merchandise management practices in retail outlets of jaipur

1 | P a g e S h e k h a n i V a s i m ( 0 8 B S 0 0 0 1 5 7 7 )

Management Research Project On

Studying the Merchandising Strategies used by Retail Outlets of Jaipur

Submitted to: Prof. Makarand Upadhyay

Submitted by: Shekhani Mohamed Vasim W.

08BS0001577


REPORT

ON

STUDYING THE MERCHANDISING STRATEGIES

USED BY RETAIL STORES IN JAIPUR

By Shekhani Mohamed Vasim Md. Wahid

08BS0001577

MBA (2008-2010)

In partial fulfillment of the requirement of

MBA Program

IBS-JAIPUR

Faculty Guide:

Prof. Makarand Upadhyay

Faculty, IBS-JAIPUR


Acknowledgement

I take this opportunity to express my gratitude towards certain key people for their constant

guidance and support, without which the project would not have been a success. This project

would have been difficult to complete without the moral support and the opportunity given by

them to be trained and gather knowledge regarding the subject.

I also like to express my gratitude to Prof. Makarand Upadhyay, Marketing Management

Faculty – ICFAI BUSINESS SCHOOL, Jaipur for providing me with the learning so that I can

work on the project. His teachings have been of great help.

I also like to thank all the employees in the department, my friends, and my parents who helped

me in successful completion of this project.


Executive Summary

In today‟s competitive scenario where more and more Retail players are coming into the

picture, there is a need to look into the customer or client behavior to know your client well. The

variety and assortment of merchandise offered by a store play a major role in attracting

customers. Merchandise comes in a variety of sizes, colors, makes and models. So any retailer,

big or small, take many decisions regarding what to purchase and what to made the goods

available to customers. This is called systematic merchandise planning. So basically merchandise

decisions are related to what type of product they are going to offer and assortment planning is

related to the varieties of product and goods offered by them in their outlets.

The main area of the research is to study the Merchandising Strategies used by Retail Outlets

of Jaipur. In this Research Project I will analyze the merchandise planning done by the various

retail stores in Jaipur. Merchandise Planning includes:

The Right Product

The Right Place

The Right Quantity

The Right Quality

The Right Price

The Right Mix or Assortment

The Right Time

The Project is based on Merchandise Planning so we will first understand the importance of

Merchandise planning in retail Industry. We will analyze various aspects to be considered while

doing Merchandise planning in Retail Industry. In this we will cover Assortment, Layout

Planning, In-Store Promotions, Merchandise Buying Decisions, Role of Technology in

Merchandise planning etc.

The Project will be based on Primary as well as secondary Data. The Primary Data will be

collected by interacting with the Store managers, Employees, etc of various Retail stores in

Jaipur while the Secondary data will be collected from Websites, Magazines, Journals, Books

etc.

After collecting the Primary as well as the Secondary Data, it will be compiled in a Proper

Format and inference will be given regarding the merchandising strategies used by the various

retail stores in Jaipur.


Table of Contents

1. Introduction ........................................................................................................................................... 6

1.1 Retailing Overview ....................................................................................................................... 6

1.2 Retail in India ............................................................................................................................... 7

1.3 Future of Retail Industry ............................................................................................................. 10

2. Merchandise Management .................................................................................................................. 11

2.1 Steps in the Retail Merchandising Process ................................................................................. 11

2.2 Category Management ................................................................................................................ 12

2.3 Assortment Plan .......................................................................................................................... 12

2.4 Retail Assortment Strategies....................................................................................................... 13

2.5 Evaluating Merchandise Performance ........................................................................................ 15

3. Research Purpose and Design process ................................................................................................ 16

3.1. Objective of the research ............................................................................................................ 16

3.2. Benefits ....................................................................................................................................... 16

3.3. Limitations .................................................................................................................................. 16

3.4. Research Methodology ............................................................................................................... 16

3.5 Process Flow of the Research ..................................................................................................... 18

4. Findings after Data Collection and Data Analysis .............................................................................. 19

4.1 Response to Questionnaire ......................................................................................................... 20

Conclusion .................................................................................................................................................. 31

Annexure ..................................................................................................................................................... 32

References ................................................................................................................................................... 33

Glossary ...................................................................................................................................................... 35


1. Introduction

1.1 Retailing Overview

It‟s a human tendency to have a comfort, luxurious life and have all facilities. And as there

is a golden period going on now; anybody can enjoy these benefits. Retailing concept is also

from one of these facilities. Retailing simply provides the end product to customer, so retailers

are directly in touch with customers. Retailing is world's largest private industry with annual

sales over $ 6600 billion. Wal-Mart‟s annual sales are over $ 250 billion. It has share of 2.3% of

U.S. G.D.P. There are nine retailers in Fortune 100, which highlights the importance of retailing

as category.


