancing products. 5. Availability of old industrial lands-prime real estate locked in sick industrial units.
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Retail Management 6. Average grocery spends at 42% of monthly spends-presents a huge opportunity. 7. Increase in use of credit cards.
THREATS
1. Rising lease/rental costs affecting project viability 2. FDI restrictions in the retail sector 3. Poor monsoons and low GDP Growth could affect consumer spending drastically. 4. Archaic labour laws are a hindrance to providing 24/7 shopping experience 5. Personalized service offered by Mom-&-Pop stores. 6. Unavailability of qualified personnel to support exponential growth in retail. 7. Differentiate taxation laws hindering expansion.
RETAIL VIABILITY As per the CII McKinsey report, based on a GDP growth rate of 6-7% per annum, by 2010 the retail sector is expected to be US $ 300 Billion industry. Some of the major factors hindering the growth of this sector are as follows: I. ?The non-industry structure and status II. The lack of adequate infrastructure III. FDI restrictions in this sector IV. The huge investments required in expanding their markets, V. Problems associated with working Capital funding from lending Institutions.
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Retail Management
BIG BAZAAR: THE INDIAN WAL-MART
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Retail Management
Pantaloon Retail (India) Limited is today recognized as one of the pioneers in the business of organized retailing in the country with a turnover of over RS 400 crores in the financial year ending June 2003. The company is headquartered in Mumbai with zonal offices at Kolkata, Bangalore and Gurgaon (Delhi). It has 4 kinds of stores; 14 Pantaloon Family Stores, 7 Big Bazaar discount hypermarkets, 6 Food Bazaar Stores with over 6.5 lakh sq ft retail space across Kolkata, Mumbai, Thane Pune, Hyderabad, Bangalore, Bagpur, Ahmedabad, Kanpur, Chennai and Gurgaon (Delhi). Pantaloon Retail India Limited is the flagship company of the Pantaloon group promoted by Mr Kishore Biyani. It has been one of the pioneers in organized retailing in India. It began its retailing operations in India way back in 1987. Currently, it manufactures and sells ready-made garments through its own retail outlets and two discounting stores. The company plans to diversify into the business of discounting in a big way, which is targeted at the growing middle class segment. It has one of India’s largest retail chain with 17 retail outlets and two discounting stores branded as Big Bazaars across the country at an estimated retail space of 4,01,300 sq. ft. The company plans to double its retail space in the next couple of years. 84
Retail Management Pantaloon has come up with an excellent revenue model, focusing on ‘value for money’ segment. Pantaloon plans to target the upper middle and the middle class segment, which forms the large chunk of Indian population. This segment is very price conscious and always looks out for value for money. Pantaloon successfully launched its discount store chain, which targets the large and growing upper-middle and middle class of Indian society. This is totally in contrast to the other organized retail players, which focus on high net-worth of individuals. Big Bazaar has strong own brand names in its portfolio across product categories. The brands include Pantaloon, John Miller and Bare. Higher percentage of ‘own brand’ sales improves margins, thus reducing the breakeven level of sales. Big Bazaar has diversified from apparels to household items in its discount stores. This has enabled them to enlarge their basket of offerings.
DRIVERS OF CHANGE IN RETAILING
• • Changing demographics and industry structure Expanding computer technology
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Retail Management • • • • • Emphasis on lower costs and prices Emphasis on convenience and service Focus on productivity Added experimentation Continuing growth of non-store retailing.
In today’s competitive environment retailers have redefined their role in general, and in the value chain in particular. Retailers act as gatekeepers who decide on which new products should find their way to the shelves of their stores. As a result, they have a strong say in the success of the product or service launched by a business firm. A product manager of household appliances claimed, ‘Marketers have to sell a new product several times, first within the company, then to the retailer and finally to the user of the product.’ It is a well-established fact that manufacturers need to sell their products through retail formats that are compatible with their business strategy, brand image, and market profile in order to ensure a competitive edge. The role of retailers in the present competitive environment has gained attention from manufacturers because external parties such as market intermediaries and supplying partners are becoming increasingly powerful. It is necessary for marketers of consumer products to identify the need and motivations of their partners in the marketing channel. This is especially true in the case or new products. The increasing numbers of product categories followed by multiple brands in each category complicate decision-making for both manufacturers and market intermediaries. Retailers want of optimize sales within the limited shelf space, governed by their individual sales philosophy. Retailers undertake risk in selecting a portfolio of products or brands to offer to their customers. Retailers have to make optimum selection of goods to be sold given the following major concerns:
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Retail Management ? ?Selling space available is relatively fixed and must return maximum profits. If such space is occupied by merchandise that is not moving, it will not result in profit. The retailer may have to resort to substantial price reductions in order to get rid of the unsold stock. ? ?There is always the risk of non-performance in terms of quality, supplies etc., which in turn harms the image of the retail outlet. Retailing is a dynamic industry---constantly changing due to shifts in the needs of the consumers and the growth of technology. Retail formats and companies that were unknown three decades ago are now major forces in the economy. Therefore, the challenges for retail managers the world over are increasing---they must take decisions ranging from setting the price of a bag of rice to setting up multimillion dollar stores in malls. Selecting target markets, determining what merchandise and services to offer, negotiating with suppliers, training salespeople---these are just a few of the many functions that a retail manager has to perform on a perpetual basis. The world over retail business is dominated by smaller family run chain stores and regionally targeted stores but gradually more and more markets in the western world are being taken over by billion dollar multinational conglomerates, such as Wal-Mart, Sears, McDonald’s, Marks and Spencer. The larger retailers have managed to set up huge supply/distribution chains, inventory management systems, financing pacts and wide-scale marketing plans. In the backdrop of globalization, liberalization and highly aware customers, a retailer is required to make a conscious effort to position himself distinctively to face the competition. This is determined to a great extent by the retail mix strategy followed by a company to sell its products.
