Retail Management

RETAIL MANAGEMENTPROF. R.MATHUR RETAIL MANAGEMENT ..1 INTRODUCTION – CONCEPTS, ROLE & ENVIRONMENT RETAILING Business activities involve Selling Goods and Services to Consumers for their Personal, Family or Household use. “Every sale of Goods and Services to final consumer” – Food products, apparel, movie tickets; services from hair cutting to e-ticketing.  Retailing is the Last stage in Distribution Process- Wholesale is an intermediate where Goods and services are sold to Business customers. RETAIL MANAGEMENT ..1  Manufacturer may reach customers through:  Dealers  Company showrooms  Super / Hypermarkets Manufacturers will decide on Retail Distribution:  Intensive  Selective  Exclusive Retailer is customer focused, not Product –focused. RETAIL MANAGEMENT ..1 ORGANISED RETAILING     In India Organised Retailing is 2% Retail sector highly fragmented Retail chains like Wal Mart, Sears, McDonalds brought Rapid Growth and consolidation of Organised Retail Rapid rise of Income levels and accompanying changes in lifestyles greatly contributed to growth of Organised Retail RETAIL MANAGEMENT ..1 ORGANISED RETAILING   In India, increase in Disposable income, Purchasing Power of growing Middle Class conducive conditions for growth of Organised Retail Indian Retail environment different from that of western countries: - Cities congested, large population in rural areas - Smaller purchases, limited household space RETAIL MANAGEMENT ..1 RETAILING CONCEPT “Retaillier” French for breaking bulk Retailer links Producers to Customers Retailer is a person, agent, agency, company or organisation reaching the Goods or Services to ultimate consumer Retailers perform specific activities:  Anticipate customer wants  Stock product assortments  Acquire market information  Finance Retail business RETAIL MANAGEMENT ..1 RETAILING CONCEPT Retailing may take place through:  Retail Store  Mail Direct  Internet Sales  Door-to-door Retail services like Restaurants, Hotels, Parlour, Health Services, car rentals, Travel In USA Retail generates $3 trillion through 23 mil. Employees. Wal Mart generates $245 Bio. sales through 1 Mio.nationally and .3 Mio. Foreigners. RETAIL MANAGEMENT ..1      Strong economies have a strong Retail sector Entry in retail sector is easy, hence results in fierce competition Retail must perform its primary role of catering to customer satisfaction Retail earns modest profits of 910% Retail stores of different sizes face distinct challenges. Their sales volume influences: - Merchandise purchase - Promotion & - Expenses Control RETAIL MANAGEMENT ..1 Last decade has seen tremendous changes in Retail Business – from made to order to ready to wear, from counter sales to self service, emphasis on value addition and cost reduction. Family run retail business giving way to modern professional retail. Retail improving inventory management through systems – faster turnover, better profitability, fast changing customer preferences for assortment of goods and services. BETTER CUSTOMER CARE RETAIL MANAGEMENT ..1 1. 2. 3. 4. 5. GLOBAL RETAIL INDUSTRY Retail sales driven by Ability (disposable income) and willingness (consumer confidence) Worldwide retail sales Est.$7 Trio. Expenditure on Household Consumption increased by 68% between 1980 and 1998 Top 200 retailers account for 30% worldwide demand Over 50 of the Fotune 500 and 25 of Asian Top 200 are Retailers RETAIL MANAGEMENT ..1 1. 2. 3. 4. ORGANISED RETAIL FORMAT By 2006 - 200 Shopping Malls – Up from 25 in 2003 Expect by 2006, to develop 40 mio.sq.ft. quality Retail Space 6 A Grade cities Delhi NCR, Mumbai, Bangalore, Hyderabad, Chennai, Kolkata will have 34 mio. and non metros Pune, Ahemadabad Ludhiana, Chandigarh, Jaipur, Lucknow, indore, Cochin 6 mio. Delhi NCR will have 26 mio., Mumbai another 5 mio. RETAIL MANAGEMENT ..1 1. 2. 3. 4. 5. 