Retailing Management Notes (2023-2025) PDF

Page |1 RETAIL MANAGEMENT-2023-25 1-5 CHAPTERS FOR MID-TERM CHAPTER I INTRODUCTION TO RETAIL BUSI...

Page |1 RETAIL MANAGEMENT-2023-25 1-5 CHAPTERS FOR MID-TERM CHAPTER I INTRODUCTION TO RETAIL BUSINESS WORLD Retailing:  Retailing- Retailing encompasses the business activities involved in selling goods and services to consumers for their personal, family, or household use. It includes every sale to the final consumer.  A retailer is a business that sells products and/or services to consumers for personal or family use. The Rise of the Retailer: The Age of the The Era of the Consumer Retailer The Dominance of the Manufacturer The Dominance of the Wholesaler The Pre-Marketing Era The Growth of the Retailer: Proximity to the Consumer Rise of Growth of Consumerism Drivers of Private Labels Retailer’s Growth Technology Globalization  Role of Retailer:  Role: - To Satisfy Consumer needs by having the right merchandise in the right place, at right price at the same time.  Provides markets to the producers.  Page |2  Final link in the distribution channel.  Vertical Integration.  Retailer bridges the gaps in market: Time Gap Space Gap Quantity Gap Variety Gap PPT 1-4 Distribution Channel Member of Distribution Channel: Functions of Retailer: 1. Assortment 2. Bulk Breaking 3. Holding Inventory 4. Providing Services Retailing Decisions: 1. Location 6. Store Activities and Services 2. Target market 7. Price Decisions 3. Product Assortment 8. Credit Decisions 4. Procurement 9. Promotion/ Communication 5. Store Atmosphere Retailers are a Business-Like Manufacturers:  Page |3 Nature of Retail Industry is Changing: Economic Significance of Retailing:  National Income: 10 % of Country’s GDP  Employment: 8% of the total Employment Types of Retailers: CASE- Klatch Coffee:  Klatch Coffee Roasters in southern California will begin offering the world's most expensive cup of coffee, reports ABC 7. The chain will split 10 pounds of Elida Geisha 803 coffee among its locations, which costs $803 a pound wholesale, and closer to $1,200 a pound after roasting. One cup of brewed coffee at the cafe will cost $75.  The Elida Geisha 803 was auctioned off to buyers all over the world. Out of an available 100 pounds, Klatch roasters own the only 10 pounds in the U.S. The beans of the Geisha 803 are organic and from a single source and direct trade, as are all of Klatch's offerings. Multi-Channel Retailing:  Customer Want to interact in different ways.  Each channel offers a unique set of benefits for Customers.  Page |4 Benefits Provided by Store Channel:  Access to large Assortment  Touch and feel products.  Personal service  Cash payment  Immediate gratification  Entertainment and social interaction Provided by Catalog Channel:  Convenience  Portability, easily accessible  Visual presentation  Safety Benefits Provided by Internet Channel:  Convenience  Safety  Broad selection  Detailed information  Personalization  Problem-solving information Reason for Adopting Multi-Channel Retailing: 1. Expanding Market Presence 2. Leveraging Existing Assets 3. Overcoming limitations of existing format 4. Insights into customers’ shopping behavior. 5. Increasing share of wallet Issues In Multichannel retailing:  Brand Image  Merchandise Assortment  Resources  Pricing E-tailing:  Electronic retailing (e-tailing) is a buzzword for any business-to-consumer (B2C) transactions that take place over the Internet. Simply put, e-tailing is the sale of goods online.  Ex. Amazon, Flipkart, Alibaba, Snapdeal etc. Resources needed for E-tailing: 1. Well-known brand name trustworthy image 2. Customer Information  Page |5 3. Complementary Merchandise & Services 4. Unique merchandise 5. Information System for effective presentation 6. An efficient distribution. Challenges for E-tailers: 1. Finding the right products to sell.... 2. Attracting the perfect customer.... 3. Generating targeted traffic.... 4. Capturing quality leads.... 5. Nurturing the ideal prospects.... 6. Converting shoppers into paying customers.... 7. Retaining customers. 8. Achieving profitable long-term growth 9. Choosing the right technology & partners 10. Attracting and hiring the right people to make it all happen Omni- Channel Retailing:  Omnichannel is a cross-channel content strategy that organizations use to improve the user experience. Omnichannel retailing is an expansion of multichannel retailing.  Omnichannel Retailing seeks to provide customers with a seamless shopping experience, whether they're shopping online from a desktop or mobile device, by telephone, or in a brick-and-mortar store.  