FACTS ABOUT THE RETAIL INDUSTRY
GLOBAL RETAIL-INDUSTRY-RELATED FACTS ? Worldwide retail sales are estimated at US $7 trillion. 87
Retail Management ? ?The top 200 largest retailers account for 30% of the worldwide demand. ? ?The money spent on household consumption worldwide increased by 68% between 1980 and 1998. ? Retail sales are generally driven by people’s ability (disposable income) and willingness ( consumer confidence ) to buy. ? ?The 1998 UNDP Human Development Report points to the fact that global expenditures on advertising are ( including in developing countries ) increasing faster than the world economy, suggesting that the sector is becoming one of the major players in the development process.
REGIONAL FACTS ? Retail industry in India has emerged as one of the most dynamic and fast paced industries with several players entering the market. The Indian retail sector has been dominated by small independent players such as traditional, neighborhood grocery stores. ? In the 1990s, organized, multi-outlet retail gained momentum, which has since accelerated. ? The retail sector in India is on a veritable take-off stage and organized retailing, which currently accounts for about $6 billion, is expected to touch $17 billion by 2010, according to a recently released study by the Associated Chambers of Commerce & Industry (ASSOCHAM). ? In 2006 itself, the organized retail industry is expected to grow to $8 billion. Overall, the sector is likely to grow into a $200-280 billion enterprise by 2010. ? India's retail industry generates 10% of the country's gross domestic product (GDP. Multi-brand stores, malls, and franchises are currently estimated to be only 3% of the total retailing business in India.
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Retail Management ? Organized retail, however, is now poised for an exponential growth. It's expected to log 25-30% growth per annum until at least 2010.
Growth in retail outlets (millions) Year 1978 Urban 0.58 Rural 1.76 Total 2.35
1984 1990
0.75 0.94
2.02 2.42
2.77 3.36
1996
1.80
3.33
5.13
Source: indiainfoline
Composition of urban outlets Retail Outlet Composition
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Retail Management Grocers Cosmetic stores Chemist Food stores General stores Tobacco, pan stores others 34.7% 4.0% 6.3% 6.6% 14.4% 17.0% 17.0%
Source: indiainfoline
Composition of rural outlets Retail Outlet Grocers General stores Chemists Others Composition 55.6% 13.5% 3.3% 27.6%
Source: Indiainfoline
RETAIL CUSTOMER BEHAVIOUR
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Retail Management Consumer buying behaviour refers to the buying behaviour of the ultimate consumer. Consumer behaviour is the study of how consumers make decisions to use their respective resources such as time, money and effort for buying, using and disposing goods and services. The behaviour of humans as consumers is complex. Marketers’ understanding of the drivers of consumers’ buying behaviour will help them to serve their customers effectively and efficiently and attract new customers. In the retailing context marketers are required to understand customers’ shopping behaviour, which includes decision variables regarding, among other things, brand selection, shopping timing and choice of retail format and store. Consumers’ shopping behaviour can be understood by analyzing the factors that affect behaviour. These factors could be demographic, psychological, environmental or related to the lifestyle of the customer. It is equally important for the retailer to identify the various stages in the consumer decision-making process and the major influences at each stage. This would make possible an effective retail marketing strategy.
WHY DO PEOPLE SHOP?
It has been suggested that consumer shopping activities are influenced by personal and social motives. Consumers’ motives are important and positively related to their pleasure and satisfaction while shopping in terms of retail choices. a) Personal Motives • Role playing—shopping activities are learned behaviours and are expected or accepted as part of one’s position or role, such as mother or housewife. • Diversion—shopping may be motivated not by the expected utility of consuming, by the utility of their buying process itself. Thus, emotional states or moods may explain why or when someone goes shopping.
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Retail Management • Learning about new trends—shopping provides consumers with information about trends and movements and product symbols reflecting attitudes and lifestyle. • • Physical activity—it involves considerable amount of exercise. Sensory stimulation—shopping can provide sensory benefits such as looking at and handling merchandise, listening to the sounds and smelling scents.
b) Social Motives ? ?Social experience outside home—shopping can provide opportunities for seeking new acquaintances, encounters with friends or just ‘people watching’. ? ?Communication with other similar interests—it provides opportunity for interactions with other customers or sales people. ? ?Peer group attraction—certain stores provide a meeting place where members of peer group may gather. ? ?Status and authority—shopping may provide an opportunity to attain status and power by being waited. ? ?Pleasure Bargaining—shopping may offer the enjoyment of gaining a lower price through bargaining comparison shopping or visiting special sales.
Having understood why people shop it is important to analyze the factors that affect the consumers’ decision making process regarding what, when and from where to shop.