6. RETAIL CHARACTERISTICS Direct End-User Interaction Platform for Promotions & POP displays Lower unit sales Retail location critical Services as important as Core Products Large number of Retailers to meet geographical coverage and population density RETAIL MANAGEMENT ..1 RETAIL EVOLUTION THEORIES Four theories of evolution are: 1. Wheel of Retailing Cyclical 2. Accordion theory Theories 3. Dialectic Process Evolutionary 4. Natural selection Theories Cyclical: Begin with one state and return to that state at some time in future Evolutionary: Changes similar to biological evolution RETAIL MANAGEMENT ..2 Wheel of Retailing Wheel represents phases through which some types of Retailers pass: Retailers attract customers – low price, low service Expand market – More expensive merchandise, More services, open More convenient locations. Trading up process increases costs & price of their merchandise, creating opportunities for new low price retailers to enter e.g. Discount stores & category specialists Some Retailers don’t begin as low price, low service entrants, e.g. Upscale fashion specialty stores. RETAIL MANAGEMENT ..2 THE ACCORDION THEORY Retailers fluctuate from strategy of offering wide merchandise with shallow assortment to offering limited categories with deep assortment In rural markets, Retailers sell many categories under one roof: shoes, cosmetics, foods, cloth, medicines. However the assortment is shallow and customers have limited choice. Department stores have both width and depth of merchandise Speciality stores carry special categories with deep selection RETAIL MANAGEMENT ..2 An evolutionary theory based on 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 as the child is the product of the pooled genes of the parents. Specialty stores with high margins, low turnover plush operations Discount stores with low margins, high turnover low operations Both the above were synthesized to form category specialist stores. DIALECTIC PROCESS RETAIL MANAGEMENT ..2 NATURAL SELECTION Those Retail Institutions Succeed which adapt to changes in customers, Technology, competition and legal environment. Department stores have tried to combat specialty stores by opening specialty counters within the stores. Interest in physical fitness and increased number of women in workforce have made salad bars in grocery stores successful. RETAIL MANAGEMENT ..2 1. 2. 3. RETAIL BUSINESS CLASSIFICATION Ownership Business: Proprietorship, Partnership, Limited liability company Operational Structure: Independent Trader, Chain Of Stores, Franchising, Consumer Cooperative Width & Depth Of Merchandise: Specific Product Category Wide Range RETAIL MANAGEMENT ..2 4. 5. Type Of Pricing: Low pricing, minimum Service Premium Merchandise, High Service Premium pricing, distinctive Image Consumer Interaction: Direct interaction Mail Order Tele-Selling Vending machines Door-to-door Mobile Vending RETAIL MANAGEMENT ..2    GROCERS - Major business is grains, provisions, spices, edible oils. Grocers may be dealing in many other items. GENERAL STORES - Deal in items Daily needs and stocking number of categories, is identified as a general store. CHEMIST- Deal in Ethical Pharmaceutical Products. Require a license and a Qualified Pharmacist. Such outlets also deal in diverse FMCG products.   RETAIL MANAGEMENT ..2 MODERN FORMAT STORE – a) Part of a chain of stores with selfservice facilities b) Part of a chain, but does not have self-service Facilities c) Stand-alone (not part of a chain) with self-service facilities FOOD STORE : Deal mainly in food products - milk, beverages, tea, coffee, squashes, ketchup, jams, chocolates, biscuits, bakeries etc.  RETAIL MANAGEMENT ..2   TOBACCO KIOSK : Deal in tobacco products like Paan, Cigarettes, etc. are called Pan Bidi shops. Many of them also deal in packaged consumer products like toilet soaps, toothpaste, washing soaps, biscuits, confectionery, batteries etc. COSMETIC STORE : Deal in Ladies Personal care products / Cosmetics, General toiletry products, Men’s toiletry products, Baby Care Products. RETAIL MANAGEMENT ..2 RETAIL CONCEPT  Customer Orientation: Attributes & Needs satisfaction  Coordinated Efforts: Maximize Business Efficiency  Value driven: Good Value for Money  Goal Orientation Achieve Goals RETAIL MANAGEMENT ..2 RETAILING CONCEPT  Communication with Customers  Identify Customers Needs  Provide Products and Services to Satisfy Customers  Elicit Feedback to Improve Services – Word Of Mouth RETAIL MANAGEMENT ..2 RETAILING CONCEPT Customer Service approach:  Create a conducive environment  Listen to your Customers  Direct mail  Relationship Marketing – Long Term  Rewards for Regular Customers RETAIL MANAGEMENT ..2 ROLE  Consumer spend their money at Retail which drives the economy. Retailers realize Revenue when Consumers buy products or Services from them.  The revenue passes up the Consumer Goods distribution chain viz. to Wholesalers, Distributors and Manufacturers. RETAIL MANAGEMENT ..2  Retail Industry employs 17-20% Workforce that drives the Economy. Retail trends often mirror trends in a nation’s overall economy. Retailers add value by Providing the Right Product at The Right Place at the Right Time.   