1.2 Retail in India

Retailing in India is witnessing a huge revamping exercise. India is rated the fifth most

attractive emerging retail market: a potential goldmine. As per a report by KPMG the annual

growth of department stores is estimated at 24%. Ranked second in a Global Retail Development

Index of 30 developing countries drawn up by AT Kearney.

According to a market estimate after agriculture, retail is the largest single sector, both in

term of turnover or will as employment in India, with market size of $200 billion. The report said

the Indian retail industry is in revolution phase. Organized retailing in India, which account for

less than 4%, is likely to grow four fold in the next five years. That means it will grow from

current size of around $4 billion (Rs. 17,000 Crores) to around $15 billion (Rs. 66000 Crores)

the neighborhoods corner shops estimated at 70 million across the country, and village Melas

characterize the unorganized and fragmented nature of retailing in India.

The retail industry in India is largely unorganized & predominantly consists of small ,

independent, owner-managed shops. Retailing is INDIA‟s largest industry in terms of

contribution to GDP & constitutes 13% of GDP. There are around 5 million retail outlets in

India. There are also an uncounted number of low cost kiosks (tea stalls, snacks centre, barber

shops, etc) & mobile vendors. In India the per capita retailing space is about 2 sq. ft, which is

quite low compared to that of developed economies

Retail Sales in India


The above chart is showing three lines mainly, overall retail sales; food, beverages and

tobacco segment sales and clothing sales. The below graph shows contrast between retail

spending between urban and rural households

The growth of the retail trade in India is associated with the growth in the Indian

economy. Based on the Market Information Survey of Households (MISH) of the National

Council of Applied Economic Research (NCAER), the number of people in the income groups

of “aspirers” and the middle class with annual income ranging from Rs. 90,000 to one million,

more than doubled from 157 million to 327 million during the last decade. The data from the

Central Statistical Organization (CSO) indicate that the growth of real private final consumption

expenditure.

Retail Sector is the most booming sector in the Indian economy. Some of the biggest

players of the world are going to enter the industry soon. It is on the threshold of bringing the

next big revolution after the IT sector. Although organized retail market is not as strong as of

now, it is expected to grow manifolds by the year 2010. The sector contributes 10% of the GDP,

and is estimated to show 20% annual growth rate by the end of the decade as against the current

growth rate of 8.5%. A CRISIL report says that the Indian retail market is the most fragmented

in the world and that only 2% of the entire retailing business is in the organized sector. This

suggests that the potential for growth is immense. There are about 300 new malls, 1500

supermarkets and 325 departmental stores currently being built in the cities across India.

Traditionally retailing in India can be traced to the emergence of the neighborhood

„Kiraana‟ stores catering to the convenience of the consumers, an era of government support for

rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries

Commission, 1980s experienced slow change as India began to open up economy. Textiles

sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the

emergence of retail chains. Later Titan successfully created an organized retailing concept and


established a series of showrooms for its premium watches. The latter half of the 1990s saw a

fresh wave of entrants with a shift from Manufactures to Pure Retailers. For example Food

World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music;

Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping

centers, mainly in urban areas, with facilities like car parking targeted to provide a complete

destination experience for all segments of society. Emergence of hyper and super markets trying

to provide customer 3 V‟s - Value, Variety and Volume. Expanding target consumer segment:

The Sachet revolution - example of reaching to the bottom of the pyramid. India is on the radar

screen in the retail world and global retailers and at their wings seeking entry into the Indian

retail market. The market is growing at a steady rate of 11-12 percent and accounts for around 10

percent of the country‟s GDP. The inherent attractiveness of this segment lures retail giants and

investments are likely to sky rocket with an estimate of Rs 20-25 billion in the next 2-3 years,

and over Rs 200 billion by end of 2010. Indian retail market is considered to be the second

largest in the world in terms of growth potential.

India Retail - Share of Categories (percentage)

2005-06 2006-07 2007-08 2008-09

1. Food & grocery 66.4 62.5 61.7 59.6

2. Beverages 2 2.7 3.1 3.6

3. Clothing &

footwear

7.3 8.8 8.6 9.3

4. Furniture,

furnishing,

appliances &

services

4.8 5.8 6.2 6.8

5. Non-institutional

healthcare

9 8.6 8.5 8

6. Sports goods,

entertainment,

equipment & books

2 2.4 2.6 2.7

7. Personal care 3.5 3.8 3.9 4.2

8. Jewellery,

watches, etc

5 5.4 5.4 5.9

Total Retail 100 100 100 100


1.3 Future of Retail Industry

The retail sector is expected to grow 40% to $427 billion by 2011.

By 2017, organized retail will be 15-20% of the total retail market.

Total retail market $ 800-billion by 2017.

Impact on rural incomes and urban prices will be real and positive.

Organized retailing in India will need painstaking, often frustrating, effort to chisel out

India ready business models, retail formats and delivery models.