FACTORS AFFECTING CONSUMER DECISION-MAKING
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Retail Management A consumer’s purchase decision tends to be affected by the following four factors: 1. Demographic 2. Psychological 3. Environmental 4. LifeStyle DEMOGRAPHIC FACTORS Demographic factors are unique to a particular person. They are objective, quantifiable and easily identifiable population data. It also involves identification of who is responsible for the decision-making or buying and who is the ultimate consumer. The following points come under demographic factors: • • • • • • Gender Age Occupation Education Family size Income
PSYCHOLOGICAL FACTORS Psychological factors refer to the intrinsic or inner aspects of the individual. An understanding of consumers’ psychology guides the marketers’ segmentation strategy. The following interpret psychological factors: • • • • • Intuitive Perception Learning Attitude Personality
ENVIRONMENTAL FACTORS
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Retail Management Environmental factors cover all the physical and social characteristics of a consumer’s external world, including physical objects, spatial relationships, the social factors, co-customers, reference groups, social class. The environmental factors influence consumers’ wants, learning, motives, which in turn influence effective and cognitive responses and among other things the shopping behaviour of the individual. • • Physical Environment Social Environment—culture, social class
LIFESTYLE Lifestyle refers to an individual’s mode of living as identified by his or her activities, interests and opinions. Lifestyle variables have been measured by identifying a consumer’s day-to-day activities and interests. Lifestyle is considered to be highly correlated with consumer’s values and personality. An individual’s lifestyle is influenced by, among other things, the social group he belongs to and his occupation. For example, double-income-no-kids (DINKS) families in metros shop very regularly at the super malls because of the limited time at their disposal and they also look for entertainment while shopping on weekends. At the same time, they are higher spenders than, for e.g., singleincome families. • • Activities and interests Nature of occupation
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Retail Management A study by imagesfashion.com highlights that Indian working women have to balance their wardrobe collection based on requirements of different occasions related to professional workplace or family gathering.
Dress working women prefer for different occasions Occasions In Office At Home To Party While Shopping During Festivals Family Occasions While Travelling Western wear 66.7 77.8 69.7 85.9 3.1 17.2 89.9 Ethnic wear 31.3 20.2 30.3 11.1 93.9 80.8 10.1 Total 100 100 100 100 100 100 100
Source: imagesfashion.com Men-The Major Decision-Maker In India consumption-related family decision-making in all areas—ranging from which cars to buy to what cloth manufacturers to patronize—is dictated by men when it comes to the most upscale market segment in India.
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Retail Management
WHO DECIDES? Decision Buying a house Child’s marriage Own marriage Child’s education Taking a loan Fixing monthly Budget Buying entertainment Durables, such as TVs Buying durables such as washing machines Deciding on holiday destinations 23.6% 6.1% 28.4% 31.8% 4.5% 5.6% 19.3% 20.6% 21.4% 10.7% 8.2% 33.3% 33.4% 26.2% 26.7% 8.2% 1.6% 1% Self 25% 7.7% 20.4% 15.1% 31.4% 24.2% Spous e 5.8% 5.9% 2.5% 6.6% 5% 10.3% Joint 20.8% 21.8% 6.2% 34% 24.3% 33.3% Family 30.1% 18.7% 22.4% 12.5% 18.1% 18.5% Elder s 14% 11.5% 29.7% 5.6% 9.2% 11.2% Children 0.4% 4% 0.9% 4.6% 0.6% 0.6%
CONSUMERS’ IMAGE OF RETAIL STORES
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Retail Management A consumer’s image of a store is the summation of his attitudes towards various aspects of that store. Retail marketers have provided considerable importance to consumers’ attitude and images in store selection and rejection. Every retail store possesses an individuality that differentiates it from its competitors. A retailer must devise a strategy to communicate its individuality or personality across to its target segments to build their confidence in its merchandise and services. Consumer decision-making is a process of matching self-imaged with the image of relevant retail store to meet their specific needs. It is argued that where there is some degree of congruity of individual’s self-image and his image of a store or brand, there is a strong possibility of positive behaviour towards that particular store or shopping centre. The measurement of consumers’ images of the store and measurement of consumers’ self-images aid retailers in segmenting the consumer population into groups by demographic characteristics or patronage practices based on differences in the image of the retail store or shopping centre.
RETAIL IMAGE DIMENSION
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Retail Management To measure the image of a retail store or shopping centre, it is essential to identify and aggregate the relevant consumer attitudes. Lot of work on factors influencing consumers’ attitudes towards sores in terms of shopping practices and in terms of store characteristics has been done in the West but it is an emerging field in the developing countries. The most comprehensive presentation is Fisk’s ‘conceptual model’ in which he summarizes store qualities as cognitive dimension. These dimensions can be used to identify relevant attitudes and assist in the development of measurement instruments for a particular retail store. These dimensions do not constitute an exhaustive list of retail store characteristics for every tore to measure the store image. One has to revise the list in respect of the product category they are in the retail format they have adopted and the competition they are facing along with characteristics of their target segment.
Dimension Determinants
1. Locational convenience o Access route o Traffic barrier o Travelling time o Parking availability 2. Merchandise suitability • • • • • Number of brands stocked Quality of line Breadth of assortment Depth of assortment Number of outstanding departments in the store.
