RETAIL MANAGEMENT

1

Group Members

NISHANT SINGH - 2012088

PIYUSH SINGH - 2012089

SANJEEV SINGH - 2012090

SUNEEL SHUKLA - 2012086

AMIT DUBEY - 2012021

2

Index

Sr. No.

Topics Pg. No.

1. INTRODUCTION 42. WHAT IS RETAIL MANAGEMENT 4-53. RETAIL FUNCTION AND DISTRIBUTION 54. BENEFITS OF RETAIL 85. CLASIFICATION OF RETAIL

INSTITUTION8-15

6. RETAIL LOCATION STRATEGY AND DECICIONS

16-18

7. SERVICING THE RETAIN CUSTOMER 19

INTRODUCTION

3

Retailing : - According to Kotler: “Retailing includes all the activities involved in selling goods or services to the final consumers for personal, non business use”

It is responsible for matching individual demands of the consumer with supplies of all the manufacturers.

WHAT IS RETAIL MANAGEMENT

Definition :- A process of promoting greater sales and customer satisfaction by gaining a better understanding of the consumers of goods and services produced by a company. A typical retail management strategy for a manufacturing business might research the retail process that distributes the finished products created by the business to consumers to determine and satisfy what buyers want and require.

The various processes which help the customers to procure the desired merchandise from the retail stores for their end use refer to retail management.

Retail management includes all the steps required to bring the customers into the store and fulfill their buying needs.

Let us understand the concept with the help of an example:

Tim wanted to purchase a mobile handset. He went to the nearby store and purchased one for himself.

In the above case, Tim is the buyer who went to a fixed location (in this case the nearby store). He purchased a mobile handset (Quantity - One) to be used by him. An example of retail.

The store from where Tim purchased the handset must have shown him several options for him to select one according to his budget and need.

From where do you think the store owner (also called the retailer) purchased all the handsets?

Here the manufacturers and the wholesalers come into the picture.

4

The retailers purchase goods in bulk quantities (huge numbers) to be sold to the end-users either directly from the manufacturers or through a wholesaler.

RETAIL FUNCTION AND DISTRIBUTION

Retailers play a significant role as a conduit between manufacturers, wholesalers, suppliers and consumers. In this context, they perform various functions like sorting, breaking bulk, holding stock, as a channel of communication, storage, advertising and certain additional services.

1: SortingManufacturers usually make one or a variety of products and would like to sell their entire inventory to a few buyers to redu7ce costs. Final consumers, in contrast, prefer a large variety of goods and services to choose from and usually buy them in small quantities. Retailers are able to balance the demands of both sides, by collection an assortment of goods from different sources, buying them in sufficiently large quantities and selling them to consumers in small units.

The above process is referred to as the sorting process. Through this process, retailers undertake activities and perform functions that add to the value of the products and services sold to the consumer. Supermarkets in the US offer, on and average, 15,000 different items from 500 companies. Customers are able to choose from a wide range of designs, sizes and brands from just one location. If each manufacturer had a separate store for its own products, customers would have to visit several stores to complete their shopping. While all retailers offer an assortment, they specialize in types of assortment offered and the market to which the offering is made. Westside provides clothing and accessories, while a chain like Nilgiris specializes in food and bakery items. Shoppers’ Stop targets the elite urban class, while Pantaloons is targeted at the middle class.

2: Breaking BulkBreaking bulk is another function performed by retailing. The word retailing is derived from the French word retailer, meaning ‘to cut a piece off’. To reduce transportation costs, manufacturers and wholesalers typically ship large cartons of the product, which are then tailored by the retailers into smaller quantities to meet individual consumption needs.

3: Holding Stock

5

Retailers also offer the service of holding stock for the manufacturers. Retailers maintain an inventory that allows for instant availability of the product to the consumers. It helps to keep prices stable and enables the manufacturer to regulate production. Consumers can keep a small stock of products at home as they know that this can be replenished by the retailer and can save on inventory carrying costs.

4: Additional ServicesRetailers ease the change in ownership of merchandise by providing services that make it convenient to buy and use products. Providing product guarantees, after-sales service and dealing with consumer complaints are some of the services that add value to the actual product at the retailers’ end. Retailers also offer credit and hire-purchase facilities to the customers to enable them to buy a product now and pay for it later. Retailers fill orders, promptly process, deliver and install products. Salespeople are also employed by retailers to answer queries and provide additional information about the displayed products. The display itself allows the consumer to see and test products before actual purchase. Retail essentially completes transactions with customers.