RETAIL MANAGEMENT ..2      ENVIRONMENT Retailing is a Dynamic field with very Competitive Environment. Retailers act as Filters – Strong lobby for success or otherwise of a Product or Services. Companies create Retailer Value and Consumer Differential Advantage to improve success rate of their Brands. Constraints – Multiple Brands and SKUs for each category, Shelf Space, funds available, Turnover of Merchandise. RETAIL MANAGEMENT ..2 1. 2. New Concepts & Trends Vertical Retail Concept: Traditional stores and Shop-in-Shop concepts – mixture of system and individuality, e.g. Sale of Nonfood items like newspapers, magazines with snacks, beverages Consumption Related Trends: Increasing Consumers with Purchasing Power & More Migrant Consumers Demand for Broad selection of Products Demand for Good quality Products e.g. Honest, Original and Green Products Indian Economy – GDP Projections Through 2022 (2007 Prices) US$ Billion Brazil Russia India France UK China Germa USA 0 1,068 979 916 2,232 2,374 2,630 2,897 2,000 4,000 6,000 2007 US$ Billion 2012 Brazil Russia India France UK Germany China USA 13,245 1,369 1,304 1,409 2,470 2,648 3,198 4,197 5,000 10,000 15,354 15,000 20,000 8,000 10,000 12,000 14,000 US$ Billion Brazil Russia India France UK Germany China USA 1,789 1,688 2,119 2,761 2,953 3,513 2017 US$ Billion Brazil Russia India France UK Germany China USA 2,282 2,103 3,128 3,085 3,251 3,766 2022 6,341 17,031 5,000 10,000 15,000 20,000 9,229 19,751 5,000 10,000 15,000 20,000 25,000 *GDP figures are in real terms with base year as 2007 India is expected to be comparable with UK & France in GDP by 2022 Rapid Transformation Anticipated Current Size & Future Projections for Indian Retail Market 1200 US$ Billion 1000 800 600 400 200 0 12 2007 17 2008 29 2009 Total Retail 51 2010 336 376 421 471 527 590 282 74 2011 Organized Retail 97 2012 2017 1011 28% share Reach a share of 28% by 2017 HIGH GDP GROWTH 1 0% 9% 8% 7% 6% 5% 4% 3% 2% 1 % 1 9 99 2 0 00 2 2 00 2 4 00 5.4% 5.2% 6.4% 6.6% 5.6% 6.0% 6.0% 6.8% 9.0% 9.4% 2 5 00 Projections of 8% sustainable real GDP growth rate till 2020 promise high growth potential for Indian Retail 2 6 00 1 7 99 1 8 99 2 1 00 2 3 00 0% Radical Transformation Anticipated In Indian Retail Country Share of Organized Retail 20% 20% 36% 40% 85% 17% (estimated) 27% (estimated) Years taken to reach the level from < 5% 10 8 15 18 50 5 10 China Poland Brazil Thailand US India India looking at rapid GROWTH compared to other countries Growth Of Indian Retail … *Projected Source: Technopak Analysis, CSO & Other Sources Indian Retail expected to grow close to 12% p.a. in the next 10 years RETAIL MANAGEMENT ..3 WITH HIGH PRIVATE CONSUMPTION Private Consumption US $568 Bn (62%)  Retail US $352 Bn (62%) Urban US $158 Bn (45%) Rural US $194 Bn (55%)  Non-Retail US $358 Bn (38%) • Public Spending +Gross Capital Formation 38%  RETAIL MANAGEMENT ..3   Rural India consists of 720 Million consumers across 627,000 villages 17% of these villages account for 50% of the rural population and 60% of the rural wealth implying reaching out to almost 100,000+ villages to address even 50% of this rural opportunity WITH HIGH PRIVATE CONSUMPTION RETAIL MANAGEMENT ..2 RAPID TRANSFORMATION  Investments in the range of US$ 20+ Billion expected in the next 5years in Retail & its Supply Chain alone  Size of modern retail likely to touch US$ 74+ Billion by 2011  At least 2.5 Million additional direct jobs likely to be created in the next 5 years  Hyper-competition is expected to set in by 2008-9. RETAIL MANAGEMENT ..3 TRADITIONAL RETAILERS     Retail market is growing from US$ 336 billion to US$ 590 in 2012 That means an additional market of US$ 254 billion Even if the modern retailing can go from US$ 12 billion to US$ 74 billion in 2011 Still US$ 180 billion is left to be addressed by traditional retailers The growth of modern retail will be more in urban as compared to rural RETAIL MANAGEMENT ..3 BOOKS FOR REFERENCE 1. 2. 