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Retail Management 3. Value for price • • • • Price of a particular item in a particular store. Price of same item in another store Price of same item in a substitute store Trading stamps and discounts • • • • • • • 5. Congeniality • • • • • • • • • Store layout Store décor Merchandise displays Class of customers Store traffic and congestion 6. Post-transaction satisfaction Satisfaction with good in use Satisfaction with returns and adjustments Satisfaction with price paid Satisfaction with accessibility to store Courtesy of sales clerks Helpfulness of sales clerks Reliability and usefulness of advertising Billing procedures Adequacy of credit arrangements Delivery promptness and care Eating facilities
4. Sales effort and store services
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Retail Management
SAMPLE OF A CUSTOMER PROFILE AND ANALYSIS
Customer research helps a retailer in defining the customer segment he can and should serve and how he can serve them more effectively and profitably. A useful customer research would like to find answers to the following questions. ? ?When do customers like to shop? ? ?How do customers like to pay? ? What quality of merchandise do customers usually prefer? ? ?What type of store has the maximum appeal for my customers? ? ?How do customers handle servicing of the mechanical products purchased by them? ? Who does most of the buying in the homes of my customers? ? ?What is the income level of my average customer? ? ?What is the general attitude of my customer towards his community? ? ?How does my customer react to new and different merchandise or promotional activities? ? What major changes has my customer made in the last two years? Based on the above customer profile, retailers will have a good idea of how to serve the needs of the target market. This would also enable the retailer to suitably tailor the advertising to appeal to the target market. Advertising in various local publications could then be a good way to reach this segment. Depending on the product or service, the customer profile study should include information relevant to the target market. Many companies seek out information on a potential user’s lifestyle, loyalty and spending habits. Businesses that advertise heavily want to know the media habits of potential customers as well. All the information that will help the retailer to promote and sell his product better should be included in the customer profile study. An understanding of consumer behaviour is important in order to formulate and Implement effective retail marketing strategies. Consumer behaviour in turn is affected by various factors specific to the consumer and the external
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Retail Management environment. These factors could be classified as intrinsic and extrinsic; the former deals with motives, perceptions and attitudes of the consumers and the latter deals with influences such as family, social class, culture and economic environment. Marketers usually identify niches by dividing a segment into sub-segments. For example, the retailer may divide the segment of working women into tow subsegments, those with children and those without children.
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Retail Management
THE 5 P’S OF RETAIL MARKETING
1. PROCESS:SEGMENTING, TARGETING AND POSITIONING Market segmentation is the process of dividing the heterogeneous total market into small groups of customers who share a similar set of wants. Each of these smaller groups possesses somewhat homogeneous characteristics. As in case of marketers in other businesses, marketers in the business of retiling may also seek the benefits of market segmentation depending on his unique market and business context. A retailer may divide women customers into two segments, working women and housewife, if it finds that these two groups have different sets of needs. Segmenting is thus an aggregating process—clustering people with similar needs into a market segment. A segment is a relatively homogeneous group and hence responds to a marketing mix in a similar way. Different groups or segments require different promotional strategies and marketing mixes because they have different wants and needs. A niche is a more narrowly defined group seeking a distinctive mix of benefits. Retail marketers are required to recognize the three stages of market segmentation: segmenting, targeting and positioning. According to this approach, the segmentation process begins with the aggregation of customers into groups to maximize homogeneity within and heterogeneity between segments. Once the market segments are identified, detailed profiles of customers in each segment should be developed. Such profiles would include demographic information on age, income level, education etc., on psychographic variables such as motives, attitudes, perceptions, values and beliers, which help to understand customers’ lifestyle and behavioural information such as customers’ shopping and consumption habits including product usage, frequency of purchase. Customer profiles help the retailers in understanding the behaviour of target markets.
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Retail Management
Stages in marketing segmentation The retailers should also be constantly looking for the emergence of new segments and search new dimensions on which the markets can be segmented. After the markets are segmented and profiled, the retailers have to decide which segments to target and focus on and how many segments to target. The retailers have to evaluate the attractiveness of each segment by estimating its size, rate of growth etc. Before selecting the target segments it should also ensure that needs of the target segments match with retailer’s business model—its product range, promotional programmed. After the target segments are identified and chosen, the retailer has to develop it positioning strategy. For effective positioning, a detailed understanding of the needs of the target segment is necessary. Market research may be carried out to get such an understanding. Finally, an appropriate marketing strategy has to be developed to create positive perceptions in a customer’s mind and achieve the desired market positioning. Market segmentation helps the retailer in understanding customer requirements and in developing an appropriate marketing mix. It helps the retailer in merchandising decision—deciding what to stock and in what quantities. Understanding requirements of target segments also helps in developing an effective promotional programme
Segmentation 1. Choose variable for segmenting market 2. State a profile of segment 3. Verify prospective segment
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Retail Management Targeting 1. Decide on targeting 2. Identify which segments will be targeted 3. How many segments should be targeted? Positioning 1. Understanding the target segment 2. Place offering in the mind of the target segment 3. Evolve marketing mix
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Retail Management 2. PLACE:RETAIL LOCATION STRATEGY
Location is the most important ingredient for any business that relies on customers. It’s also one of the most difficult to plan for completely. Location decisions can be complex, costs can be quite high, there is often little flexibility once a location has been chosen and the attributes of location have a strong impact on a retailer’s overall strategy. In India, most retailers prefer to own the property rather than avail of the desired property through lease or rental. This makes the location decision even more critical. Choosing the wrong site can lead poor results and in some cases insolvency and closure. IMPORTANCE OF LOCATION DECISION The importance of the location decision is due to the following factors. Location is a major cost factor because it i. ii. iii. ?Involves large capital investment ?Affects transportation costs Affects human resources cost, e.g., salaries
Location is a major revenue factor because it i. ii. ?Affects the amount of customer traffic Affects the volume of business
The traditional inclination of Indian retailers to own property further increases capital investment and this along with the penchant of Indian retailers to continue their business at the same location makes the location decision even more important. The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. ‘Location’ is a broader concept, which denotes the store and its trading area from where a majority of its customers
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Retail Management originate, while a site refers to the specific building or part of the building where a store is located. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising, operations and customer service characteristics. For example, designers men’s sore located in an up market shopping centre or a mall near posh residential colonies, housed in an attractive building with adequate parking facilities. LEVELS OF LOCATION DECISION AND ITS DETERMINING FACTORS A retailer has to take the location decision, basing on three aspects: 1. Selection of a city 2. Selection of an area or type of location within a city 3. Identification of a specific site The factors which influence these decisions are discussed below:
Selection of a City
The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business: • ?Size of the city’s trading area:
A city’s trading area is the geographic region from which customers come to the city for shopping. A city’s trading area would comprise its suburbs as well as neighbouring cities and towns. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns.