Rather than working in parallel, communication channels and their supporting resources are designed and orchestrated to cooperate.  Omnichannel implies integration and orchestration of channels.  Ex. Amazon, Pepper fry, Myntra, Van Heusen, Reymond’s, Adidas, Starbucks Integration – Key to Omni-Channel Retailing:  Create a Seamless Experience: Synchronized & consistent service regardless of channel.  Know the Customer: Need and Preferences & One to One Marketing.  Make it Easy: Ordering, Returns, Refunds.  Provide Support: Call Centre, Shopping Advice, Customer Service. Illustration of Omni-Channel Integration:  Page |6 Advantages of Omni-Channel Retailing:  Improvement in Consumers’ Perception & Satisfaction  Improved Sales  Higher margins  Building brands  New income streams  Better Data Collection  Enhanced Productivity Service Retailing:  Retailers' business focused on selling the services rather that goods is called Service Retailing.  Classification of Services: People processing Services. Possession Processing Services Information Processing Services Mental Stimulus Processing Services Four Characteristics of Services Retailing:  Intangibility  Inseparability  Perishability  Variability Sell service rather than merchandise: Customer Loyalty:  Brand Loyalty Committed to a Specific Brand Reluctant to Switch to a Different Brand May Switch Retailers to Buy Brand  Store Loyalty Committed to a Specific Retailer Reluctant to Switch Retailers  Page |7 Encouraging Impulse Buying:  Have Salespeople Suggest Add-ons  Have Complementary Merchandise Displayed Near Product of Interest  Use Signage in Aisle or Special Displays  Put Merchandise Where Customers Are Waiting  Use catchy offers & schemes.  Provide personalized discounts to loyal customers.  Create highly delightful shopping ambience in store. Why People Go Shopping:  Purchase merchandise or services.  Learn new trends and fashions.  Take a break from daily routine.  Satisfy need for power and status.  Social experience  Self-rewards Methods for Increasing Consumer Evaluation:  Increase Performance Beliefs of Your Store  Decrease Performance Beliefs About Competitor  Increase Importance Weight of Attributes on which You Have an Advantage  Add a New Benefit on which You Excel Consumer Classification: CHAPTER II THEORIES OF RETAILING Phases of Retail Evolution:  Barter  Brick-&-Mortar  Paddler  Digital  Temporary Stalls  Phygital  Page |8 The History and Evolution of Retail Stores:  People exchanged cows and sheep in trade as far back as 9000 BC.  The first proper currency extends as far back as 3000 BC in Mesopotamia.  The first retail stores take up the mantle a bit further down the line.  By 800 BC in ancient Greece, people had developed markets with merchants selling their wares in the Agora in the city center. History of Retailing:  1200 BC – The ancient origins of the retail industry  1300 AD – Renaissance Europe marketplaces  1890 AD – High Street hysteria  1910 AD – Self-service and the corner store  1930 AD – Mass modernization culture  1960 AD – The fashion boom of the Swinging Sixties  1970 AD – The dawn of supermarkets  2000 AD – Retail in the digital world  2025 AD – What does the future hold for retail? Development Phases of Retailer’s Business:  Mom and Pops: 1700s–1800s.  Department stores arrive: Mid 1800s – Early 1900s.  Cha-Ching: 1883. - The first cash register.  Credit takes a hold: 1920s - In the 1920s, credit cards or “charge cards” began to take hold of the American shopper.  Shopping malls: 1950s.  Big Box is in 1960s.  Ecommerce looms on the horizon: 1990s.  Social media opportunities: 2007  Retail slows while ecommerce grows: Modern day.  Page |9 History of Disruptions in Retailing: Retail Challenges: Theories of Retailing:  At different times, different retail formats have been popular.  Strong retail formats have become marginal and new retail formats have often emerged to dominate the retailing scene.  Cyclical Theories Wheel of Retailing Retail Accordian Theory Retail life cycle  Environmental Theories Theory of Natural Selection Melting pot theory Polarization Theory  Conflict Theory  P a g e | 10 The Wheel of Retailing: By Mcnair II The Wheel of Retailing:  The first theory is known as the wheel of retailing theory, which explains how new retailers enter the marketplace. The theory proposes that retailers go through three stages:  Entry Phase: This is when a retailer is new to the marketplace. They offer low prices but also have limited facilities and limited services. In this stage, new retailers are able to be competitive and draw customers away from more established retailers because of their low- price offerings.  