3. Retail Management By Chetan Bajaj Retail Management By Berman & Evans Retail Management By Levy & Weitz RETAIL MANAGEMENT ..3 CASE STUDY:      Facts Of the Case – No assumptions Key Issues List alternatives Evaluate alternatives Recommend Course Of Action RETAIL MANAGEMENT ..2 TOTAL RETAIL EXPERIENCE  Merchandising & Display  Brands and Quality Of Goods  Inventory Carried  Customer Service  Pricing  Support Functions: Parking  Create Customer Excitement RETAIL MANAGEMENT ..2 TOTAL RETAIL EXPERIENCE Possible Pitfalls: Discount stores – Ample Stock Neighborhood Store – Overly Trendy Products Full Service Store – Knowledgeable Theme Restaurants – Novelty wears off, food so-so, Prices high MEET CUSTOMER NEEDS RETAIL MANAGEMENT ..2 OPPORTUNITIES:   Management – Raise capital Purchase Use MIS to Control Operations Employ for Sales Counters, Stores and Cash Counters Undertake Marketing Activities Entrepreneurial Opportunities RETAIL MANAGEMENT ..3 RETAIL STRATEGY OVERALL ACTION FRAMEWORK  Mission  Goals  Consumer Market  Overall Activities  Feedback and Control Mechanism RETAIL MANAGEMENT ..3       Forward Retail Planning – FOCUS Analysis Of Requirements Of Business Set realistic Goals Differentiate Itself for Target Customers - Benchmarking Knowledge Of Business Environment – Legal, Economic, Competitive Synergize efforts Reduce Business Risk – Feedback and Control RETAIL MANAGEMENT ..3 MISSION    Commitment to A Business – Business Decision Around Goods and Services sold or around Consumer needs. Specific or Generic approach RETAIL MANAGEMENT ..3    Distinctive Role In Market – A Leader or a Follower Leader – Unique strategy Follower – Emulate standard Practices with better execution than competitor. Market Scope – Customer Base Dynamic Decision In Sync. With Retail Environment RETAIL MANAGEMENT ..3 Ownership and Management:  Sole Proprietorship –Individual accrues Profits, Risks, Costs. Is Liable for Legal Claims. Limited Capital and Expertise.  Partnership – Share Profits, Risks, Costs. Owners Liable for Legal Claims. Better Capital Investments and Capabilities. RETAIL MANAGEMENT ..3  Corporation – Incorporated under law. Funds through Sale of Stocks. Ownership Transfer is easy. Private Limited Company – Limited number of Individuals with Limited Liability. Public Limited Company – Open to Public to Invest In Stocks. Profits and Dividends attract Taxes. Managed by professional managers. RETAIL MANAGEMENT ..3 Business:  Start A New Venture – Flexibility of retailing Factors  Buy an Existing Business – Balance Of Advantages should be Positive – weigh the negatives carefully  Become A Franchisee – Combines Enterprise with Known Brands. Brand also puts a number of rigid Quality and Business Restrictions. RETAIL MANAGEMENT ..3 Types Of Retail Goods & Services  Durable Goods Furniture, Electrical Appliances, Hardware, Timber, Jewelry, Automotive and Spare Parts  Non-Durable Apparel – Cloth, Garments, Food Group – Green Grocers, Packaged Foods, General Merchandise, Eating Places, Petrol Stations, Chemists, Stationery RETAIL MANAGEMENT ..3 Service Establishments  Personal Services Dry Cleaning, Health Care, Photographic Goods, Barber Shops, Amusement Services, Movie Theatres, Clubs, Amusement Parks, Game Arcades  Repair Services Automobile, Electrical Gadgets, Watch & Jewelry, Electronic Gadgets RETAIL MANAGEMENT ..3 Hotel Services Hotels, Resorts  Professional Services Lawyers, Doctors & Surgeons, Chartered Accounts, Stock brokers, Real Estate Agents Potential Retail Business Owners Aptitude for a Particular Business  RETAIL MANAGEMENT ..3     Personal Aptitude Knowledge, Experience, Qualifications, Inborn Skills and Acquired Skills Financial Resources Land and Building, Fixtures, Equipment Time Demands Owner’s Availability Personnel Sales People, Inventory, Cashiers RETAIL MANAGEMENT ..3 RETAIL OBJECTIVES – STRATEGY  Sales – Growth, Market Share  Profit – Level, ROI, Efficiency  Satisfaction – Total Retail Experience  Positioning – Up-market, Mid-Priced, Discount Oriented, Mass Market, Niche Value Scale-Quality, price Fashion Scale-Fashion, Style, Assortment Image Projected RETAIL MANAGEMENT ..3 Target Market – Customer Group To Be Attracted and Satisfied. Mass – Broad Spectrum of Customers Concentrated – Specific group Differentiated – Two or more distinct Groups with Different Retail Approaches RETAIL MANAGEMENT ..3 STRATEGY LOCATION MASS MARKET TARGET MARKET TECHNIQUES CONCENTRATED DIFFERENTIATED Near Large Population Wide Assortment, Medium Qual. Mass Advtg. Near Small Medium Pop. Deep Assortment, High/ Low Qual. Direct mail Near Large Population Distinct Goods for Target Market Different Media for Target Groups High, Medium and Low Strategies directed at Heterogeneous Groups RETAILMIX PROMOTION PRICING Popular Large Homogeneous Group High or Low Specific Strat. Directed at Specific Gr. STRATEGY RETAIL MANAGEMENT ..3 CONTROLLABLE VARIABLES UNCONTROLLABLE VARIABLES