Products, Properties, People and Profitability are going to be huge challenges.

The real estate prices and shortage of talented staff, the run-up expenses for growth are

going to shoot up sharply.

Significant delay in completion of shopping malls by developers and unreasonably high

property prices is adversely affecting the growth of the sector.

By the year 2010, it is expected that there will be around 500 shopping malls, adding over

250 million square feet of retail space.

Understanding, interpreting and catering to Indian consumer behavior, taking into

account the social diversity in the country will be crucial to the success of new players.

New formats in specialty retail, wholesale retail and luxury retail are expected to emerge.

By 2010 a conclusion on the consumption potential in India can be reached.

No one can stop the growth of modern retail and the consequent impetus to consumption

and development in India.


2. Merchandise Management

For every industry, its product range and varieties are the best way to attract and retain

customers. That‟s why this concept of merchandise and assortment planning emerged and now

most of retail organizations focusing on this for being alive in the market. The retailer must make

decisions regarding the merchandise offered depending on the sales targets and financial

objectives of the store. Merchandise comes in a variety of sizes, colors, makes and models.

Retailers should be very careful while deciding on the amount of stock to be maintained in each

category, if large stocks are maintained in a particular category, there may not be sufficient

resources left for providing a deeper assortment of goods. Hence, the retailer should establish a

trade-off between the type of categories or assortment and the inventories being maintained. This

is called merchandise assortment planning.

2.1 Steps in the Retail Merchandising Process

1. Develop the merchandise mix and establish the merchandise budget.

2. Build the logistic system for procuring the merchandise mix.

3. Price the merchandise offering.

4. Organize the customer support service and manage the personal selling effort.

5. Create the retailer‟s advertising, sales incentive and publicity programs.

Retail merchandising also includes:

Planning Merchandise Variety

Controlling Merchandise Variety

Planning Merchandise Assortment/Support

Controlling Merchandise Assortment/Support

Merchandise Mix Strategies i.e.

1. Merchandise Variety (No. of product lines)

2. Merchandise Assortment (No. of product items)

3. Merchandise Support (No. of product units)

As seen in first step of merchandising process it requires management of Merchandise Budget

which includes:

Planning And Controlling Retail Sales

Planning And Controlling Inventory Levels

Planning And Controlling Retail Reductions

Planning And Controlling Purchases

Planning And Controlling Profit Margins


2.2 Category Management

A category is a distinct, group of products or services, which are perceived by customers

to be interrelated and suitable. For example, men‟s jeans and girl‟s jeans are two categories,

which have similar characteristics. The pricing and promotional aspects of these two

merchandise categories are targeted at similar customers.

Category management involves the management of price, shelf-space, merchandise

category, promotional efforts and other elements of the retail mix with in the category, based on

firm‟s goals, the changing environment and the consumer behavior. In majority of retail

organizations, the responsibility for purchasing merchandise is shared by a category manager and

a merchandise planner. Merchandise planning is handled differently by different retailers.

Typically it is the category manager who looks after all the functions of merchandise

management. The responsibilities of a category manager include:

Interacting with the vendors

Merchandise selection

Merchandise Pricing

Developing various promotional schemes etc.

2.3 Assortment Plan

An assortment plan depicts what should be carried in a specific category of merchandise. An

assortment plan for a merchandise category based on fashion will not identify particular stock

keeping units, because fashions vary from year to year and sometimes, from season to season.

The more fashion-oriented the merchandise category is, the more necessary it is for the

merchandise planner to accommodate changes in fashion, and hence, the lower the level of detail

in the assortment plans. The starting point for developing an assortment plan for a given season

is the historical data for a particular merchandise category. Apart from the assortment plan for a

merchandise category in the previous season, sales, inventory turnover and GMROI (Gross

margin return on inventory investment) figures are used to develop an assortment plan for the

current season. The merchandise planner then makes the required changes according to his

expectations of what products or fashions will be really significant for the coming season.

Assortment Plan for Boy’s Jeans

Style Straight-leg Straight-leg Straight-leg Loose-fit Loose-fit

Retail Price (in Rs.) 999 1399 1799 1299 1599

Type of Fabric Regular

Denim

Stone Washed

Denim

Tinsel-Lycra

based Denim

Broken twill Over Dyed

Colors Light Blue Dark Blue Light Blue Light Blue Blue

Black Indigo Black Black Black

Black Deep Blue


This plan describes general styles, price levels, fabric composition and colors. The process of

developing an assortment plan can be quite complex, especially in multi-store chains like

Shoppers‟ Stop, Pantaloons or Food World. An effective assortment plan requires equal or more

effective sales, inventory turnover and GMROI forecasts, to complement the experienced

judgment of the merchandise planner.