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Retail Management • ?Population of population growth in the trading area:
The larger the population of the trading area, the greater the potential of the city as a shopping location. A high growth n population in the trading area can also increase the retail potential. • Total purchasing power and its distribution:
The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area. Cities with a large population of affluent and upper middle-class customers can be an attractive location for stores selling high-priced products such as designer men’s wear. The fast growth in purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India. • ?Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities Moradabad has become an important retail location for brassware products whip Mysore is famous for silk saris. • ?Number, size and quality of competition:
The retailer also considers the number, size and quality of competition before selecting a city. • ?Development cost:
The cost of land, rental value and other related cost.
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Retail Management
Selection of an Area or Type of Location within a City
In the selection of a particular area or type of location within a city, evaluation of the following factors is required.
? ?Customer attraction power of a shopping district or a particular store: Major shopping centre like Chandni Chowk in Delhi, Colaba in Mumbai and Commercial Street in Bangalore attracts customers from far off; while small shopping centre located in colonies attract customers from immediate neighbourhood. ? Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores, number of stores in the area, etc. before selecting the area. ? ?Availability of access routes: The area or shopping centre should provide easy access routes. There should not be traffic jams and congestion MG Road inBangalore provides easy access from different t parts of the city and hence has become popular. ? Nature of zoning regulations: The retailer should also consider the zoning regulations in the city. ? Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location.
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Retail Management
Selection of a Specific Site
The choice of a specific site is particularly important. In central and secondary shopping centre, non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. The large stores in turn depend on attracting customers from the existing flow of traffic. Where sales depend on nearby settlements, selecting the trading area is even more important than picking the specific site.
TYPES OF RETAIL LOCATION
A retailer has to choose among alternate types of retail locations available. It may locate in an isolated place and pull the customer to the store on its own strength, such as asmall grocery store or paan shop in a colony which attracts the customers staying close by. Or, it may locate in a business district where ther3 are a large number of retail establishments. If it decides to locate its store in a business district, it may have a choice ranging for, the large shopping centres in the heart of the city or smaller shopping complexes in a suburb. The various options available to a retailer in India are shown below: Free-standing Location Where there are no other retail outlets in the vicinity of the store and therefore, thestore depends on its own pulling power and promotion to attract customers. This type oflocation has several advantages including no competition, low rent, and often better visibilityfrom the road, easy parking and lower property costs. Neighbourhood Stores Neighbourhood stores are located in residential neighbourhoods and serve a small locality. They sell convenience products like groceries. Now, even the large organized sector stores, which pull customers from across the city, are also coming up in suburbs or away from major markets as free-standing locations. For 109
Retail Management example, Kemp Fort and LifeStyle stores are free-standing stores in Bangalore away from major market of the city. Highway Stores Highway sores are located along highways or at the intersections of two highways and attract customers passing through the highways. Business-associated Location These are locations where a group of retail outlets offering a variety of merchandise work together to attract customers to their retail area, but also compete against each other for the same customers. This type of location can be further classified as: Unplanned Business Districts/Centres: An unplanned business district is a type of retail location where two or more retail stores locate together on individual considerations rather than on the basis of any long-range collective planning. Thus, we may find four to five shoe stores, three to four medical stores in a cluster but no grocery store. An unplanned district generally provides certain advantages like availability of a variety of goods, services and prices; access to public transport; nearness to commercial and social facilities; and pedestrian traffic. ?Planned Shopping Centres: A planned shopping centre consists of a group of architecturally owned or managed stores, designed and operated as a unit, based on balanced tenancy and surrounded by parking facilities. Regional Shopping Centres or Malls: Regional shopping centres or malls are the largest planned shopping centres often they are anchored by two or more major department store, have enclosed malls, serve a large trading area, and have high rents.
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Retail Management They attract customers from across the city and suburbs. Major regional shopping centres or malls in India include Crossroads in Mumbai, Ansal Plaza in Delhi, Spencers Plaza n Chennai and Meropolitan Mall in Gurgaon.
SITE SELECTION ANALYSIS
With the advent of new retail formats in India such as planned shopping centes and malls, emergence of free-standing department stores, hypermarkets, etc., and further development of traditional business districts and other unplanned shopping locations, a retailer is presented with a wider choice of locations. Consideration of all the options keeping in view the product mix, customer profile and overall business model presents an enormous challenge. A retailer has to consider the following factors while selecting a site: ? Kind of products sold ? Cost factor ? Competitor’s location ? Ease of traffic flow and accessibility ? Parking and major thoroughfares ? Market trends ? Visibility Kind of Products Sold For stores dealing in convenience goods, the quantity of traffic is most important. The corner of an intersection, which offers two distinct traffic streams and a large window display area is usually a better site than the middle of a block. Convenience goods are often purchased on impulse from easily accessible stores. For stores dealing in shopping goods, the quality of the traffic is more important. The emergence of several apparel factory outlets within a short stretch
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Retail Management on the Delhi-Jaipur highway, at Mahipalpur market in Delhi, is driven by this factor. Cost Factor in Location Decision Location decision on cost considerations alone is risky. Space cost is a combination of rent or mortgage payment, utilities, leasehold improvements, general decoration, security, insurance and all related costs having a place to conduct business operations. Traditionally, the retail community placed great importance on owning the place since this was considered prestigious in the business community. However, there are many periodic retail markets in Indian which operate on particular days of the week. The retailers operating in these periodic markets keep shifting from place to place and do not own any property; instead they pay a small rental for their set-up in each market. This supports their model of selling goods at very low margins. Competitor’s Location The type and number of competitors is another important factor. The presence of major retail centres, industrial parks, franchisee chains and department stores should be noted. Intense competition in the area shows that new businesses will have to divide the market with existing businesses. If one is not able to offer better quality and competitively priced products, one might reconsider that particular location. An excellent location may be next or close to parallel or complementary businesses that will help to attract customers. Ease of Traffic Flow and Accessibility These two factors are more important to some businesses than others. Consider the nature of the business you are planning to open and your potential customers. Retailers selling convenience goods must attract business from the existing flow of traffic. Studying the flow of traffic, noting one-way streets, street widths and parking lots, is hence important.