Store Location Managing a Business Merchandise @ Pricing Communicating Consumers Competition RETAIL Technology STRATEGY Economic Conditions Seasonality Legal Restrictions RETAIL MANAGEMENT ..3                 Mission Situation Analysis Ownership Goods/Services category Sales ObjectivesProfit Customer satisfaction Image Mass Target Customer Concentrated Differentiated Controllable Overall strategy Uncontrollable Short Term Specific activities Competition Evaluation Control Adjustment RETAIL MANAGEMENT ..4  RETAILERS MARKETING DECISIONS: -Target Market: Focus resources & Retail Mix -Product Differentiation Strategy: Product Assortment Breadth & Depth -Services: Pre-purchase, Post-purchase, Ancillary -Price: Target market, Product Mix, Competition -Promotion: Promote & Reinforce Image -Location: Vicinity of Target market RETAIL MANAGEMENT ..4   MARKET SEGMENTATION- TARGET MARKET Sex, Age, Family Size -Type, Marital, Status, Socioeconomic Class, Occupation, Geographic: Metros, large Towns Psychographic: lifestyles, Personality, Values Services: Advertising, Displays, Special Offers; Delivery, Gift Wrapping, Returns, Tailoring, Installation; Cheque Cashing, Parking, Restaurants, Rest rooms RETAIL MANAGEMENT ..4 Pricing: High Profit %, Low Volume & Low Profit %, High Volume Loss Leader, Discounts -Clear Merchandise EDLP Every Day Low pricing vs. Discounts  Promotion: Frequent Shopper Rewards, Coupons, Sampling, Ads.  Location: Sales effectiveness – Number of people pass by - % Enter – % Buy- Average Amount per Sale CASE STUDY – CONVENIENCE STORE RETAIL MANAGEMENT ..5 MERCHANDISE MANAGEMENT:  A Key Strategy: Develop & Implement Merchandising - Plans Of Proper Assortment Of Goods & Services As In Demand, make them Available at Places, Times, Prices & Quantity to Satisfy Target Customers  Merchandising Decisions dramatically affect Performance.  Investments in Merchandising Skills & Talent produce Better results than Investments in Technology or other Skill Specialties. 70 -80 % Results Depend on Merchandisers. RETAIL MANAGEMENT ..5 MERCHANDISING PLAN:  All Merchandising Decisions Based on Plans1. Needs Of Target Market 2. Type Of Retail Business 3. Marketplace Positioning : Mass - Wide & Deep Assortment – Broad Customer Market :Niche –Specific Market Segment – High Customer Loyalty – Shields against Conventional Competitors RETAIL MANAGEMENT ..5 4. Defined Value Chain – (Trends ) - Expected: Hygiene, Timely Service, Knowledgeable, Stock Popular Products, Returns/ Redressal -Augmented: Special Services, Differentiated Brands, Loyalty Prog. -Potential: Elements not yet Perfected or Opportunities not yet exploited. 5. Product Trends RETAIL MANAGEMENT ..5 Merchandising Plans will drive Decisions: Product Lines to Carry Shelf Space to Allot to Different Products Inventory Turnover Pricing – Across Categories & Within Promotions Assortment – Breadth: Narrow or Wide Depth: Deep Or Shallow  RETAIL MANAGEMENT ..5 Scope Of Responsibility for Personnel: Full Merchandising Functions – Buying & Selling: Selection Of Merchandise, Pricing Displays, Customer Transactions. Separate Buying & Selling Functions. Micro Merchandising – Shelf space Basis Demand Pattern Cross Merchandising – Carry Complimentary Goods & Services Water, Soda, Soft Drinks, Juices, Ethnic  RETAIL MANAGEMENT ..5   Merchandise Plan - Forecasting : Staple Merchandise – Regular Daily Need Products, Stable Sales – List Of products, Inventory Level, Colours, Brands, Style Size Assortment Merchandise – Apparel, Furniture, Autos. Variety Of products to enable Customers a Selection. Demand Varies, Forecast difficult. Decision On Product Lines, Styles Designs & Colours. Model Stock Plan - Colour, Size, Qty. RETAIL MANAGEMENT ..5 Fashion Merchandise – Cyclical sales due to Changing tastes and Life Styles  Seasonal Merchandise – Seasonality In Sales – Summers Cottons, Winters Woolens – Forecasting for Season  Fad Merchandise – High Level Of Sales In a Short Time. Toys, Games are short lived Fads. Extended fads – Residual sales Continue for longer Periods. Never Out List – Always in stock  RETAIL MANAGEMENT ..6 PRICING STRATEGY IN RETAILING: Retailer Prices Goods & Services to: - Achieve Profitability - Satisfy Customers - Be Consistent with Overall Image, Sales, Profits, ROI Pricing Options: - Discount Orientation - At-the-market Orientation- Average Pricing - Upscale Orientation RETAIL MANAGEMENT ..6 Discount Orientation: - Low pricing as competitive advantage - Low status Image, Fewer shopping frills, Price based customers, Low operating costs, High Inventory T/O.  