12 RETAIL MANAGEMENT

Strategies, Location, Retail formats, Stores layout, Merchandising Techniques

13. MERCHANDISING

Merchandise Mangement, Assortment Planning, Merchandise Servicing & Buying, Supply Chain Mgmnt

12 RETAIL MANAGEMENT

Retailing can be most simplistically defined as

'selling directly to consumers'.

It is the sale of goods or commodities in small quantities directly to consumers.

The word "Retail" originates from a French-Italian word ‘retailer’ which means someone who cuts off or sheds a small piece from something.

RETAIL MANAGEMENT - Definition

Retailing is the set of activities

that markets products (or services)

to final consumers

for their own personal or household use.

It does this by

organizing their availability on a relatively large scale and

supplying them to consumers on a relatively small scale.

Retail Strategies

Strategic planning involves

•adapting the resources of the firm to the opportunities and threats of an ever-changing retail environment.

•retailers achieve and maintain a balance between resources available and opportunities.

Strategic planning consists of four components:

Development of a mission statement (or purpose) for the firm

Definition of specific goals and objectives for the firm

SWOT Analysis

Development of basic strategies that will enable the firm to reach its objectives and fulfil its mission

Retail Strategic Planning & Operations Management Model

Retail Store Location

In deciding a store location, decision needs to be taken on two broad issues:

i. the current and future potential of the catchment area of the store and

ii. the exact site of the store.

The process could consist of the following steps:

1. Evaluate alternate geographic areas in terms of the potential characteristics of residents, offices, commercial settlements, and existing retailers,

2. Determine what type of site is desirable from the three basic locational formats: isolated, unplanned district, or planned centre,

3. Select the general location of the store and

4. Evaluate the specific alternative store sites.

The retailing system in modern India

Retail trade is predominantly in the hands of private independent owners and the distribution structure for fast moving consumer goods consists of multiple layers such as carrying and forwarding agents, distributors, stockists, wholesalers and retailers.

Retailing system operates at three parallel levels:

The Formal Sector: Traditional small retail shops and the newer forms of retail establishments that have ongoing businesses and fixed premises registered with the appropriate Government agencies.

The Informal Sector: Enterprises without fixed premises and includes the hawkers and vendors.

The Fair Price Shops: Mostly privately owned, but, business carried under the Government’s public distribution system.

Retail Formats

Store-Based Non-Store-Based

Freestanding Street Peddling

Business District Direct Selling

Shopping Centers/Malls Mail Order

Nontraditional Internet

Automated Merchandising Machines

Store based retailers operate from a fixed store location that requires that customers travel to the store to view and select merchandise.

Non-store-based retailers reach the customer at home, at work,

or at a place other than a store where they might be open for purchasing.

Retail Formats

The retail format is the store package that the retailerpresents to the customer.

Retail formats can be defined according to different attributeslike: Location, Size, Merchandise, Price, and Atmosphere andservice.

Retail Formats

Store-based Classification

General Stores: Old-fashioned, with low levels of self-service.

Variety Stores: Have mixed merchandise, wide assortment but limited depth.

Supermarkets: Self-service food store offering mostly groceries as well as some clothing and home wares and general merchandise.

Department Stores: Known for its large assortment and service. The goods and services are organised into separate departments. Comprehensive service for quality value shopping.

Hypermarkets or Superstores: Stores that unite supermarket and general merchandise sales in one store. Provide a range of shopping requirements under one umbrella.

Retail Formats

Ownership-Based Classification

Independents: An independent retailer owns a single retail unit.

Chains: A chain retailer operates multiple store units (outlets) under a common ownership & name.

Franchising: Involves a contractual agreement that allows the franchisee to operate a retail outlet using the name and format of the franchiser.

Store Layout

Store layout is the way merchandise is laid out for inspection and accessed by consumers.

It determines the appearance of the store

It limits the way in which customers may negotiate their way around the store, which affects customer traffic flow or circulation.

The starting point of developing a floor plan is analysing how the available store space should be allocated to various departments.

There are five basic types of space needs in a store:

1. Backroom,

2. Office and other functional spaces,

3. Aisles, service areas, and other non-selling areas of the main sales floor,

4. Wall merchandise space, and

5. Floor merchandise space.

Store Layout

Every variable within the store sends out some kind of message to the customer.

Some basic elements of store layout are:

Planning and circulation,

storefronts and entrances,

merchandising,

materials and finishes,

lighting and music, and

graphics and signage.

Store Layout

Certain types of stores layout have evolved over time

Some common store lay out models are the

grid, free flow, boutique, loop and spine (s-shaped).

Merchandising Techniques

There are two basic types of merchandise presentation:

on-shelf merchandising and

visual merchandising.

On-shelf merchandising

The merchandise that is displayed on and in counters, racks, shelves, and fixtures throughout the store.

This is the merchandise that the shopper actually touches, tries on, examines, reads, understands, and hopefully buys.

There are essentially six methods of on-shelf merchandising: Shelving, Hanging, Pegging, Folding, Stacking and Dumping.

Merchandising Techniques

There are two basic types of merchandise presentation:

on-shelf merchandising and

visual merchandising.

visual merchandising

The artistic display of merchandise and theatrical props used as scene-setting decoration in the store.