Trading-Up Phase: In the trading-up phase, retailers are expanding their services and facilities, but they're also increasing operational costs. That means that the low prices they once had are also increasing.  Vulnerability Phase: Because of the rising cost of doing business and increasing prices for consumers, retailers enter a phase of vulnerability where they must continue to raise prices to stay profitable and become susceptible to new retailers entering the marketplace.  Ex. Big Bazaar – Future Group THE RETAIL ACCORDION - BY HOLLANDER (1966)  The retail accordion theory has to do with the expanding and contracting size of retailers (like Walmart has done with its transition from Supercenters to Neighborhood Markets). - general-specific-general theory.  P a g e | 11  This theory specifies that retailers evolve from large stores with merchandise that covers a wide variety of departments to smaller, more targeted stores with smaller product lines.  In the middle of the 20th century, shoppers were intrigued by the idea of one-stop shopping, paving the way for giant superstores offering groceries, fabric and automotive supplies, among others.  Today, the shrinking of the accordion shows the success of specialty retailers such as Starbucks, Foot Locker and Amazon's new brick-and-mortar bookstores.  Ex. More Megastore Ikea plans to open both small and large format stores in India’s bigger cities:  In India, Ikea has an online presence across Hyderabad, Mumbai, Bengaluru, Surat, Ahmedabad and Vadodara. (Photo: Bloomberg) Retail Life Cycle: Theory of Natural Selection:  According to this theory retail stores evolve to meet change in the microenvironment.  The retailers that successfully adapt to the technological, economic, demographic and political and legal changes are the ones who are more likely to grow and prosper.  This theory is considered as a better one to wheel of retailing because it talks about the macro environmental variables as well, but the drawback of this theory is that if fails to address the issues of customer taste, expectations and desires.  Ex. Reliance Retail - Jio Mart. Melting Pot Theory:  According to this theory, a new value proposition by one retailer gives rise to two new retailers with the same proposition.  This theory, also called the dialectic process, suggests that retail firms adapt mutually to the emerging competition and tend to adopt the plans and strategies of the opposition.  Ex: Amazon took over Whole Foods Market, Walmart took over Flipkart  P a g e | 12 Polarization Theory:  This theory suggests that, in the longer term, the industry consists of mostly large and small- sized retailers. The medium-sized becomes unviable.  This is called polarization. The large-sized retailers take advantage of large and direct purchases from the manufacturers and offer a large range at very competitive prices.  This phenomenon has led to an increase in the size of retailers and a reaction in their numbers. Larger stores offer one-stop shopping.  The smaller retailers offer a limited range of products, but add value to their offers with other services, or tend to specialize. Conflicts Theory:  Within a broad retail category, there is always a conflict between the retailing of similar formats, which leads to the development of new formats. Thus, the new retail formats evolved through dialectic process of blending two formats.  Thesis is a single retailer around the corner of the residential area.  Antithesis is a large department store near the same residential area, which develops over some time in opposition to Thesis. Antithesis poses a challenge to Thesis.  When there is conflict between Thesis and Antithesis, a new format of retail is born. It is called Synthesis.  Ex. D-Mart CHAPTER III RETAILING STRATEGY Issues in Retailing:  How can we best serve our customers while earning a fair profit?  How can we stand out in a highly competitive environment where consumers have too many choices?  How can we grow our business, while retaining a core of loyal customers? Organizational Mission: Retailer’s commitment to a type of business and to a distinctive role in the marketplace. Image and Positioning: An image represents how a given retailer is Perceived by consumers and others.  P a g e | 13 Benefits of Strategic Retail Planning:  Provides thorough analysis of the requirements for doing business for different types of retailers.  