retail business & concepts - pss jan '09

8/8/2019 Retail Business & Concepts - PSS Jan '09

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RetailingRetailing includes all activities in selling goods& services to the final consumer

The seller is a Retailer & his business isRetailing.

It doesnt matter howhow the products are sold ( byperson, mail, telephone, internet etc) orwherewherethey are sold from ( store, on the street or inconsumer homes )

2Retail Business - Management & Concepts - PSS Jan '09


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Conventional Sales & Distribution Set up FMCG,Durables ,Apparels,Daily needs,Financial Products etc

Retail Environment &Growing Importance Retail scenario over last 8-9 Yrs

Current scenario

Players & Their Influence

Retail Business - Management & Concepts - PSS Jan '09 3


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Retail Store Operations

Functions & Working

Significance of marketing



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Company owned /Stand alone stores

Specialty stores

Departmental Stores SuperMarket

Hyper markets

Malls &CommercialSpaces

RetailChain s


Convenience Stores

Discount stores

Off Price Retailer

Category killer Catalog Showroom

Self Service

Self Selection

Limited service

Full Service

Retailers can also position themselves on service intensity


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Human resources management Institutional business Administration / Maintenance

SupplyChain & LogisticsManagement Maintenance Accounts & Finance Business Development / BOT MIS management

Visual merchandising Marketing & Loyalty Program management Operations Buying & Merchandising



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Top lines Sales Customer Entry Marketing programs

Productivity & Efficiency

Category Management &Consolidation

Profitability

CategoryManagement &MOS tracking, GMROF,OperationalCosts Occupation, HR, Electricity,CAM

SOP & LegalCompliance

Accounts & Processes, Best Practices Team, Audit Frequency Efficiency

Conversion

CashMemo Size GMROL

Customer Satisfaction Index Concept ofMystery Shoppers

SOP Audit

Associate Satisfaction Index Rewards & Recognition



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Conversion =Total Number of BillsTotalCustomer entry

E.g. on a single day the total entry of the customers in

the store is 1000 & the total bills made by thecustomers is 400 No's

The conversion will be 400 / 1000 = 40%



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Cash Memo Size = Total SalesTotal no of Bills


the store is 1000 & the total bills made by thecustomers is 400 No's, The sales are 800,000/-

Cash Memo Size will be 800,000/ 400= 2000/-



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Items per Ticket = Total number of Items Sold

(IPT) Total number of bills


the store is 1000 & the total bills made by thecustomers is 400 No's & the total number of items sold

is 1600 nos

IPT will equal to 1600 / 400 = 4 items



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Sales per square feet

GrossMargin Return on Footage (GMROF)

SPQFT = Total Sales for a period

Total area or MPA

GMROF = Gross Margin earned

Total Area or MPA



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What is merchandise management ?

Making assortment plan, Deciding on the product mix, forecasting & allocating the products

mix , Negotiating the price of the products,Merchandise plan considers


Marketing

Considerations

Store & Image,Trading format, retail proposition,

EnvironmentMerchandise strategyoptions

Issues of Width & depth,Quality, Exclusivity, Seasonalityof range, Promotional agreement

Type of customer base Frequency of customer visits & purchases, Length ofseason,Avg transaction value , Range purchased

Financial considerations Profitability & sales performance projections, Stockturnover ratio,Terms of trade, corporate objectives &

pricing considerations

MerchandiseAssortment Search

Ensuring merchandise meets criteria of required range,comparison, cost , price range offer, brand policy, etc


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( should avoid resistance to change & constantly consolidate basis GMROFor Sales per Sqft )

Analysis What people want

Planning What time frame is in consideration? Acquisition Where to get it from ? Handling Issues like,Tagging, Soiling, etc

Control Inventory management

Arrangement Centralized / Decentralized TOT Consignment ,Outright,Minimum

guaranteed commission or MGC)



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An assortment of items that the customer sees asreasonable substitutes for each other Destination Brands,Toys ,Music

Routine White Shirts, Soaps

Seasonal Mangoes , oranges,Christmas merchandise

Convenience fill In

Categories could also be

Traffic Builders

Transaction builders CashGenerators

Image creators

ExcitementCreators



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Arrange them as customers would arrange them Take into consideration time, space, etc

Drive purchases of multiple categories Its not an institutionalized decision, its dynamic Plays important role in differentiation



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Variety / Assortment Basis positioning

Breadth Within categories which Brands?

Depth Within Brands which lines Guided by constraints

Space ( Synergy ,Clutter !)MPA theory

Investment ( VMI, Inventory management , etc )



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Avg monthly sales = Total planned sales for season / number of months Avg stock for season = Total Planned sales / Inventory turnover ( Inventory turnover = number of turns the inventory is expected to do

during the season ) Basic Stock = Avg Stock Avg monthly Sales Hence monthly stock = Basic stock + planned months sales

Typical for a merchandise wherein the planning is done for 6 months period There could be variation during each months sales which reflects in stocking



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Average monthly sales = Total Planned sales 500000

Number of Months 6

83333

Average stock for the season = Total Planned sales 500000

Inventory Turnover 2

250000

Therefore Basic stock equals Avg stock 250000

(-) Avg monthly sales 83333

166667

- Depending on planned sales for the month as below BOM will be maintained

Hence BOM stock @ retail equals Basic Stock BOM

Feb 75000 166667 241667Mar 75000 166667 241667

Apr 100000 166667 266667

May 50000 166667 216667

Jun 125000 166667 291667

Jul 75000 166667 241667

T tal sales 500000



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Number of weeks to be

stocked

( depends on ) Number of weeks in the period / 26

Stock turnover for the period 2

13

Average weekly sales Estimated Sales 500000

Number of weeks 26

19230

BOM

Average weeskly sales (*) number of weeks to be

stocked 19230 13 250000



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Planned sales for month 75000