At-the-market Orientation: Middle Class shoppers - Offers excellent service, Good atmosphere  RETAIL MANAGEMENT ..6 - Profit margins > = Moderate - Quality > = Average - Price Range Difficult to Expand as Competition from Discount Stores or Prestige Stores Squeezes the Range  Upscale Orientation: - Prestige Major Competitive Edge - Smaller Target Market, Higher Operating Costs, lower Inventory T/O Means Customer Loyalty, RETAIL MANAGEMENT ..6 Distinctive Services & Product Offerings, High unit Profit margins PROVIDE A GOOD VALUE IN CUSTOMERS’ MIND FOR THE CHOSEN PRICE ORIENTATION. CUSTOMER NOT NECESSARILY LOOKING FOR THE BEST PRICE BUT FOR GOOD VALUE – REAL & PERCEIVED -FOR MONEY. RETAIL MANAGEMENT ..7 Research on price In Buying Decisions reveals Different Motivations for Different market Segments. CONSUMER PURCHASE & PRICING: Price Elasticity Of Demand – Sensitivity to Price Changes. Small % Change in Price Substantial % Change in Demand – High Price Elasticity. Urgency to purchase is low or acceptable substitutes exist. RETAIL MANAGEMENT ..7 Large % Change in Price Small % Change in Demand – Demand InElastic. Urgency to purchase is high or there are no acceptable substitutes. Occurs with Brand or Retailer Loyalty. Unitary Elasticity - % Change in Price directly off-set by % Changes in Quantity Demand RETAIL MANAGEMENT ..7 In Retailing computing Price Elasticity is Difficult due to other factors of Product Mix also interplay. Demand hard to predict. Price Sensitivity varies by Market Segment based on Shopping Orientation:-Economy: Shop around for Lowest Price. Segment Growing rapidly. - Status: Perceive Retailers as different, Look for Prestige Brands and customer Service. RETAIL MANAGEMENT ..7 - Assortment oriented: Seek Retailers with Strong Assortment in Product Categories and look for Fair Pricing - Convenience Oriented: Shop only when they Must at nearby locations with long hours. Prepared to pay higher Prices. - - Loss Leaders: Price below cost to attract more customers. - - Predatory Pricing: Seek to Reduce Competition by selling at very low Pricing RETAIL MANAGEMENT ..7 Unit Pricing: Indicate Pricing at a unit, e.g., per Kg – to enable quick comparisons by customers. Sharp Practices: Bait and Switch Advertising: Lures customer with exceptionally low prices. On contact customer informed of stock-out and offer another product. RETAIL MANAGEMENT ..7 Conflicts In Pricing: ManufacturerWholesaler Retailer Co. PriceDistributor’s Price (a-b%) Wholesale Price (a-w%) Price To Retailer (a) Price To Consumer (a+ c%) Gray Market Goods: Imported Goods at Lower Prices. RETAIL MANAGEMENT ..7 Market Pricing: High Competition, customers seek lowest pricing. Price increase leads to brand switching. Administered Pricing: Strong product Differentiation, Control by retailer on Price charged. For customers Image, Assortment, Personal service more important than Price, e.g. Fashion apparel stores, upscale restaurants. RETAIL MANAGEMENT ..7 PRICING OBJECTIVES: Market Penetration – Achieve large revenues by setting Low prices and sell high unit volumes – an aggressive strategy to discourage competition Market Skimming – Profit is Objective. Charge Premium Prices and attract Customers seeking Service, Assortment & Status. Does not maximize Sales. ROI or early Cash Recovery Objectives met. RETAIL MANAGEMENT ..7 Selling Pr. 9 10 11 12 Selling Pr. 9 10 11 12 Unit Sales Demand 114000 104000 80000 60000 Tot. Profits 55600 129600 132000 115000 Sales Goal Profit ROInv. % Profit/Unit Sales 1026000 1040000 880000 720000 Markup % 16 22 25 27 Av .Cost 7.6 7.85 8.25 8.75 Av. Inv. Hold 12000 13000 14000 16000 Op. Exp. 104000 94000 88000 80000 Inv. T/O 9.5 8 5.7 3.8 Tot. Cost 970400 910400 748000 605000 R O Inv.