5: Channel of CommunicationRetailers also act as the channel of communication and information between the wholesalers or suppliers and the consumers. From advertisements, salespeople and display, shoppers learn about the characteristics and features of a product or services offered. Manufacturers, in their turn, learn of sales forecasts, delivery delays, and customer complaints. The manufacturer can then modify defective or unsatisfactory merchandise and services.

6: Transport and Advertising FunctionsSmall manufacturers can use retailers to provide assistance with transport, storage, advertising and pre-payment of merchandise. This also works the other way round in case the number of retailers is small. The number of functions performed by a particular retailer has a direct relation to the percentage and volume of sales needed to cover both their costs and profits.

7: Arranging AssortmentManufacturers usually make one or a variety of products and would like to sell their entire inventory to few buyers to reduce costs. Final consumers in contrast prefer a large variety of goods and services to choose from and usually buy them in small units. 

8: Promotional support:

6

Small manufacturers can use retailers to provide assistance with transport, storage, advertising, and pre- payment of merchandise. 

Benefits

The implementation of such a retail marketing strategy yields benefits for consumers, manufacturers and wholesalers and creates economic utility. The first point under retailing benefits for customers, bulk breaking refers to the act of retailers of buying goods in large quantities and then breaking them into smaller sizes for their individual customers.

As a result purchases become convenient for customers - in terms of quantity bought as well as expenditures made.The assorting function is nothing but evaluating all the different products available and offering to the target the optimum array of products from which to choose.

The storing function performed by the retailers relieves customers of the task of anticipating their desires too far in advance of their needs as the retailers keep goods in inventory until customers are willing to buy and use them.Further, retailers help manufacturers smoothen the production cycle by placing orders for peak demands well in advance and by managing inventory even on behalf of the manufacturer. They create economic utility for consumers by providing the products in the form and

at the place and time desired by the consumer.

Reach more customers

Reduce costs

Improve cash flow

Increase sales more rapidly

Focus on area of expertise

CLASIFICATION OF RETAIL INSTITUTION

7

Ownership format serves a marketplace niche.

Independent retailers capitalize on a very small targeted customer base & please shoppers in a friendly, folksy (simple) way. Word-of mouth communication is important. These retailers should not try to serve too many customer & enter into price wars.

Chain retailers benefit from widely known image, economies of scales (i.e. cost advantages that a business obtains due to expansion), & mass promotion possibilities. They should maintain their image chain wide & not be inflexible in adapting changes in the marketplace.

Franchisors have strong geographic coverage & motivation of the franchisees as owner-operators. They should not get bogged down in policy disputes with franchisees or charge excessive royalty fees.

Leased departments enable store operators & outside parties to join forces & enhance the shopping experience, while sharing expertise & expenses. They should not hurt the image of the store or place too much pressure on the lessee to bring in store traffic.

A vertically integrated channel gives a firm greater control over sources of supply, but it should not provide consumers with too little choice of products or too few outlets.

Cooperatives provide members with price savings. They should not expect too much involvement by members or add facilities that raise costs too much.

a) Independent Retailer : - An independent retailer owns one retail unit.

Advantages

There is flexibility in choosing retail formats, location, assortment (variety), prices, hours etc., & devising strategy based on the target customers.

Investment costs for leases, fixtures, workers, & merchandise can be brought down. There is no duplication of stock or personnel function. Responsibilities are clearly delineated (defined) within the store.

Independents frequently act as specialist in a niche of the particular goods/services category. They are then more efficient & can lure (attract) shoppers interested in specialized retailers.

Independents exert strong control over their strategies, & the owner-operator is typically on the premises. Decision making is centralized & layers of management personnel are minimized.

There are certain image attached to independents, particularly small ones, that chains cannot readily capture.

8

Independents can easily sustain consistency in their efforts because only one store is operated.

Independents have “Independence”. No meetings, union, stockholders & labor unrest etc.

Disadvantages

Less bargaining power with the suppliers as they buy less quantity.