2.4 Retail Assortment Strategies

There are 4 types of assortment strategies. They are:

1. Wide & deep

- Many categories & large assortment in each category

2. Wide & shallow

- Many categories & limited assortment in each category

3. Narrow & deep

- Few categories & large assortment in each

4. Narrow & shallow

- Few categories & limited assortment n each

1. Wide and Deep

Advantages

- Broad market

- Full selection of items

- High level of customer traffic

- Customer loyalty

- One-stop shopping

- No disappointed customers

Disadvantages

- High inventory investment

- General image

- Many items with low turnover

- Some obsolete merchandise

2. Wide and Shallow

Advantages

- Broad market

- High level of customer traffic

- Emphasis on convenience customer

- Less costly than wide and deep


Disadvantages

- Low variety within product line

- Some disappointed customers

- Weak image

- Many items with low turnover

- Reduced customer loyalty

3. Narrow & Deep

Advantages

- Specialist image

- Good customer choice in category(ies)

- Specialized personnel

- Customer loyalty

- No disappointed customers

- Less costly than wide and deep

Disadvantages

- Too much emphasis on one category

- No one-stop shopping

- More susceptible to trends/cycles

- Greater effort needed to enlarge the size of the trading area

4. Narrow & shallow

Advantages

- Aimed at convenience customers

- Least costly

- High turnover items

Disadvantages

- Little width and depth

- No one-stop shopping

- Some disappointed customer

- Weak image

- Limited customer loyalty

- Small trading area


2.5 Evaluating Merchandise Performance

There are 3 different ways to evaluate the performance of the merchandise for any retailer.

They are:

ABC Analysis

Sell through Analysis and

Multi- attribute method

1. ABC Analysis

In this method merchandise is ranked according to its sales. ABC analysis is based on 80-

20 rule, which says that only 20% of total merchandise bring 80% of the total revenues. In this

method first of all parameters are chosen based on which merchandise is to be categorized or

ranked for e.g. contribution margin, sales etc. After that the next step is to define criteria to place

merchandise in A, B or C category. For e.g. A category consists of only top 5% items which

bring 70% of total revenue, B category consists of 10% of merchandise which contribute 20% of

total revenue and rest are placed in category C.

2. Sell through Analysis

A sell through analysis helps determine the requirement for early markdowns or the

requirement of more merchandise to fulfill the demand by comparing the actual sales with the

planned sales.

3. Multi-attributes method

In this method the vendors are assigned weighted average scores based on certain parameters.

The vendors are evaluated based on these scores only. The parameters may include Reputation,

Promotional assistance, delivery time, selling history etc.


3. Research Purpose and Design process

3.1. Objective of the research

Merchandising Strategy plays a very important role in success of a retail outlet. It helps to

attract more and more customers as well as retaining the old customers by adopting customer

centric approach so the main Objective of the research is to study the Merchandising Strategies

used by Retail Outlets of Jaipur.

3.2. Benefits

To Self-

Knowledge earning.

Gaining practical exposure to Merchandise Assortment Planning.

To companies-

This report will be beneficial for companies and outlets too because from this report

they get to know what merchandising trends are prevailing in the industry.

From this report they will get the knowledge about required changes in their

strategies.

To customers-

They will get to know about retailer‟s strategies and their work process.

3.3. Limitations

The following limitations may arise during the study:

Time constraint

Money constraint

The pace of technological changes.

3.4. Research Methodology

For this project one has to know each and every aspect of the concept thoroughly. And then

for merchandise assortment planning one has to get updated with the latest trends and all factors

which are continuously affecting these decisions. So acquiring the data regarding this I have

gone through several sources like Books, Magazines, Journals and Web site.


In order to understand the merchandise assortment planning process, as per the objective

stated, the various steps which are to be followed are given below:

1. Planning the research design.

2. Selecting the research method.

3. Selecting the sampling procedure.

4. Data collection.

5. Evaluating the data.

6. Preparing and presenting the research report.

1. Research Design:

The research design will be Descriptive studies. Descriptive studies are well structured,

they tend to be rigid and its approach cannot be changed every now and then. The objective of

this kind of study is to answer the why, who, what, when and how of the subject under

consideration.

I will be taking descriptive because my research includes understanding Merchandising

Strategies adopted by various Retail Stores. I will be working on to know how Manager of

Various Retail Stores develop a merchandise plan, what things do they consider while

developing it and how do they modify the same as per customer‟s preferences

2. Research Method

After developing an appropriate research plan, it is important for the researcher to select a

proper research method. For this research, the research methods chosen by the researcher are

secondary data and survey methods.

Secondary data studies: This is concerned with the analysis of already existing data that is

related to the research topic in question.

Surveys: This is a research technique, which is used to gather information from a sample of

respondents by employing a questionnaire.

3. Sampling Procedure

Sampling is generally a part of the research design but is considered separately in the

research process. Sampling is a process that uses a small number of items or a small portion of a

population to draw conclusion regarding the whole population. For this research the sampling

method chosen is simple random sampling and Convenient Sampling.