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Retail Management The following factors have to be considered: parking availability, distance from residential areas or other business areas, traffic congestion, side of street, width of street, part of the block and neighbours. Evaluate how accessible the site is for walk-in or drive-by traffic as well as the amount of pedestrian traffic and automobile traffic that goes by the proposed location.
Parking and Major Thoroughfares Parking is another site characteristic that is especially a cause for concern in densely populated areas. When evaluating the parking that exists at a retail site, there are two considerations: parking capacity (the number of cars that can be parked), and parking configuration (the way the parking lot is laid out, the direction of the travel lanes and spaces, landscaping, etc.). There are several ratios that are generally used to determine the adequacy of a parking lot. While different ratios exist for different types of retailers or service providers, the ideal ratio for food stores is in the magnitude of 7-8 cars per 1,000 square feet of food store. Market Trends Evaluate the community from a broad, futuristic perspective. Local newspapers are a good source of information. Discussions with business owners and officials in the area can also help. Make use of information available through the Chamber of commerce. Visibility Visibility has a varied impact on a store’s sales potential. It is important when a shopper is trying to find the sore for the first or second time. Once the shopper has become a regular customer, visibility no longer matters. But consider this
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Retail Management fact: one in five families’ moves every year, which means that some part of a community’s population may be ‘shopping’ in a new store.
NEW RETAILING—THE THANE EXPERIENCE
Thane is a city in the western Maharashtra state. It lies on the Thane river in the north Konkan coastal lowland, on the mainland of the Deccan Plateau. Located about 30 km from the central business district of Mumbai, Thane has developed as one of Mumbai’s suburbs. Industries in Thane manufacture a wide variety of products, including woolen fabrics, dyestuffs, drugs, pencils, glassware, cotton textiles and handloomed fabrics. Major rail lines and a national highway link Thane with Mumbai and other cities and towns. The nearest airport is in Mumbai. According to the 1991 Census, the population of the district was 52.49 lakhs. During 1981 to 1991, this population increased by 56.59%. This increase in population was the highest in the State for this period. According to the 1991 Population Census, the total working population in the district was 1,961,704 persons, which was 37.37% of the total population of the district. Out of the total workforce, 30.75% were engaged in agriculture and allied activities, 1.19% in manufacturing service and cottage industries and remaining 30.69% in other activities. Women constituted 22.89% of the workforce in the district. Infrastructural facilities are the main source of industrial development in the district. Thane district is ranked third in the list of industrially developed districts in the state. More than 50% of the economic and social development of the district is on account of its progress in industrialization. The MIDC has developed 10 industrial estates in the district. The city is experiencing a growth in many things. Thane has emerged as one of the major shopping destinations. It is experiencing a large-scale development of 114
Retail Management shopping malls and multiplex theatres. Recently, leading brands across product categories established their outlets in Thane, such as McDonald’s, Pantaloons, Planet Fashion, Crocodile, Lee, Dominoes, Lee Cooper, Arrow and Reebok. The advents of national retail chains, across product categories are driving the changing face of the retail formats of Thane city. The high rate of development in the district is due to its proximity to Mumbai and its port, the transportation and subsidy facilities provide by the state government and also the uninterrupted power supply by the atomic energy plant at Tarapur in the Palghar taluka of the district.
STORE SPACE MANAGEMENT
Space and inventory are the two most important resources of the retail firm. The best possible allocation of the store space to departments, product categories, storage space and customer space is a major challenge for the owners and managers of the store. Retailers acknowledge the importance of space management for the success of business. It has a two way bearing on retail business—it not only attracts business by ensuring convenience to customers but also places the merchandise in accordance with the salespersons’ work allocation. The key objectives of retail space management are: • To obtain a high return on investment by increasing the productivity of retail space, this requires effective utilization of space for merchandise display and customer movement. • To ensure a compatible, exciting and rational interface between the customer, merchandise and sales people, Space, as a retail input, is fixed in supply with the retailer and is not easy to expand as it involves huge investments. Therefore, the allocation of the internal space among various heads is a challenging task for the retailer. He has to clearly nnel space and customer space.
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Retail Management Effective ALLOTMENT OF the available space to provide the selling space, merchandise spacerequires a sound understanding of the following factors: • • • The nature of offerings, suppliers and departments within the store The quantity of merchandise the store wants to carry and display The location and proportion of space allotted to different types of merchandise Issues related to the nature of offerings, suppliers and departments within the store are very important in the retail management. The quantity of merchandise and space allotted to respective merchandise depends on the sales productivity of the particular merchandise and brand positioning of the retailer. Retailers’ decision regarding the proportion of space to be allocated to specific merchandise is further guided by the following factors: • • • • Profitability of merchandise Merchandise display Placement of merchandise within the store Seasonal considerations
The space management decision also has an important influence on subdecisions like: i. ii. iii. iv. Location of various departments Arrangements between departments within the shop floor Selection of layout with customer behaviour in mind Planned traffic flow of customers
For better store layout, retail space can be expanded, keeping in mind other factors, by including the first floor or a basement as part of the retail area to be accessed from the ground floor by an internal staircase.