Outlines retailer goals  Allows retailer to determine how to differentiate itself from competitors.  Allows retailer to develop an offering that appeals to a group of customers.  Offers an analysis of the legal, economic, and competitive environment.  Provides for the coordination of the firm’s total efforts.  Encourages the anticipation and avoidance of crises. 6 P’s of Retail: Developing an Overall Retail Strategy: RETAIL STRATEGY: The plan or framework of action that guides a retailer to decide:  Target Market  Retail Format / Retail Mix  Sustainable Competitive Advantage  P a g e | 14 1. Target Market: The market segment(s) toward which the retailer plans to focus its resources and retail mix. Three techniques  Mass marketing  Concentrated marketing  Differentiated marketing. Understanding Retail Shoppers: 2. Retail Format: i. Store Location, ii. Operating Procedures, iii. Goods/Services Offered, iv. Pricing Tactics v. Store Design & Visual Merchandise vi. Customer Services vii. Advertising & Promotional Programs i. Trading-Area \ Store Location: A trading area is a geographic area containing the customers of a particular firm or group of firms for specific goods or services. i. Criteria to consider a location:  Population size and traits  Transportation access  Competition  Parking availability  P a g e | 15  Nature of nearby stores  Length of agreement  Property costs  Legal restrictions ii. Operating A Retail Business:  Operations Blueprint  Store Security  Store Format, Size, and Space  Insurance Allocation  Credit Management  Personnel Utilization  Computerization  Store Maintenance, Energy  Outsourcing Management, and Renovations  Crisis Management  Inventory Management iii. Inventory Management Decisions  How can handling of merchandise from different suppliers be coordinated?  How much inventory should be on the sales floor versus in a warehouse or storeroom?  How often should inventory be moved from non-selling to selling areas of a store?  What inventory functions can be done during non-store hours?  What are the trade-offs between faster supplier delivery and higher shipping costs?  What supplier support is expected in storing merchandise or setting up displays?  What level of in-store merchandise breakage is acceptable?  Which items require customer delivery? When? By whom? iv. Store Security:  Uniformed security guards  Undercover personnel  Brighter lighting  TV cameras and other devices  Curfews  Limited access to backroom facilities  Frequent bank deposits v. Insurance Issues:  Rising premiums  Reduced scope of coverage by insurers  Fewer insurers servicing retailers  Greater need for insurance against environmental risks vi. Credit Management Decisions:  What form of payment is acceptable?  Who administers the credit plan?  What are customer eligibility requirements for a check or credit purchase?  What credit terms will be used?  How are late payments or non-payments to be handled?  P a g e | 16 vii. Crisis Management:  There should be contingency plans for as many different types of crisis situations as possible.  Essential information should be communicated to all affected parties as soon as the crisis occurs.  Cooperation – not conflict – among the involved parties is essential.  Responses should be as swift as feasible.  The chain of command should be clear and decision makers given adequate authority. viii. Assortment Merchandise:  Apparel, furniture, auto, and other products for which the retailer must carry a variety of products in order to give customers a proper selection.  Decisions on Assortment: Product lines, styles, designs, and colors are projected, Model stock plan. ix. Price Strategy:  Demand-Oriented Pricing  Cost-Oriented Pricing  Competition-Oriented Pricing a) Price Strategy Concepts:  Customary Pricing: Everyday Low Pricing  Variable Pricing: Yield Management Pricing  One-Price Policy  Flexible Pricing: Contingency Pricing  Odd Pricing: Leader Pricing  Multiple-Unit Pricing: Price Lining x. The Elements of Store Design: xi. Store Atmosphere: The psychological feeling a customer gets when visiting a retailer.  Store retailer: atmosphere refers to store’s physical characteristics that project an image and draw customers.  