4. Data Collection

After preparing a suitable sample, the researcher collects the data from the units in this

sample. As stated above that research method which will be used in the research comprises of

surveys therefore data collected will be of primary in nature and partly secondary since

secondary data will also be taken.

5. Evaluating and analyzing the data

This step includes editing, coding, tabulation and processing of collected data. The

Schedules are required to be edited during the field survey for necessary corrections. After the

survey was complete they are required to be checked again for completeness, accuracy and

uniformity. The data is then arranged in a particular fashion for better understanding.

3.5 Process Flow of the Research

Findings and Recommendations

Data Cleaning and Analyzing

Data Entry

Getting Response

Design of Questionnaires


4. Findings after Data Collection and Data Analysis

The question given in the annexure were orally asked to store managers, management etc.

of various retail outlets across Jaipur. In order to get proper and true data regarding merchandise

management practices in retail stores of Jaipur; care was taken that all different types of retail

store formats are included as sample unit. The various formats include:

Chain stores like More, Reliance Fresh, Lifestyle, Big bazaar etc.

Franchise Stores like Belmonte, Reebok etc.

Single stores owned by local Businessmen like Mansi Fashions, S-mart etc.

Unorganized Retail stores

and various others.


4.1 Response to Questionnaire

Q.1. Tell me something unique about your outlet and brand and about your vision and

mission?

This was a general question just to start the interview smoothly and also to know what

positioning strategy the retail store managers are adopting and to know the Brand Identity of the

retail stores.

In response to this Question the Managers told various things that they thought are unique

in their retail outlet and which attracts the target customers towards their store instead of their

competitors like:

Brand name

Store location

Store‟s presence in the city

Able to understand customer demands and their need patterns

Store‟s Exterior design

Promotion strategy

Merchandise Assortment

Depth of Products

Customer service

Aesthetics inside the store i.e. store ambience

Store layout

Visual merchandising within the store

Pricing policy

Various loyalty programs

Procedure of handling customer complaints and queries etc.


Q.2. Which is your target market and what you doing to capture it?

This Question was to know the target market of various retail stores and the customer bas

they are focusing on. All retailers have their own target markets and their all efforts are focused

on capturing as high market share as possible. They use various tools for the same like Pricing

Strategy, Promotional strategy and more importantly merchandise assortment planning decisions.

Different stores have different target market segments and their basis of segmenting also

differs like let‟s take an example:

Big Bazaar through the introduction of “SABSE SASTE DIN” focuses on the middle

class and the lower class of the society, who is very conscious about the price and decide

on the basis of the value the merchandise provides them.

Retailers like Blackberry, Levis and other brands they focus on the upper middle class

and the upper class of the society whose needs fall in the category of Self-esteem and

Self-actualization. This class don‟t care about the price they have to pay but they want to

buy those merchandise which suites their status and is noticed by everyone.

Let us take another example of apparel retail stores which have different target segment

to focus on which is shown in the table below:

Target Segment Retail Brands/Stores

Formals John Players, Peter England etc.

Casuals Adidas, Reebok, Spykar, Lee, Levi‟s,

Wrangler, Gas, Tommy Hilfiger etc.

All family apparel market Sportking, Monte Carlo, Priknit, Cotton

County, Koutons, Lee, Allen solly etc.

Children‟s market Gini & Jony, Lilliput etc.


Q.3. Before taking decisions about your product varieties and range (Merchandise

Assortment Planning), what factors you considered?

The variety and assortment of merchandise plays an important role in attracting the

customers. There is a difference between variety and assortment of merchandise. Variety means

number of different categories of merchandise within a store while assortment means the number

of stock keeping units within a merchandise category. In short one can say variety means breadth

and assortment means depth of merchandise. So before deciding the amount of merchandise to

be purchased, its variety and its assortment the stores take various factors into consideration like:

Corporate philosophy of brand

Physical characteristics of the store i.e. size etc.

Degree to which merchandise complement each other

Financial Objectives

Customer‟s preferences and demand

GMROI figures

Retail brand‟s image and good will

Seasonal demand and fashion etc.


Q.4. Do you make assortment plan for your merchandise?

As explained earlier assortment plan is an important feature of category management.

Every retail store whether it be a single store, franchise store, chain stores etc., they all use

category management as one of their strategy whereby they maintain stock keeping unit of each

category but all of them do not utilize category management to the fullest i.e. they don‟t use each

and every aspect of category management .

Store like single stores, which are owned by a fairly literate businessman, do not use

assortment plan as a tool to plan their merchandise management because they don‟t know the

formal way of making assortment plan as they don‟t have knowledge regarding the same but

they use some layman techniques to organize each category through their experience from the

market.