Cannot gain economies of scale (i.e. cost advantages that a business obtains due to expansion) in buying & maintaining inventory. Transportation, ordering, & handling costs are high.

Operations are labor intensive.

They are limited to certain media for advt. because of financial constraints.

Family-run independents is overdependence on the owner. It is difficult to keep it up & running.

Limited time allotted to long-run planning, since owner is intimately involved in day-to day operations.

Chain Retailer :- Chain retailer operates multiple outlets (store units) under common ownership. It usually involves in some level of centralized purchasing & decision making.

Advantages

Many chains have bargaining power due to their purchase volume. They receive new items when introduced, have orders promptly filled, get sales support, & obtain volume discounts.

Chains achieve cost efficiencies when they buy directly from the manufacturers & in large volumes, ship and store goods, & attend trade shows sponsored by the suppliers to learn about new offerings. They can sometimes bypass wholesalers.

Efficiency is gained by sharing warehouse facilities; purchasing standardized store fixtures; centralized buying & decision making etc. Headquarters have broad authority for personnel policies & for buying, pricing, & advt. decisions.

Computerized ordering merchandise, inventory, forecasting, sales, & bookkeeping. This reduces overall costs.

Take advantage of variety of media from print to electronic.

9

Detailed & clear responsibility for employees with available substitute incase any employee is retiring or quitting.

Disadvantages

Flexibility may be limited. Consistent strategies on pricing, promotions, & product variety must be followed throughout all units which may be difficult to adapt to local diverse market.

Investment is high due to infrastructure & store as multiple store has to be stocked.

Managerial control is complex due to geographically dispersed branches.

Limited independence to the personnel.

Franchising :- Franchising involves a contractual arrangement between a franchisor (a manufacturer, wholesaler, or service sponsor) & a retail franchisee, which allows the franchisee to conduct business under a established name & according to a given pattern of business.

The franchisee pays an initial fees & a monthly %age of the gross sales in exchange for the rights to sell goods & services in an area.

A franchisee operates autonomously in setting store hours, chooses a location, & determines facilities & displays.

Advantages of Franchisees

They own a retail enterprise with a relatively small capital.

They acquire well-known names & goods/services lines.

Standard operating procedures & management skills may be taught to them.

Cooperative marketing efforts (like national advt.) are facilitated.

They obtain exclusive selling rights for specified geographical territories.

Their purchases may be less costly per unit due to the volume of the overall franchise.

Disadvantages of Franchisees

Oversaturation could occur if too many franchisees are there in one geographical area.

Due to overzealous selling by some franchisors, franchisees’ income potential, required managerial ability, & investment may be incorrectly stated.

10

They may be locked into contracts requiring purchases from franchisors or certain vendors.

Cancellation clauses may give franchisors the right to void agreement if provisions are not satisfied.

In some industries, franchise agreements are of short duration.

Royalties are often a %age of gross sales, regardless of franchisee profits.

Advantages of Franchisors

A national & global presence is developed more quickly & with less franchisor investment.

Franchisee qualification for ownership are set & enforced.

Agreement require franchisees to abide by stringent operating rules set by franchisors.

Money is obtained when goods are delivered rather than when goods are sold.

Because franchisees are owners & not employees, they have greater initiative to work hard.

Even after franchisees have paid for their outlets, franchisors receive royalties & may sell products to the individual proprietors.

Disadvantages of Franchisors

Franchisees harm the overall reputation if they do not adhere to company standards.

Lack of uniformity among outlets adversely affects customer loyalty.

Intra-franchise competition is not desirable.

The resale value of individual units is injured if franchisees perform poorly.

Ineffective franchised units directly injure franchisors’ profitability.

Franchisees, in greater number, are seeking to limit franchisors’ rules & regulations

Leased Department :- A leased department is a department in a retail store – usually a department, discount, or specialty store – that is rented to outside party.

11

The leased department proprietor is responsible for all aspects of its business & normally pays a %age of sales as rent.

The store sets operating restrictions for the leased department to ensure overall consistency & coordination.

Advantages (from the stores’ prespective)

The market is enlarged by providing one-stop customer shopping.

Personnel management, merchandise displays, & reordering items are undertaken by lessees.

Regular store personnel do not have to be involved.

Leased department operators pay for some expenses, thus reducing store costs.