P a g e | 17  Non-store retailer: atmosphere refers to the physical characteristics of catalogs, vending machines, Web sites, etc. xii. Visual Merchandising: Proactive, integrated atmospherics approach to create a certain look, properly display products, stimulate shopping behavior, and enhance physical behavior. xiii. Customer Service: Activities undertaken by a retailer in conjunction with the basic goods and services it sells. a) Expected customer service is the service level that customers want to receive from any retailer such as basic employee courtesy. b) Augmented customer service includes the activities that enhance the shopping experience and give retailers a competitive advantage. c) Typical Customer Services:  Multiple Payment Option  Baggage Counter  Credit  Gift certificates  Delivery  Trade-ins  Alterations  Trial purchases  Installations  Special sales  Packaging/ gift wrapping  Extended store hours  Complaints/ Return handling  Mail and phone orders. xiv. Planning a Retail Promotional Strategy: a) Elements of the Promotional Mix:  Advertising  Personal Selling  Public Relations  Sales Promotion 3. Sustainable Competitive Advantage: I. Retail Information System II. Human Resource Management III. Unique Retailer / Unique Merchandise IV. Vendor Relations  P a g e | 18 V. Customer Loyalty i. Retail Information System (RIS):  Anticipates the information needs of retail managers.  Collects, organizes, and stores relevant data on a continuous basis.  Directs the flow of information to the proper decision makers. a) Information Flows in a Retail Distribution Channel: b) Suppliers Need to Know: From the Retailer:  Estimates of category sales  Inventory turnover rates.  Feedback on competitors  Level of customer returns From the Customer:  Attitudes toward styles and models  Extent of brand loyalty  Willingness to pay a premium for superior quality. c) Retailers Need to Know From the Supplier  Advance notice of new models and model changes  Training materials  Sales forecasts  Justifications for price changes From the Customer  Why people shop there.  What they like and dislike  Where else people shop d) Consumers Need to Know: From the Supplier  Assembly and operating instructions  Extent of warranty coverage  Where to send a complaint  P a g e | 19 From the Retailer  Where specific merchandise is stocked in the store  Methods of payment acceptable  Rain check and other policies e)Database Management:  A major element in an RIS  System gathers, integrates, applies, and stores information in related subject areas.  Used for Frequent shopper programs Customer analysis Promotion evaluation Inventory planning Trading area analysis ii. Human Resource Management in Retailing:  Recruiting  Compensating  Selecting  Supervising  Training  Expatriate Management iii. Relationship Management Among Retailers and Suppliers/Vendors: Disagreements may occur:  Control over channel  Profit allocation  Number of competing retailers  Product displays  Promotional support  Payment terms  Operating flexibility a) Relationship Retailing: Seek to establish and maintain long-term bonds with customers, rather than act as if each sales transaction is a completely new encounter to gain ‘Customer Loyalty’.  Concentrate on the total retail experience.  Monitor satisfaction.  Stay in touch with customers. b) Effective Relationship Retailing:  Use a win-win approach: It is harder to get new customers than to keep existing ones happy.  Develop a customer database: Ongoing customer contact is improved with information on people’s attributes and shopping behavior. c) Earning Unique Retailer Status:  Be price oriented and cost efficient.  Be upscale.  P a g e | 20  Be convenient.  Be innovative or exclusive.  Offer a dominant assortment.  Unique business concepts  Offer superior customer service. Legal Environment and Retailing: A. Store Location:  Zoning laws  Direct selling laws  Blue laws  Local ordinances  Environmental laws  leases and mortgages B. Managing the Business  Licensing provisions  Franchise agreements  Personnel laws  Business taxes  Antitrust laws  Recycling laws C. Merchandise Management and Pricing  Trademarks  Unit-pricing laws (MRP)  Merchandise restrictions  Sale prices  Product liability laws  Price discrimination laws  Sales taxes (GST) D. Communicating with the Customer:  Truth-in-advertising and selling  Bait-and-switch laws. laws.  Inventory laws  Truth-in-credit laws  Labeling laws  Telemarketing laws  Cooling-off law CHAPTER IV RETAIL ORGANIZATION STRUCTURE The Process of Organizing a Retail Firm:  P a g e | 21 Tasks in Retailing: Strategic Mgt Merchandise Mgt Store Mgt Administrative Mgt Retail strategy Buying Store design Merchandise HRM Store Format Inventory Visual Display Promotion Target mkt Pricing Services Distribution Location Sales & Billing Financial Control Design org Structure Delivery Principles for Organizing a Retail Firm:  Delegate authority while maintaining responsibility.  