On the contrary big retail stores like Big-bazaar chain, More, Reliance fresh, Lifestyle

etc. they take due care of preparing their assortment plan and maintaining it by updating and

changing it time to time so that they come to know merchandise belonging to which stock

keeping unit should be ordered in advance so that there is no shortage in its supply similarly they

can also decide on which merchandise should be ordered in less quantity as a result of drop in

sales in that particular stock keeping unit, the reason may be change in the trend, fashion change

etc.


Q.5. Is there any proper strategy you are adopting for these decisions i.e. Do you use

standard tools like budget plan and open to buy for purchasing?

In case of franchise stores and chain stores, they have their own strategic plans for

capturing market and company‟s management also helps these store owners in strategic

planning. As all brands have their own vision and mission so mainly these Retail store owners

are also adopting same strategies for them. While in case of single stores the owner takes all the

purchasing decisions based on the inputs from the store manger regarding purchasing trends and

preferences about the customer for previous month/s. But as all customers have their own

specialties so these retailers also have to change their strategies according to their own localities

and they make some modifications in the plan according to suit the local circumstances.

When asked about whether they use standard tools like Budget plan or open to buy the

retailers gave different responses. In case of single stores owned by fairly literate businessman

they told that some of them have no idea about such tools but then they were told that a budget

plan contains items like:

Monthly sales percentage distribution to season

Monthly sales

Monthly Reductions percentage distribution of sales

Monthly reductions

Beginning of the month inventory to sales ratio

Beginning of the month inventory

End of month inventory &

Monthly additions to inventory

while Open to Buy system consists of calculating difference between actual and the planned

sales and inventory. On hearing that what actually all this standard tools contain they told that

they also make use of all this items but not in standard for as described by us thus we can say

that this businessmen make use of such standard tool but in their own way.

In case of big retailers like lifestyle, Big-bazaar, More, S-Mart etc. they told that some of

them use this tool while some of them have their own tools which they designed for their store

managers to use and plan their merchandise. Thus we can say every retailer uses proper strategy

while making purchase decisions regarding the merchandise to be offered by the store to the

customers.


Q.6. Are all decisions related with your outlet’s merchandise are independently taking by

you or is there any interference or support by company’s side also?

In case of Retail chain like Reliance Fresh, More, Spencer etc. they get huge support

from the company in taking decisions regarding the merchandise to be offered to their

consumers. Even in some retail chains like Reliance Fresh all decisions are taken by the

company depending on the sales data of the store which is transferred from the store database to

company database regularly but the store manager has the authority to suggest any

recommendation if any, may be regarding some new merchandise to be offered or to increase the

quantity of old merchandise being offered by the store. Mainly based on the sales data the

company makes an estimate about the inventory required at the store and after consolidating

inventory required by all the stores in a region, the inventory is dispatched to regional warehouse

from where the inventory is arranged in groups to cater to particular retail stores and then the

merchandise is finally unloaded at the retail store.

In single Retail stores like Mansi fashions etc. the decision regarding the merchandise is

entirely taken by the owner in coordination from the store manger if any and from the sales data

regarding the ales of the merchandise in the previous month/s.

While in case of some franchise store they have liberty to prepare their merchandise

strategy through their own, the company only lends the name to the franchisee. In this case the

franchisee along with the store mangers takes the responsibility to carry out the merchandise

purchasing decisions.


Q.7. Do you incorporate category management? If yes do you appoint Category manger for

the same or it is done by store manager only?

Every Retail store whether small or big, whether single store or chain store they all

incorporate some part of category management in their stores like:

Dividing merchandise into separate stock keeping units based on category as perceived

by the customers.

Allotting different shelf space to merchandise belonging to different categories

Designing different promotion schemes for different categories

Deciding price of merchandise belonging to various categories separately etc.

But there are still many other things that the retail stores are not doing in field of category

management like:

Appointing separate category manager for different categories, who takes care of a

particular category of merchandise.

Giving category manger the power to select the merchandise to be offered in the

particular category.

Giving category manager the power to negotiate with the vendors directly regarding the

merchandise purchased from him.

While in case of some big chains like Big-bazaar super market, Lifestyle they even

appoint special category manger for different categories of merchandise but still they don‟t give

all power to the category mangers regarding that particular category . As for example category

manger can decide regarding promotion, shelf space etc. but they can‟t directly negotiate with

the vendors or they can‟t fix the price etc.

Thus we can say that category management is in initial stage in Retail market of not only

Jaipur but the whole of India as it is a new concept and it will take time to flourish in Indian

retail industry.


Q.8. Before buying merchandise for the coming month do you analyze the merchandise

performance of the previous month? If yes, which tool do you use for the same i.e. ABC

analysis, Sell through analysis etc.?

Every Retail store whether big or small, whether chain stores or a single store; they all

thoroughly analyze the performance of merchandise during previous months and based on that

and certain other criteria they take decision regarding buying merchandise for the coming month.