Plus EOM planned retail stocks 300000

Minus BOM 225000

Equals planned purchases 150000

educt current commitments for delivery ( GIT from Vendor ) 15000

OTB 135000



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Model Stock Plan : Example

Category Men's Shirts 100%

Attributes

Formals Casuals Sport Patry Wear

Type 10% 40% 20% 30%

Small Medium Large XL

Size 25% 40% 25% 10%

Long Short

Sleeve 30% 70%

Collar Button Down Regular

40% 60%

Color White Blue Beige Yellow

40% 18% 32% 10%

Fabric Cotton Blended

25% 75%



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GatheringInformation

electing themerchan isean ven or

interactions

Evaluatingoptions basisMo el stock Plan

Negotiating apurchase

Conclu ing the

purchases


This process is then followed up by Receiving of merchandise & Reordering


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TradingManagers Non Apparels

CategoryManagers -Cosmetics

Merchandiser

Mass Lakme,Chambhor

MerchandiserPremium

Loreal,Vichy

Category mangerWatches &Sunglasses

Merchandiser fullline

Lancome,Clarins


It will also be guided by the Degree of centralization or decentralization in buying


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Understanding price as a concept

Price sensitivity

Factors influencing price

Approaches to Retail price adjustments

Markdown,Markdown policy



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PriceConcept

ProfitMaximization

Target Return on Investment Target Return on Total sales

Market Share


Cost of ProducingCost of ProducingDistributor /Distributor /

Manufacturer PriceManufacturer PriceRetailMarginsRetailMargins Retail PriceRetail Price


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Substitutes availability Unique Value Importance of purchase Price Quality comparisons Expenditure Size Psychology Fairness / Transparency Perish ability Competition

Volatile market Fluctuations

Supply Issues

Shrinkage rates



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MRP = Selling price

Mark Down = Discounted price Cost Price or List price COGS =Cost of goods sold or aggregate List Price MOS =Margin on Sales GMROF =Gross margin return on footage GMROL =Gross margin return on labor

MPA = Merchandise Plan Area

Sales per Sqft = Total Sales / MPA



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Factors Below the Market Pricing At Par with Market Above the Market Pricing

Store location Inconvenient Competitive Prime

Store Hours Short toCompetitive Competitive Long

Customer Service Self Service, LittleSupport, Limited Displays

Moderate High Service Intensity

Prestige Low Medium High

Merchandise uniqueness None Average Highly unique

Product Lines carried Mostly Private labels,

Closeouts,Some Brands

Better in terms of brands

availability, mostly Privatelabels

Exclusive in terms of

offerings, Rich Brandassortment

Assortment Innovation Conservative Concentration on Best

sellers

Leader

VAS Not Available Available at Fee Included in Price



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Market Penetration : Low prices

Market Skimming : High margins

ELDP : Everyday Low Prices Cost Oriented Pricing

Demand Oriented Pricing

Competition Oriented Pricing



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Markdowns

AdditionalMarkup

Employee Discounts Coupons

Rebates



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Overall Market Demand

Select Market Prices that will Maximize target market demand

Product Demand

Ensure the product / merchandise price is competitive for market share objectives

Competitive Environment

Estimate competitor reaction

Public Reaction

Consumers Sensitivity to Prices

Financial Goals

Test price against financial Goals

Marketing MixEnsure the price is consistent with Marketing mix

Profit Plan

Should be done with cost estimations in Place

Establish Pricing Policy

Timing , responsibility & Monitoring plan


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Understanding marketing mix from retail

Perspective & its role in differentiation

Product & Services Offered

Price

Promotion Place



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Retailing & Marketing

Strategy & Execution ofMarketingPlans approach

Typical set up of theMarketing

Departments or Team



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Consumer behavior in retail context

Comparison of challenges in

conventional formats v/s modern Trade Buying decision process its significance

Implications on retail management



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1. Merchandise management

2. Category management

3. Assortment Plan



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InformationGathering

Customer

Suppliers / Vendors Sales People feedback

Competition data

Other sources



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Selecting and Interaction with Sources

Company owned

Traders / importers EvaluatingMerchandise

Inspection

Sampling



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Setting objectives

Communication effects

Advertising Sales promotion

Relationship marketing & loyalty programme

Public relations

Promotional tools



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Components Merchandise Plan Area

Arrangement ofMerchandise & Departments

Synergy & Adjacency of Displays

Check out counters &Customer Entry Exits

Non Selling areas & facilities

Signanges & In store use of communication tools

Objectives Consistency with store positioning & Image

Functionality Ease & influence onCustomer buying decisions

Optimization of productivity from retail space



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Layouts / Patterns

Grid Pattern

Free Flow Boutique

Loop



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GRID Pattern



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Loop



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Boutique



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Free flow


Office

Racks

Storage

Stora

ge


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Channels & channel flows

Supply chain

Growth of channel relationships &

partnerships Distribution logistics and stock control

Retail logistics cost structure

CPFaR



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Geographic locations

Locations sites and retail development

Catchment analysis Retail property development, current context

Leasing / buying decisions & processes



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Role of IT

IT for competitive advantage

Point of sales scope Database marketing

Business intelligence

IT training & domain expertise



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50Retail Business Management & Concepts PSS Jan '09

retail business & concepts - pss jan '09

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