Trace line of authority from top to bottom  Limit span of control  Empower employees.  Show interest in employees’ welfare.  Monitor employee turnover, lateness, and absenteeism.  Acknowledge need for coordination and communication.  Recognize the power of informal relationships. Organizational Design Considerations  Specialization  Responsibility and Authority  Reporting Relationships  Defined by Organization Structure Retail Organization Structure:  Organization of a single store retailer  Organization of corporate retail chain Corporate Functions: Merchandising and product development including Pvt. Labels. Financial Administrative and HRM Logistics and operation Store Functions: Merchandise planner Category manager Salespeople Administrative  P a g e | 22 Issues in Retail Organization Design:  Centralization v/s Decentralization  Coordinating merchandising and store management  Recruiting and selecting store employees  Socialization and training of new employees  Motivating retail employees Different Forms of Retail Organization: Different Forms of Retail Organization: Different Forms of Retail Organization:  P a g e | 23 Organization Structures Used by Small Independents: Organization Plan for Department Stores: The Equal-Store Organizational Format Used by Chain Stores:  P a g e | 24 Human Resource Management in Retailing:  Recruiting  Compensating  Selecting  Supervising  Training  Expatriate Management Objectives of Human Resource Management:  Short Term Increasing Employee Productivity Productivity = Sales/Number of Employees  Long-Term Increasing Employee Satisfaction. Reducing Turnover Human Resource Management Challenges in Retailing: Downward Performance Spiral: Special HR Considerations Facing Retailers:  Need for Part-Time Employees  Demand on Expense Control  Changing Employee Demographics  Differing Cultural and Legal Requirements  P a g e | 25 Strategic Management Tasks Performed in a Retail Firm:  Strategic Management  Determine the retail format  Devolp a retail strategy  Desing the organizational structure  Identify the target market  Select locations Assignment of Responsibility for Tasks:  Strategic: Top Management, Board of Directors  Merchandise Management: Merchandise Division  Store Management: Stores Division  Administrative: Corporate Specialists Grouping Tasks into Jobs: A Job Description for a Store Manager: Advantages of Centralized Decision-Making:  Retailers can reduce overhead, i.e. fewer managers.  Coordinating efforts, it can achieve lower prices from suppliers.  Opportunity to have the best people making decisions.  P a g e | 26 A Checklist of Selected Training Decisions: Motivating and Controlling Employees:  Policies and Supervision: Behavior Enforced by Managers  Incentives: Commission, Bonus  Organization Culture: Unwritten rules, norms, Behavior enforced by social pressure. Style of Supervising Retail Employees:  Management assumes employees must be closely supervised and controlled; only economic inducements motivate.  Management assumes employees can be self-managers and assigned authority; motivation is intrinsic.  Management applies self-management approach. Employee Behavior and Motivation: Several attitudes may affect employee behavior:  Sense of accomplishment  Liking of work  Attitude toward physical work conditions  Attitude toward supervisors  Confidence in company  Knowledge of business strategy  Recognition of employee role in achieving corporate objectives True Cost of Employee Turnover:  Recruiting and hiring new employees  Training costs – including management time.  Full pay and benefits during training, before full productivity is reached.  Costs of mistakes made by new, inexperienced employees.  Loss of customers loyal to departing employees  Lost or damaged relationships with suppliers  Employee morale and customer perceptions of that morale  P a g e | 27 Building Employee Commitment:  Building Employee Skills Selective hiring Extensive training  Empowering Employees  Creating Partnering Relationships Reducing Status Differences Promotion From Within Balancing Careers and Families: Flex Time, job sharing, day care. Women in Retailing: Issues to address with regard to female workers:  Meaningful training programs  Advancement opportunities  Flex time –the ability of employees to adapt their hours.  Job sharing among two or more employees.  