When further asked about whether they take help of standard tool for analyzing the

merchandise performance like ABC analysis, Sell through analysis, Multi attribute model etc.;

the retailers gave different responses. In case of single stores owned by fairly literate

businessman they told that some of them have no idea about such tools but then they were told

that what actually this various tool contains then they told that they all use such strategies but

only the thing is that they don‟t know this standard tools.

In case of big retailers like Big-bazaar, Reliance Fresh etc. they told that some of them

use this tool while some of them have their own tools which they have designed for their store

managers to use and evaluate the performance of the merchandise.

Every Retail store uses Price mark-up in case of cost of raw material increases and if

merchandise does not sell they even use mark-downs based on the merchandise performance this

is nothing but the Sell-through analysis. Similarly every retailer assign some rating to the vendor

based on certain attribute it possesses like fast delivery, low price etc this is nothing but the Multi

attribute model and so on. So we can say that analyzing of merchandise performance of previous

month/s is a very important aspect for a retailer while purchasing merchandise for coming month

and every retailer whether big or small uses this strategy.


Q.9. How is the price of the merchandise Fixed in your store?

Different retailers use different strategies for fixing their price. The Pricing decision of a

retailer is influenced by:

Target Market i.e. Market Skimming, Market penetration or Market holding

Corporate philosophy of brand

Physical characteristics of the store i.e. size etc.

Financial Objectives

Retail brand‟s image and good will etc.

The various pricing strategies which retailers in Jaipur use are:

Market skimming for brands like Levi‟s, Blackberry etc.

Market Penetration for brands like More, Reliance fresh etc.

Market holding and

Cost based Pricing

For retail chains like More, Reliance Store, Big-bazaar etc., the store manager have very

less or even negligible power in pricing decision of the merchandise. All pricing decisions

regarding the price are taken by the mangers at corporate headquarters.

While in case of Small Retailers having single store like Mansi Fashions, S-mart etc., the

pricing decisions are taken by the management with due inputs from the store managers and

based on the discussion the price of the merchandise is fixed in this stores.


Q.10. How do you handle the logistics for the procurement of the merchandise from

vendors?

The way of handling the logistics for the merchandise differs for every retail store. Some

develop their own logistic system and some use outside logistic service provider‟s facility.

For Big Retailers like Big-bazaar, More etc. they have their own logistic system designed

by the company and these fleet works only for their retail stores. They have their own vehicles,

warehouses etc. even in many cases the company leases the warehouses, vehicles etc. for

particular time period.

In case of small and medium retailers they take use of logistic service providers like Gati,

DHL, TNT express etc. Even for very small retailers they don‟t even have any permanent

logistic service provider they use different services at different time as per the availability of the

logistic service provider.


Q.11. What factors do you consider while opting for in- store advertising, sales promotion

etc.? Do you perform all these promotional activities by yourself or use external assistance

for the same?

Different Retailers have different philosophy regarding promotions of their merchandise

as well as the store. Big Retail giants like Big-bazaar, Lifestyle, More, Vishal Mega mart etc they

spend huge amount of money for the promotions. Even these retailers apart from various Medias

also launch private labels whereby along with other brands they also launch their own brand of

merchandise and they compete with other brands. The main aim of using the private labels is to

achieve economies of scales by high profit margin. They generally use PUSH strategy for private

labels. In order to promote the private labels many retailers they keep their products just besides

the well known brands and they promote then in such a way that instead of choosing the regular

brand consumers prefer the private label because of the price difference, the assortment, the

aesthetics etc.

Small retailers like S-mart, Mansi fashions etc. they also use private labels to increase

market share as well achieving the economies of scale. Many small retailers apart from using

conventional media like TV, Radio, Print etc. they also use unconventional media which suit the

local consumers preferences of Jaipur like Bill board in camel cart, bullock cart, Gas balloon tied

at some point, microphone and loudspeaker in auto rickshaws etc. Because of this innovativeness

and unconventional methods used by the small retailers many a time customer gets attracted

towards them instead of big retailers; this is the main aim of using such media.

For in-store promotions many retailers like big-bazaar, more etc. either they have

category mangers looking for the same or they hire external assistance by service providers. If

they don‟t have category mangers than the store manger along with the assistance from the

company headquarters design the promotions, the store manager has very limited role in such

case i.e. only to give suggestions regarding preference of local community. Even now-a-days

small stores are also hiring external promoters for in-store promotions. Otherwise in case of

small retailers the responsibility of making in-store promotions rests in the hand of store manger

but he has to consult the owner before implementing it.


Conclusion

From the research conducted, the researcher has reached to the conclusion that in this

quick-moving world, now retailers have also realized that they need to work more strategically

for their survival. That is the reason why now they are taking merchandise assortment decisions

seriously and are spending huge amount of time and efforts for such decisions.