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3. PRODUCT
RODUCT AND BRAND MANAGEMENT Product and merchandise management is a key activity in the management of retail business. It drives the business strategy of the retailer and has immense cost and profit implications. A related issue is also the management of retail brands and the decision to offer retailer’s private labels along with or instead of national and local brands. While product management deals with issues related to the kind of products sold by the retailer, merchandise management concerns itself with the selection of the right quantity of the product and ensuring its availability at the right place and time. This involves a careful planning of merchandise mix and its financial implications are reflected in the merchandise budget. PRODUCT MANAGEMENT Products are critical to a retail firm’s existence and profitability. They constitute the basis of exchange transactions between retailers and customers. Products, in a retailing context, are defined as anything sold and purchased in a retail transaction. Hence, it could constitute goods, services, places, events, ideas. A product could be tangible or intangible. Product management, in the context of retailing, may be defined as a se of decisions related to the selection and removal of products from the retailers’ portfolio, along with the related product and market analysis. Product management is critical to the success o retail business. Identification of the products to be retailed forms the core component of the retailer’s business plan. Hence, it determines business profitability to a large extent. There are different cost implications in sourcing various kinds of products. Besides, there are varied demand patterns and competitive factors for different product categories.117
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BRAND MANAGEMENT AND RETAILING Of the top ten strongest brands in the world, five are retail brands. Brand management poses several challenges to the retailer. The key issues in retail branding are: ? Brand management of the retail outlet; and ? Deciding whether or not to opt for the strategy of self own branding. Retailers may also choose to adopt a multi-pronged strategy. A strong retail brand and a strong private label strategy can be an effective tool to differentiate the stores and the shopping experience. Strong retail brands have a sharper definition of their brand identity in terms of the following criteria: ? Who am I? ? What do I do? ? How am I different from others? ? Why buy me? The sharper this focus, the stronger is the retail brand. A retailer’s brand is valuable since it enhances reach and endurance with the consumer and ensures a more focused strategic plan. In many cases ‘store’ as a brand is stronger than the ‘brand’ stored within. In the retail boom that India is going through, many manufacturing brands are losing their identity to retail brands. The ten strongest brands in the world are given below:
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Coca Cola McDonald’s Sony Nike Microsoft Wal-Mart Ford 118
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• • •
Levi’s Gap Amazon
4. PRICE:RETAIL PRICING Setting the right price can influence the quantities of various products or services that consumers will buy, which in turn determines the total revenue and the profit of the retail store, IN the end, the right price for the product or service is the price that the consume is willing to pay for it. Therefore, sound pricing decisions are important to successful retail business. Systematic and informed decisions regarding pricing strategies must be made while considering a wide range of issues. Profitability of retail unit is subject to selling of merchandise for more than it has cost a retailer. The difference between the cost of the merchandise and the retail price is called the mark-up. Profitability is a prime objective of any retail firm. Profitability covers the cost of buying merchandise, costs of running business (rent, salary, maintenance cost), and finally the cost of investment for further expansion of the retail business. Profitability of retail business is influenced by two factors: one, the profit margin on the offerings that are sold and second, the cost involved in the selling of merchandise. These two factors directly influence the pricing of the merchandise sore, which in turn influences the profitability of the store. EXTERNAL INFLUENCES ON RETAIL PRICING STRATEGY Apart from internal factors like costs, desired profit margin etc., the price fixed by a retailer is also influenced by a number of external factors. Pricing Strategy Competitors Suppliers Customer
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Competitors
Suppliers
Pricing strategy
Government
Customer
Using Porte’s model to analyze these factors for strategic pricing, they can be broadly segregated into four ‘force’—customers, suppliers (manufacturers, wholesalers and other suppliers), competitors and government. These four factors or ‘forces’ have to be considered while determining the pricing strategy. In some cases, their influence may be inconsequential, while in others, the retailer may be totally constrained, as in the case of government regulations. The extent of influence may vary from industry to industry. Customers
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Retail Management A retailer needs to understand the price sensitivity of customers that form his target segment. The price sensitivity of customers is based on various personal, social or geographical factors and presents a major challenge for retailers while setting prices. Suppliers It may happen that retailers and manufacturers have different objectives, which leads to conflict between the two. Generally, the cause of this conflict is the final prices set by the retailer. Both the retailer and the supplier (manufacturer) like to have control and want to price the product or services according to their own image, goals, and objectives. With the advent of Internet, manufacturers are selling their goods directly to the final customer. Competitors In most cases, competitors are the most influential factor in determining the price. The competitive environment affects the freedom of a retailer to fix prices to a great extent. Competition can range from being perfect competition to a monopoly. A perfectly competitive market is the most competitive market imaginable.
Government In the Indian context, various government agencies exercise a strong influence on the price levels through legal and policy directives. RETAIL PRICING OBJECTIVE Retail pricing objectives or goals provide direction to the whole pricing process. Retailers are supposed to determine their objectives as the first step in pricing. When deciding on pricing objectives a retailer need to consider:
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Retail Management ? The overall financial, marketing and strategic objective of the retail business ? The characteristics of product or brand ? Consumer price elasticity and price points ? The resources available. Broadly, there could be various pricing objectives such as market penetration, market skimming, return on investment and early recovery of investments. Within these broad objectives a retailer may also try to fulfill the following specific objectives. ? PROFIT OBJECTIVE The retail store may price its product with the objective of maximizing profits in the short run or long run or both. The objective of profit maximization must be studied carefully because it may lead to unethical practices such as overcharging or deceiving the customers. At other times, the marketer may price his products with the objective of obtaining only a target rate of return on his investment. This particularly so with products in the mature stage of the product life cycle.