A %age of revenue is received regularly.

Disadvantages (from the stores’ prespective)

Leased department operating procedures may conflict with store procedures.

Lessees may adversely affect the stores’ image.

Customers may blame problems on the store rather than on the lessees.

Advantages for Leased department operators

Stores are known, have steady customers, & generate immediate sales for leased departments.

Some costs are reduced through shared facilities like security equipment & display windows.

Their image is enhanced by the relationships with popular stores

Disadvantages for Leased department operators

There may be inflexibility as to the store hours they must be open & the operating style.

The goods / services lines are usually restricted.

If they are successful, the store may raise rent or not renew leases when they expire.

In-store locations may not generate the sales expected.

12

CONVENIENCE STOREA convenience store is usually a retailer that is well located, open long hours, and carries a moderate number of items. It’s a small store with average prices, goods and services.

DEPARTMENT STOREA Department store is a large retail unit with an extensive assortment of goods and services that is organized into separate departments for purposes of buying, promotion, customer service and control.

CONVENTIONAL SUPERMARKETA conventional supermarket is a departmentalized food store with a wide range of food and related products; sales of general merchandise are rather limited.

SPECIALTY STOREA specialty store concentrates on selling goods or service line, such as apparel and accessories, toys, furniture. In contrast to a mass marketing approach, specialty stores usually carry a narrow assortment in their chosen category tailoring to selective market segments.

DISCOUNT STOREIt is a type of department store with following features: High-volume, low-cost, fast-turnover outlet.  Centralized checkout service.  Lower operating costs.  Clear customer focus: shoppers looking for good value. 

FACTORY OUTLETA factory outlet is a manufacturer-owned store selling manufacturer closeouts, discontinued merchandise, irregulars, cancelled orders, and, sometimes, in-season, first quality merchandise. Factory outlets can be profitable despite prices up to 60 percent less than customary retail prices due to low operating costs. At factory outlets, manufacturers can decide on store visibility, set promotion policies, etc. E.g. .Levi’s Factory Outlet Store at Marine Lines, Mumbai. Reebok, Nike & Adidas Stores on the Delhi-Haryana border.

DIRECT MARKETINGIt is a form of retailing in which a customer is exposed to a good or service through a non-personal medium (e.g. Direct mail, T.V., radio, magazines, or internet.). It has the following features: Low costs and inventories  More geographical coverage.  Convenience for customers.  No prior to purchase examination of goods. 

13

DIRECT SELLINGDirect selling includes both personal contacts with consumers in their homes as also phone solicitations. The strategy mix for direct selling emphasizes convenience in shopping and a personal touch. Besides, for the retailer, direct selling has lower overhead costs.

VENDING MACHINESA vending machine is a retailing format involving the coin-or card-operated dispensing of goods and services. It eliminates the use of sales personnel and allows for 24-hour sales.

WORLD WIDE WEBIs another aspect of modern retailing. I shall touch upon this in our part on role of I.T. in retailing.

RETAIL LOCATION STRATEGY AND DECICIONS

Location is the most important ingredient for any business that relies on customers. It is also one of the most difficult to plan for completely.

14

Location decisions can be complex, costs can be quite high, there is often little flexibility once a location has been chosen and the attributes of location have a strong impact on a retailer’s overall strategy. In India, most retailers prefer to own the property rather than avail of the desired property through lease or rental. This makes the location decision even more critical. Choosing the wrong site can lead to poor results and in some cases insolvency and closure.

Importance of Location Decision

The importance of the location decision is due to the following factors. Location is a major cost factor because it

Involves large capital investment

Affects transportation costs

Affects human resources cost, e.g., salaries

Location is a major revenue factor because it

Affects the amount of customer traffic

Affects the volume of business

The terms ‘location’ and ‘site’ are often used interchangeably but there is a distinct difference between the two. ‘Location’ is a broader concept, which denotes the store and its trading area from where a majority of its customers originate, while a site refers to the specific building or part of the building where a store is located. Location and site characteristics should interact in a positive and synergistic way with a store’s merchandising, operations and customer service characteristics. For example, a designer men’s store located in an up market shopping centre or a mall near posh residential colonies, housed in an attractive building with adequate parking facilities.