% 61 127 114 82 RETAIL MANAGEMENT ..7 Prestige Pricing: Premium pricing to convey exclusive image for the product or Service. Evoke perceptions of Quality and Prestige. Habeebs Parlour, Delhi Golf Club, Luxury hotels. Odd – Even Pricing: Odd Pricing to indicate lower “Good” deal. Even Pricing to indicate higher quality. RETAIL MANAGEMENT ..7 Bundled Pricing: Offering two or more Products or Services at one price. Fixed & variable Pricing: Variable pricing for highly differentiated or unbranded products. Fixed pricing for Branded products. RETAIL MANAGEMENT ..8 PLANNING & CONTROL Retailer forms a New Strategy or Adjusts an Existing one, gathering and analyzing feedback reveals effectiveness of Operation. Feedback can be obtained for: - Attributes, Buying Behaviour - Alternative Store location - Inventory Planning - Product Mix Offering RETAIL MANAGEMENT ..8 - Pricing - Promotion - Store image Research efforts related to risk involved: - Higher risk : Store Location - Lower risk: Introduction of New Product Line Information Gathering and Processing is ongoing for Feedback & Control RETAIL MANAGEMENT ..8 Non-systematic or Incomplete ways of obtaining information due to constraints of Time, Costs or Lack of Research Skills: - Using Intuition: Gut feel - Assuming Past Trends to Continue and follow past practices - Copy Competition - Devising a Strategy based on few individuals perceptions RETAIL MANAGEMENT ..8 Example: Movie tickets cost –weekdays vs. weekends and matinee vs. evenings Toy store orders for holiday season basis last year’s demand +. Research indicated higher optimism and desire to gift. Stock-out before peak, unable to get delivery of extra stocks. Chain Store in new Location – doing 40% of expected business. Research shows Store name and Image unknown, ad media choice incorrect RETAIL MANAGEMENT ..8 Retailer’s Objectives direct Strategic Planning – some Routine. Non-routine require careful evaluation Strategy outlined, new data required for its operation acquired and files updated or retrieved from storage, analyzed and interpreted. All this at Information Control Centre. Decisions made and put into operation. RETAIL MANAGEMENT ..8 Retail Information System – RIS Environment Mission, Objectives Competitors, Economy Strategic Plans (a) DATA COLLECTION INFORMATION (b) DATA STORAGE+ ANALYSIS CONTROL RETREIVAL INTERPRETATION CENTRE © UPDATING DATA FILES FEEDBACK IMPLEMENTATION Retail Operation RETAIL MANAGEMENT ..8 Performance results are fed to ICC and compared with objectives set. Regular and Exception reports ( Giving reasons for deviation) generated and sent to Operational Managers for necessary action. Building RIS How active RIS role – Reports in routine or as-and-when RETAIL MANAGEMENT ..8 Internal or Out-sourced- Some Specific Researches can be out-sourced. Cost Of RIS – 0.5 to 1.5% of revenue Quanta of Data – Edit raw data and share interpretation Frequency of Data dissemination – who receives which report Data Storage – Easy retrieival, adequate Longitudinal analysis (Period to Period) RETAIL MANAGEMENT ..9 RETAIL PROMOTION All communication that informs, persuades and reminds the target market about marketing mix of the Retail business. Objectives of Communication: - Increase customer Flow - Increase Purchase BY Target Market RETAIL MANAGEMENT ..9 - Increase sale of Specific product or Product Category - Develop Store Image Communication Promotion Mix: - Advertising - Sales Promotion - Publicity - Personal Selling RETAIL MANAGEMENT ..9 Department or Large Stores manage through Promotion department of the store. Small Retailers pool resources with manufacturers for Promotions. Advertising – Paid Communication using Impersonal mass media: Print – news papers, magazines, direct mail and AV media like TV, radio. Local, vernacular language Print media used by small retailers. RETAIL MANAGEMENT ..9 Cable TV is also used by small retailers. Large retailers use a combination of media. Sales Promotion is a paid Impersonal communication offering additional value to customer. Encourages customer visits and Promotes trial and repeat Purchase of focus Products or Services Special events, In-store Demonstration, Contests RETAIL MANAGEMENT ..9 Publicity -Un-paid form of Communication that provides Information about the retail through media. A Powerful Business strategy evolves through knowledge of Target Customers, Clarity of Business Objectives. Effective selection of media for Promotion Strategy. Major shift to Nuclear families in ’90’ s have shifted focus on to kids in Promotional strategies RETAIL MANAGEMENT ..10 ATMOSPHERICS & RETAIL SPACE MANAGEMENT REFERS TO THE PHYSICAL CHARACTERISTICS OF THE RETAIL STORE LIKE EXTERIORS, INTERIORS, LAYOUT PLANNING AND VISUAL MERCHANDISING. PLAY A SIGNIFICANT ROLE IN  ATTRACTING CUSTOMERS AND RETAINING THEM  IMPROVING QUALITY OF SERVICE EXPERIENCE  POSITIONING THE RETAIL OUTLET  OPTIMUM RETAIL SPACE UTILIZATION RETAIL MANAGEMENT ..10 DIMENSIONS OF ATMOSPHERICS:  PRESENTATION LIGHTING  STYLING COLOUR PLANNING  DESIGN USE OF WALLS/ MATERIALS APPEAL TO CUSTOMERS EXTERIORS – STORE FRONT, DISPLAY WINDOWS INTERIORS – LIGHTING, COLOUR, FACILITIES