Childcare Facility Compensation:  Total compensation  Salary plus Incentives  Profit-sharing Use of Incentive:  Advantages Aligns Employee and Company Goals Strong Motivating Force  Disadvantages Employees Only Focus on Sales Less Commitment to Retailer Trends in Retail Human Resource Management:  Managing Diversity Diversity Training Support Groups and Mentoring Career Development for Promotion  Legal and Regulatory Issues  Use of Technology  P a g e | 28 Diversity Two premises:  That employees be hired and promoted in a fair and open way, without regard to gender, ethnic background, and other related factors.  That in a diverse society, the workplace should be representative of such diversity. Legal Considerations for Retailers  Equal Employment Opportunity  Employee Safety and Health  Compensation  Employee Abuse & Harassment  Labor Relations  Employee Privacy Legal Considerations: Retailers must not:  Hire underage workers.  Pay workers “off the books.”  Require workers to engage in illegal acts.  Discriminate in hiring or promoting workers.  Violate worker safety regulations.  Disobey the Safety & Disabilities Act  Deal with suppliers that disobey labor laws. Use of Technology in Retail  Inventory Management  Display & Visual Merchandising  Store Security  Billing & Delivery  Accounting & Finance  Customer Services  Promotion  CRM CHAPTER V MERCHANDISE MANAGEMENT Merchandising: Activities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantity that enable a retailer to reach its goals. Merchandise Management: Merchandise management is the process through which each retailer decides what items to carry, how much to have on hand to meet the needs of customers, where they should be  P a g e | 29 displayed in the store to maximize sales, and how they should be priced to sell the best and maximize profits. Merchandising Philosophy:  Sets the guiding principles for all the merchandise decisions that a retailer makes.  Should reflect. Target market desires Supplier capabilities Retailer’s institutional type Costs Market-place positioning Competitors Defined value chain Product trends Scope of Responsibility  Full array of merchandising functions Buying and selling Selection, pricing, display, customer transactions  Focus on buying function only. Micro-merchandising: Retailer adjusts shelf-space allocations to respond to customer and other differences among local markets. Cross-merchandising: Retailers carry complementary goods and services to encourage shoppers to buy more. Retail Merchandising Management Process: Analysis Planning Acquisition Handling Control Analysis:  Forecast of sales for the entire organization, department and product wise is to be made.  Further new products to be added, or deletion of product is to be considered.  Estimates are made based on past records, present scenario, impact of fashion, economic trend etc.  Firm also has to determine pricing strategy in the sale of product. Merchandise Planning: Merchandise Planning:  Setting Objectives for merchandise planning Target market Establishing performance goals Inventory management  Sales Forecasting: Developing sales forecasts Store level forecasting.  P a g e | 30 CPFR Model- (Developed by Wal-Mart in 1995) 1. Develop Front End Agreement 2. Create the Joint Business Plan 3. Create the Sales Forecast 4. Identify Exceptions for Sales Forecast 5. Resolve/Collaborate on Exception Items 6. Create Order Forecast 7. Identify Exceptions for Order Forecast 8. Resolve/Collaborate on Exception Items 9. Order Generation Considerations in Devising Merchandise Plans: Factors to Consider When Planning Merchandise Quality: S. No FACTOR RELEVANCE for PLANNING 1 Target market(s) Match merchandise quality to the wishes of the desired target market(s) 2 Competition Sell similar quality or different quality 3 Retailer’s image Relate merchandise quality directly to the perception that customers have of retailer 4 Store location Consider the impact of location on the retailer’s image and the number of competitors, which, in turn, relate to quality 5 Profitability Recognize that high quality goods generally bring greater profit per unit than lesser-quality goods; turnover may cause total profits to be greater for the latter. 