Levels of Location Decisions and its Determining Factors

15

A retailer has to take the location decision, basing on three aspects:

1. Selection of a city

2. Selection of an area or type of location within a city

3. Identification of a specific site

The factors which influence these decisions are discussed below:

1. Selection of a City

The following factors play a significant role in the selection of a particular city for starting or relocating an existing retail business:

Size of the city’s trading area: A city’s trading area is the geographic region from which customers come to the city for shopping. A city’s trading area would comprise its suburbs as well as neighboring cities and towns. Cities like Mumbai and Delhi have a large trading area as they draw customers from far off cities and towns.

Population of population growth in the trading area: The larger the population of the trading area, the greater the potential of the city as a shopping location. A high growth n population in the trading area can also increase the retail potential.

Total purchasing power and its distribution: The retail potential of a city also depends on the purchasing power of the customers and its distribution networks in its trading area. Cities with a large population of affluent and upper middle-class customers can be an attractive location for stores selling high-priced products such as designer men’s wear. The fast growth in purchasing power and its distribution among a large base of middle class is contribution to a retailing boom around major cities in India.

Total retail trade potential for different lines of trade: A city may b become specialized in certain lines of trade and attract customers from other cities. Moradabad has become an important retail location for brassware products while Mysore is famous for silk saris.

Number, size and quality of competition: The retailer also considers the number, size and quality of competition before selecting a city.

Development cost: The cost of land, rental value and other related cost.

16

2. Selection of an Area or Type of Location within a City

In the selection of a particular area or type of location within a city, evaluation of the following factors is required.

Customer attraction power of a shopping district or a particular store: Major shopping centres like Chandni Chowk in Delhi, Colaba in Mumbai and Commercial Street in Bangalore attract customers from far off, while small shopping centres located in colonies attract customers from immediate neighborhood.

Quantitative and qualitative nature of competitive stores: Retailers would like to evaluate the product lines carried by other sores, number of stores in the area, etc. before selecting the area.

Availability of access routes: The area or shopping centre should provide easy access routes.

Nature of zoning regulations: The retailer should also consider the zoning regulations in the city.

Direction of spread of the city: The retailer should consider the direction in which the city is developing while selection the location.

3. Selection of a Specific Site

The choice of a specific site is particularly important. In central and secondary shopping centre, non-anchor sores depend on customers coming to the market and the traffic generated by anchor stores. The large stores in turn depend on attracting customers from the existing flow of traffic. Where sales depend on nearby settlements, selecting the trading area is even more important than picking the specific site.

Servicing the retail customer

17

To start with let us understand what is meant by the term customer service. Is it a returns policy? Is it a loyalty program? In India customer service is largely associated with loyalty programs however by itself customer service is a subject of a phenomenal amount of research world over. Customer service continues to remain an enigma to most retailers. Defining customer service is difficult as the concept itself is multi faced. The definition given by Lovelock focuses on various aspects:Customer service is a task, other than proactive selling that involves interactions with customers in person or by telecommunications, mail or automated processes. It is designed performed and communicated with two goals in mind: operational productivity and customer satisfaction.Thus, customer service may be termed as all the functions and activities performed by a retailer in order to satisfy the customer thereby building customers for life. In case of most customers, what is uppermost in the mind is their last experience with the retailer. They may have had a positive experience on the past ten occasions, but if the eleventh experience with the brand has been negative, it will subsume all the good ones that came before. Hence, customer service has in fact, become a necessity.Very often, the terms customer service and customer satisfaction are used interchangeably however, the basic difference between them needs to be understood. Customer service focuses on measurement of how well a firm meets the established performance standards that re viewed as important to meeting customers’ needs Customers satisfaction on the other hand is how the customer measure externally the service performance of a firm. An important key to customer satisfaction is obtaining customer feedback. The aim of customer satisfaction is to identify the gap between customer perception of service and the actual service.It is believed that every encounter that a customer has with a service provider in any form – personal on the phone, complaint handling bills etc – is a moment of truth. What customers know of the organization comes from various encounters that they had with the organization. How they feel about the organization is a result of the quality of these encounters. A moment of truth occurs any time a customer comes in contact with some aspect of the organization and uses the opportunity to judge the quality of service the organization provides. This when applied to the retailer, helps us understand why customers choose to patronize some retailers over others.

18

19