? MARKET SHARE OBJECTIVE The retailer or marketer may also price his product with the intention of increasing his market share or stabilizing his market share. He can set the price of his product lower than that of his competitors.
? COMPETITOR-ORIENTED OBJECTIVE
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Retail Management The retailer or marketer may price his product to counter any existing or prospective move by his competitors. A retailer may deliberately price its merchandise low to: ? Discourage potential retailers from entering the market, ? Expedite the exit of the potential competitors from the market, ? Hasten the exit of the marginal firms, and ? Spoil the market of retail competitors with an eye on getting future benefits. With a low price, the marketer can prevent price-cutting by range. ? BUYER-ORENTED OBJECTIVE Another pricing objective adopted by a retailer may be buyer-oriented. The aim of such pricing is to maintain socially acceptable prices and be fair to customers. The prices of goods at super bazaars such as Margin Free can be considered. ? GOVERNMENT-ORIENTED OBJECTIVES The pricing of some products may be constrained by the existing laws or may be influenced by government action. The prices of petrol, grocery items and vegetables in India are, to a large extent, controlled and influenced by government action. ? PRODUCT-ORIENTED OBJECTIVES The retailers or marketers, at times, make their offerings more ‘visible’ by means of pricing. Customers are usually attracted by the advertisements in newspapers highlighting special offers and discount. This is especially true in an inflationary economy, which has made many people very price-conscious. With a lower price, the retail store can therefore catch the attention of buyers and this will help him to introduce new offerings, increase the sale of weak products or reduce his stock at the end of a season. Many of the retail stores in India such as Big Bazaar are using these pricing techniques. Products can also be made visible by means of a high price. This 123
Retail Management was practiced in the cosmetics and jewellery trade, where people tend to associate high prices with better quality products and a higher status or image.
5. RETAIL PROMOTION STRATEGY
Retail promotion is broadly defined as all communication that informs, persuades and reminds the target market or the prospective segment about marketing mix of the retail firm. The retailers seek to communicate with customers to achieve a number of objectives. These objectives include increasing store traffic by encouraging new shoppers to visit the store, increasing share-of-wallet for all shoppers of specific groups among them, increasing sale of a given product or category and developing the store image or the retail brand. The retailers communicate with customers through many vehicles: advertising, sales promotion, publicity and personal selling. The promotion mix is managed by the retail firm’s marketing and advertising department. Such kind of structure is common in the case of multi-chain department stores or company-owned retail chains in case of small independent retailers, small retail chains and franchisees, manufacturer in terms of material, ideas and funds. In some cases, retailers and manufacturers pool in resources for effective promotional strategy. Advertising, sales promotions, and personal selling are example of paid impersonal communications. The responsibility of personal selling predominantly lies with the sales personnel and in case of small retail outlets, with the owner himself. Personal selling is the cornerstone of the promotion strategy for the Indian retail industry, especially in the unorganized sector. The key advantage with the retail sector is the opportunity of face-to-face interaction with customers. Hence, it has the advantage of utilizing various facets of personal selling to personalize the promotion efforts. Advertising is a form of paid communication and it uses impersonal mass media like newspapers, magazines, TV, radio, direct mail, etc. 124
Retail Management A sales promotion is another form of paid impersonal communication, which offers additional value and incentives to the customer. It not only encourages the customers to visit the stores buy also promotes trial and repeat purchases. Some of the popular sales promotion activities are special events in-store demonstration, coupons and contests. Publicity is an un-paid form of communication that provides information about the retailer through the media. POPULAR MEDIA VEHICLES USED IN THE INDIAN RETAIL SECTOR There is a whole range of vehicles for promotion available to the retailers to choose from. While selecting a particular set of materials for the publicity, retailers have to consider factors such as cost of the selected material, compatibility with their objective and the rest of the communication strategy. ? Leaflets of Flyers:Retailers to promote specific activities and events use leaflets or flyers. They have a short shelf life, so they are most useful for marketing specific activities such as opening of a new outlet or off-season sale. ? Posters/Calendars: Retailers use posters to promote specific activities and events or as free gift to other channel members, especially their loyal customers. ? Booklets:Retailers from the organized sector can afford this costly mode of communication. It is effective in case of products or services which are intense on information, such as banking, real estate practitioners, fashion designers and insurance services. ? Direct mail:-
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Retail Management Retailers can opt to send out regular, targeted letters as part of their communication strategy. Direct mail advertising includes postcards, catalogues, brochures, email and single letters. This technique is considered to be effective at the time of introducing new product and informing about prospective sales and or special discounts. ? Magazines:Magazines are considered to be and effective medium to advertise to the target segment. For example, a retailer selling baby products could put an ad in Parenting or Health and Nutrition. ? Local Cable Channels:With the advent of the local cable TV channels, most of the small retailers, basically located in central business districts, use this medium to communicate about their offerings and promotions to their target segment more effectively.
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CONCLUSION
The convenience and personalized service offered by the unorganized sector holds its future in good stead for the future. Organized retail of late has seen a tremendous boom and is attracting more people to the malls. What is to be seen is how organized retail can duplicate the same level of personalized customer service levels offered by the unorganized sector to have a higher conversion ratio. The target audience for both the organized and unorganized retail formats remains relatively the same. When shopping in malls, people value the experience related to the trip the most and return most frequently for the same. Besides, while enjoying the experience they seem to buy high ticket and items of conspicuous consumption most frequently.
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