ENHANCES DISPLAY & PROVIDES RELEVANT INFORMATION RETAIL MANAGEMENT ..10 ATMOSPHERICS PLANNING RELEVANT FOR ALL RETAIL SET-UPS, ESPECIALLY: - PLANNED SHOPPING CENTRES - LIFESTYLE STORES A TIDY WORK ENVIRONMENT ATTRACTS A HIGH STORE PATRONAGE ATMOSPHERICS PLAY AN IMPORTANT ROLE: - CREATE POSITIONING FOR RETAIL OUTLET - ATTRACT NEW CUSTOMERS - ORGANIZE STORE AND MERCHANDIZE - ENRICH SHOPPING EXPERIENCE RETAIL MANAGEMENT ..10 ATMOSPHERICS ROLE IN RETAIL STRATEGY  ATTRACTS NEW CUSTOMERS  CREATES A USP  FACILITATES EASY MOVEMENT INSIDE THE STORE  FACILITATES ACCESS TO MERCHANDISE INSIDE THE STORE  ENSURES OPTIMUM SPACE UTILIZATION  ENSURES EFFECTIVE & DESIRED PRESENTATION INSIDE THE STORE  REDUCES PRODUCT SEARCH TIME INSIDE THE STORE RETAIL MANAGEMENT ..10 CHOICE OF FIXTURES, DÉCOR, SIGNAGE ENABLE CUSTOMERS PERCEPTION. PROPER PLACEMENT OF SIGNAGES INDICATING PRODUCTS OFFERED INCREASE EFFECTIVENESS. CUSTOMERS NECESSITY TO ASK QUESTIONS INCREASE STRESS LEVELS. UNIFORMS WORN BY STORE EMOLOYEES ALSO REDUCE CUSTOMER STRESS AND ANXIETY TO ASK QUESTIONS. QUALITY OF STORE FIXTURES SIGNIFY A RETAILER CUTTING CORNERS OR MAKING LARGE PROFITS. RETAIL MANAGEMENT ..10 SIGNAGE, LAYOUT AND FURNISHINGS ADD TO AMBIENCE AND EFFECTS STOREBROWSING COMFORT OF CUSTOMERS. IN STORE ELEMENTS SUCH AS COLOUR, LIGHTING AND MUSIC MAY AFFECT PURCHASE DECISIONS MORE THAN POP AND DISPLAYS. TO IMPROVE IN STORE ATMOSPHERE, PERFUMES GET DESIRED EFFECT – ESPECIALLY TO GET RID OF CERTAIN ODOURS. IF THESE ARE COMPLEMETARY TO THE STORE, THE SERVICE QUALITY EXPERIENCE IMPROVES. RETAIL MANAGEMENT ..10 MUSIC PLAYS AN IMPORTANT ROLE IN ENHANCING CUSTOMER’S TIME SPENT IN THE RETAIL OUTLET – ESPECIALLY SOOTHING MUSIC, NOT THE FAST PACED. STIMULATE RETAIL ENVIRONMENT PLEASURE EFFECT: CLASSICAL HINDI MUSIC ENHANCES SHOPPERS’ ENJOYMENT AROUSAL EFFECT: SLOW INSTRUEMENTAL MUSIC RESULTS IN SUBDUED ACTIVITY IN SERVICE SETTINGS LIKE RESTAURANTS. RETAIL MANAGEMENT ..10 DOMINANCE: CUSTOMERS FEEL DOMINANT ( IN CONTROL). ENVIRONMENTAL ASPECTS COLOUR OF INTERIORS, HEIGHT OF CEILING DETERMINE CUSTOMER DOMINANCE. FURNITURE AND FIXTURES MAY IMPACT THE DURATION OF TIME SPENT IN-STORE. PHYSICAL ENVIRONMENT STORE LAYOUT/DESIGN EMOTIONS SHOPPING MERCHANDISE DISPLAY BEHAVIOUR MUSIC AROMA CUSTOMER’S SENSES RETAIL MANAGEMENT ..10 KEY COMPONENTS OF RETAIL ATMOSPHERICS EXTERIOR ATMOSPHERICS  INTERIOR ATMOSPHERICS  STORE LAYOUT  VISUAL MERCHANDISING  RETAIL MANAGEMENT ..10 EXTERIOR ATMOSPHERICS STOREFRONT MARQUEE ENTRANCES DISPLAY WINDOWS SIZE OF BUILDING ACCESSIBILITY VISIBILITY RETAIL MANAGEMENT ..10 INTERIOR ATMOSPHERICS FLOORING LIGHTING ODOUR/ AROMA FIXTURES WALLS TEMPERATURE AISLES CONVENIENCES/HYGIENE RETAIL MANAGEMENT ..10 STORE LAYOUT SHOPPING FLOOR SPACE TRAFFIC FLOW DEPARTMENTS LOCATION SPACE / MERCHANDISE CATEGORY SIGNAGE RETAIL MANAGEMENT ..10 VISUAL MERCHANDISING ASSORTMENT THEME ENSEMBLE RACKS AND SHELVES CASH COUNTERS RETAIL MANAGEMENT ..11 CONTROL RETAIL STRATEGY Rules to stay Competitive: Commitment – Enthusiasm in Business Share – Staff Involvement in Decision making Listen & Communicate – Customers and Staff Appreciate – Good efforts Celebrate – Good Achievements Motivate – Challenging goals and rewards for High performers Exceed – Deliver more than promises Control – Operating Costs Swim Upstream – Evaluate Competition and do something Different. RETAIL MANAGEMENT ..11 INTEGRATING RETIAL STRATEGY Situation Analysis Objectives Strategy Specific Activities Control Target Market RETAIL MANAGEMENT ..10 OPPORTUNITY ANALYSIS Overall Direction & Goals: Top Down Middle Level: Inputs from Internal and External Sources. Generate Ideas early. Generate Specific Plans with Deadlines. S ALES OPPORTUNITY GRID Rates the promise of New and Established Goods, Services, Store outlets RETAIL PRICE, FLOOR SPACE, DISPLAY COSTS, OPERATING COSTS, MARKUP; SALES ESTIMATES, GROSS AND NET PROFITS IN Rs. AT FIRST, SIX AND 12 MONTHS. RETAIL MANAGEMENT ..11 DEFINING PRODUCTIVITY Efficiency with which a Retail Strategy is carried out. Reach Sales and Profit Goals keeping Operating Costs under control. PERFORMANCE MEASURES Criteria used to assess effectiveness and setting standards for each performance. Measures used: Total Sales Turnover, Average Sales per store, Sales by Goods/ Service Category, Gross Margin/ ROInvst., Op.Income, Inventory T/O, Financial ratios, Profitability RETAIL MANAGEMENT ..11 RETAIL INSTITUTION BY OWNERSHIP Retail Institution refers to basic format or structure of a Business.