The scenario has changed totally. Earlier Markets used to be Product-centric but now

market is totally customer-centric and highly competitive. So if any company wants to survive in

this competitive environment then they have to fulfill the changing demands of their customers

whether it is a big giant or a small business unit. That is a reason why in a city like Jaipur also,

which is considered as a historic place, retailers are adopting new techniques to fulfill their

customer‟s need. And hence here also customer can get all those qualities and varieties of

merchandise which earlier were not possible to find.

Although Merchandise management is not a new concept here but the systematic

planning procedure is yet not been adopted by many retailers because of lack of knowledge

about modern merchandise management tools which help to take such decisions more efficiently

and effectively and many other reasons like lack of infrastructure, finance, skilled manpower etc.

The full fledged blooming of Modern Merchandise Management will take some time in Jaipur

but big Retailers like Big-Bazaar, Lifestyle, More etc. have started moving on that path of

success.

We can say that in present Scenario also Darwin‟s Law (on Evaluation Theory) is

applicable on retailers as, “Only the most powerful and quick updating creature, according to the

circumstances will remain alive and others, who couldn‟t adopt themselves according to the

changing environment, will be finished.”


Annexure

Following is the Questionnaire which will be asked to Retailers during the research.

Questionnaire

Q.1. Tell me something unique about your outlet and brand and about your vision and mission?

Q.2. Which is your target market and what you doing to capture it?

Q.3. Before taking decisions about your product varieties and range (Merchandise Assortment

Planning), what factors you considered?

Q.4. Do you make assortment plan for your merchandise?

Q.5. Is there any proper strategy you are adopting for these decisions i.e. Do you use standard

tools like budget plan and open to buy for purchasing?

Q.6. Are all decisions related with your outlet‟s merchandise are independently taking by you or

is there any interference or support by company‟s side also?

Q.7. Do you incorporate category management? If yes do you appoint Category manger for the

same or it is done by store manager only?

Q.8. Before buying merchandise for the coming month do you analyze the merchandise

performance of the previous month? If yes , which tool do you use for the same i.e. ABC

analysis, Sell through analysis etc.?

Q.9. How is the price of the merchandise Fixed in your store?

Q.10. How do you handle the logistics for the procurement of the merchandise from vendors?

Q.11. What factors do you consider while opting for in- store advertising, sales promotion etc.?

Do you perform all these promotional activities by yourself or use external assistance for the

same?


References

Faculty Guide:

Prof. Makarand Upadhyay

Websites:

www.indiainbusiness.nic.in

www.google.com

www.wikipedia.com

www.researchindia.org

www. bigbazaar.futurebazaar.com

www.morestore.com

www.adidas.com

www.priknit.com

www.rbk.com

www.lilliput.com

Books and Articles:

Cases of Retail Management, Prentice-Hall Publications.

Retailing Environment in India, Tata-McGraw Hill Publications.

Retail Management, ICFAI University Press

Nordstrom‟s Perpetual Inventory System, Page No. 245-260

Turnaround of JC Penney, Page No. 261-274

Big Bazaar: Serving the Classes, Page No. 275-276


Journals:

Darley, W.K. & Su Lim, J(1999), “Effects of store image and attitude toward secondhand stores

on shopping frequency and distance traveled”, International Journal of Retail & Distribution

Management, Vol.27, pp311-318

Gerth, K.C. (2004), “Situational, consumer, and retailer factors affecting Internet, catalog, and

store shopping”, International Journal of Retail & Distribution Management, Vol.32, pp5-18

Mattila, A.S. & Wirtz, J. (2001), “Congruency of scent and music as a driver of in-store

evaluations and behavior”, Journal of Retailing

Paulins, V.A. & Geistfeld, L.V. (2003), “The effect of consumer perceptions of store attributes

on apparel store preference”, Journal of Fashion Marketing and Management, Vol. 7, pp371-

385


Glossary

Chain Stores- Stores that have two or more retail outlets that are commonly owned and

controlled. These stores have a centralized buying, and merchandising system and sell similar

lines of merchandise.

Combination Store- A blends of a super market and a general merchandise store, where the

general merchandise contributes more than 40 percent of the sales.

Franchise Store- A store based on a contractual arrangement between a franchiser

(manufacturer) and a retail franchise, which allows the franchise to conduct a given form of

business under as established name and according to a given pattern of business.

Customer service- A set of activities and programs taken up by a retail organization to offer

their customers a rewarding shopping experience.

GMROI- Gross Margin Rate on Investment.

Market Positioning- The kind of image the retailer wants to establish among its target group

and the group of firms with which it wishes to compete and coexist.

Market Segment- A group of customers whose needs will be satisfied by the same retail

offering because they have similar needs and go through similar buying processes.

merchandise management practices in retail outlets of jaipur

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