6 Manufacturer versus Understand that, for many, manufacturer brands private brands connote higher quality than private brands 7 Customer services offeredKnow that high-quality goods require personal selling, alterations, delivery, and so on 8 Personnel Employ skilled, knowledgeable personnel for high- quality merchandise 9 Perceived goods/ service Analyze consumers. Lesser quality goods attract benefits customers who desire functional product benefits;  P a g e | 31 High-quality goods attract customers who desire extended product benefits 10 Constrained decision Face reality. Franchises or chain store managers have making limited or no control over products; Independent retailers that buy from a few large wholesalers are limited to the range of quality offered by those wholesalers Assortment planning:  Variety  Product Availability  Assortment Planning for service retailers Merchandise Mix:  Determining Variety and assortment Corporate Strategy and positioning towards the assortment Profitability of merchandise mix Physical characteristics of store Balance between too much v/s too little assortment Complementary merchandise Types of Merchandise: 1. Staple merchandise 2. Fashion merchandise 3. Seasonal merchandise 4. Fad merchandise CATEGORY MANAGEMENT: Category lifecycle analysis Category Captain: Category Captains drive retailer profits by the strategic development of a specific category, building upon their knowledge and expertise of how consumers think and act when they enter a store.  P a g e | 32 Responsibilities of Category Captains:  Deciding which products should be on the shelf of their category.  Determining how much space each product deserves.  Taking sales into consideration when allocating space to products, without exerting bias toward a particular product.  Developing Planograms for their category on behalf of the retailer.  Managing the relationship between retailer and category partners.  Creating the product placement layout and sending the category partners for feedback. Deciding the Brands: Manufacturer’s Brands: Generic Goods:  P a g e | 33 Private Labels - Big Bazaar: Blinkit: Wal-Mart: Advantages of Private Labels:  Higher profit margins  Lower operating costs  Enhanced Customer Value  Better brand loyalty  Greater market stability  P a g e | 34 Private Labels of Popular Retailers:  Wal-Mart - 315 brands in 20 categories.  Metro - over 1,000  Target - 48 private brands.  Star Bazaar’s - 32 categories under private labels  Big Bazaar – Over 200  Jio Mart - More than 150 Sales Forecasts: Forecasts are projections of expected retail sales for given periods.  Components: Overall company projections Product category projections Item-by-item projections Store-by-store projections (if a chain) Inventory management:  Putting sales, margin, and turnover together  Measuring Inventory Turnover Advantages of High Inventory Turnover  Increased sales volume  Less risk of obsolesce and markdown.  Imposed Salesperson morale.  More money for Market Opportunities  Decreased operating Expenses.  Increased Return on assets Disadvantages of too high inventory Turnover  Lower sales volume  Increased Operating expenses. Supply Chain Management:  Warehousing.  Logistics.  Reverse Logistics.  P a g e | 35 The Attributes and Functions of Buying Organizations: The Process of Merchandise Buying: Open-To-Buy:  Open To Buy is defined as a retail inventory management tool that allows you to figure out how much inventory you need to purchase initially and on a monthly basis to meet your sales projections.  Another way of explaining it is to say it’s a financial budget to help you figure out how much merchandise you can buy without getting into trouble.  It’s also structured specifically to address the needs of retailers and is designed to help them with their inventory management.  P a g e | 36 Benefits of Open-To-Buy:  You’re able to estimate how much money you need to invest in inventory from month to month.  You can keep a fresh flow of merchandise coming in, which will mean your customers will keep coming back.  You’re able to restrict your merchandise commitments so that you don’t get too much new merchandise too quickly.  You can have an adequate amount of stock on hand, which will support your planned sales.  You’re able to pinpoint those areas of your plan that needs to be strengthened to maximize your output. Guidelines for Pruning Products:  Select items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutes.  Gather and analyze detailed financial and other data about these items.  Consider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting prices, and cooperating with other retailers.  After making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand. Current Trends in Retail Merchandising:  6 Retail Merchandising Trends for Increasing Sales Today  Omnichannel Retail Merchandising Experience....  Interactive Retail Merchandising Displays....  Social-Retail Integration.... (Virtual Showroom)  Hyper-Personalized Offerings....  Mobile/Wearable Checkout.  RFID based Inventory Management