Visual displays are not typically associated with a shopable fixture, but are located in a focal point, feature area, or other area remote from the on-shelf merchandising and perhaps even out of reach of customers.

Their goal is to create a feeling in the store conductive to buying merchandise.

Visual merchandising

Visual merchandising uses various displays to increase consumer interest in and desire for the products offered for sale.

Props and elements in addition to merchandise are used in visual merchandising.

Visuals may not include merchandise – they may be interesting displays of items somehow related to the merchandise or to a mood the retailer wishes to create. To be most effective, however, visuals should incorporate relevant merchandise. In apparel retailing, for instance, mannequins or figure forms are used to display merchandise as it might appear on a person.

There are a number of other aspects that form part of the atmosphere of the store and contribute to its image.

These include signage, lighting, colours, music and scent as they can be used to control the customer.

13. MERCHANDISING

The term merchandising is used to describe many aspects of the planning and presenting of stock.

It also refers to the intermediate stages, which the products pass through from the original source to the end consumer.

These stages are: Planning, sourcing, buying, arranging, displaying and space management of products or services.

Merchandising is not just about laying out items on shelves; it is also concerned with the planning, sourcing, buying and arranging of these products and services.

It is the coordination of these and other functions that make for a successful retail business.

Stages of Merchandising

Planning retail ranges involves careful consideration of the customer, competitors and the type of retail business, that is, discount/upscale, high priced/low priced.

Retailers plan for the types of goods they wish to sell to their customers. This requires thinking about the image of the retail business and the requirements of the customer.

It is useful to think of merchandise fitting into four groups or categories: impulse, convenience, shopping and speciality.

A more functional side of planning, involves obtaining regular supplies of merchandise from suppliers. This involves making decisions about selection, turnover, replenishment of stock and relationships with suppliers.

Stages of Merchandising

Sourcing is the locating and purchasing of merchandise to sell in the store.

An apparel retailer will source catwalk fashions from low-cost sources to enable them to sell at high street prices.

Sourcing is all about obtaining the merchandise we wish to sell at the right price, quantity, and quality in a timely manner.

Stages in the sourcing process are:

The retailer has a need for a product

The need is clearly defined

The product specifications are agreed

A suitable supplier is found

The retailer then agrees on quantity, date of delivery, target price, packaging weight and volume, mode of transportation and payment terms.

Stages of Merchandising

Sourcing

FSP Agreement

Depending on the type of merchandise, a sourcing agreement may be given to a third party who has the resources to solve the purchasing and logistics problems.

This is called a Full Sourcing Package or FSP agreement.

Such agreements include the details of delivery such as timing and frequency.

The company that handles the FSP will arrange and schedule the transportation details and date of delivery.

Stages of Merchandising

Buying involves negotiation and a step-buy-step buying process.

Every retailer has to buy stock an a managed and cost-effective manner.

Most large retail firms have dedicated buying departments or systems.

Small independent retailers rely on wholesalers or buying co-operatives to provide a suitable selection of merchandise.

Stages of Merchandising

Buying

Buyers have significant influence over the following factors:

Sales volume: merchandise in the right quantity and at the right time in the right place.

Gross margins: the cost of the merchandise, the extent of the mark-up, and the price paid by the consumer.

Markdowns: buyers influence markdowns as they regulate the quantity, price, purchase period and the type of merchandise ordered.

Stock levels: buyers balance stock levels to achieve high sales with low inventory.

Stages of Merchandising

Buying

Steps in the Buying Process

Product Information → Identify Possible Suppliers → Negotiate with Preferred Suppliers → Ordering

There are five different sorts of discounts, all of which may form part of negotiation:

1. Trade discount, 2. Quantity discount, 3. Cash discount,

4. Promotional discount, and 5. Seasonal discount.

Stages of Merchandising

Arranging and displays

Arranging and displays can have a major affect on sales.

Customers reasonably expect displays of merchandise to be exciting and enticing.

At certain times of the year, for example, Christmas and sale time, display is more critical than others.

The way the merchandise is laid out in a store is also critical.

For example, the placing of likely accessories next to clothing items in a women’s fashion store or laying out perishable foods in a supermarket.

Stages of Merchandising

Space management is planning for space allocation and may require the use of computer-based planning models.

Space management is concerned with placing merchandise within the store in the most profitable manner.

The most significant factor in planning merchandise layout is that space varies in value.

Some parts of the store are more valuable because customers visit them more frequently.

Height from the ground also affects value.

As a general rule, it is best to locate the highest profit generator in prime locations in order to maximise space productivity.

There are several methods of planning the amount of space a product range requires. These may be by one or a mixture of the Historical sales, Contribution to profit, Gross margin, or Industry average.

Supply Chain and Retailing

The Retailer is a part of the Supply Chain for any product that it sells.

The supply chain consists of different stages; starting with the raw materials it links raw material producers, manufacturers, wholesalers and transport firms with the retailer and the final consumer.

The retailer comes at the end of the supply chain and provides the final link between the producer and consumer.

Supply Chain and Retailing

Much of modern retailing, however, is linked very closely to whole supply chain, and may even be the dominant part of the supply process.

Major grocery retailers play a very active role in arranging distribution of products to their stores. They may own production facilities as well.