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Managing Retail
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Project on Book Store Retail Output

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Anup Merkap
Roll No. U109108
Xavier Institute of Management, Bhubaneswar
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INTRODUCTION
India serves as one of the most lucrative option for any growing Retails giant across continents. Infact
the Indian retail sector is one of the fastest growing segments of the world. Comprising of both
organized and unorganized sector, the Indian retail industry is expected to reach Rs 109000 crores by
2010 as compared to Rs 35,000 crore in 2004-05.

In this scenario, increasingly more and more players are investing heavily. The spread of the model
ranges from groceries to stationary, apparels, medicines and many more. In this heightening
competition the retail store outlet which seems most lucrative is Book store. Today apart from the
traditional book outlets we have several large format book store chains around – Landmark, Timeout,
Crossword, Depot and others. There has been marked improvement in not just the product offering but
also in the customer experience as well. These days one doesn’t need to know the name of the
book/author he/she is looking for, one can go and browse the books, read them, discover new authors
right there in the book store – none of which is possible in an old format store. The choices available are
much wider.

‘Inspirations’ is the chosen brand name for an organized chain of book retailers. This would be a
specialty store with narrow product line but deep product assortment.

The format of the store would be normal grid type structure with wide aisles just to ensure proper
breathing space in the store. Apart from selling the best sellers from across the industry verticals the
store would also include certain niche categories which would appeal to the target group well.

Apart from books, the store can have a range of product merchandise like greeting cards, candles, lamp
shade and other related gift items. There is also provision of having an arrangement for a tea stall as
well, where the customers can browse through the book within the stall over a cup of tea/coffee. This
strategy is just to make sure that the customer spend ample amount of time in the store and finally ends
up buying some of the store’s product.

LAUNCH PLANS AND STORE FORMAT

After having a test run in some of the market, the store is now ready to be opened in various cities of
the country. For the initial phase, the plan is to have the store opened in 7 locations- Banglore,
Hyderabad, Pune, Chennai, Delhi, Mumbai and Kolkata. The reason for choosing the major metros is
because the target group which the shop “Inspirations’ is eyeing belong to the higher or upper middle
class society (SEC – A and B). Since most of the target group live in such cities, it would be easy for
Inspirations to break even quickly. The total space taking into account all the 7 cities would be around
50,000 sq ft.

After going through the current trends and the retail scenario, the annual turn over is expected to be
around Rs 3.5 crores. If the company is able to gather a top line sales of Rs 3.5 crore in 1 year, the
company is expected to break even in a very short span of time.

Another very striking feature of this shop would be the presence of less number of professionals in the
aisle. However there would be a customer care space which would address customer queries or direct
the customer to the section of their choice. The reason for low manned aisle space is that, customer
don’t feel comfortable when there is some one bugging them while they are going through the books.
So an independent customer care center would not just respect customer’s privacy but also provide a
more structure format to reach out to the customers.
The store would be one which would be more of theme based. Such orientation would help attract more
customers. The theme may vary from the traditional ethnic themes to the more recent one like financial
planning, health journals, etc. The layout would be so strategically planned that this would give the
shoppers a chance to go through the books and stay in the shop for a long time. This can only be
ensured y making arrangements for comfortable seating and a more organized layout. Good lighting and
contemporary pictures would add in more appeal and attract more customers.

POSITIONING AND COMPETITION

The store is to be positioned as a book store that not just sells the best sellers but also stocks some of
the niche categories that is specific to the need of the target group. This group is primarily members of
high income family who needs to spend a quality time in such store. The positioning statement would be
“we take care of your special needs”. This positioning statement vary well encapsulates all that has
been stated above.

The whole of store format and extensive customer care center set up ensures that this positioning
statement is met and there is no customer leaving the shop unsatisfied.

The potential competitors are the already existing book stores present in the cities. These outlets have
been there for a long period of time and have managed to better their product offering for quite some
time now. Apart from the organized retailers, the other potential competitors are the online sites like
flipcart and amazon.com. Such websites are easily accessible but don’t give the feel of actually touching
and smelling the book before buying it. The vast unorganized segments are also possible competitors.

ESTIMATED GROSS VALUES AND OPERATING RATIOS

It is very important to gauge the output after having set the base. There are various avenues to do so.
Following are the gross values one is looking for:

Customer Transaction
A very big problem with today’s retail format is that the conversion rate is abysmally low. The fact that
most of the customers who walk in change their mind and walk out empty handed. The reasons could be
many. One of them could be price and the other could be the unavailability of the desired product.

Since “Inspirations” is designed to cater to every need of the target customer, it is aware of what its
customer wants and what is expected out of such retail formats.

On any given day the average foor fall is expected to be some where around 300- 400 and the expected
bill size is some where close to Rs 700-800.

Assuming that the conversion rate is some where around 30 %, the expected daily revenue comes out to
be close to Rs 96,000.

With this figure the company can expect an annual turn over of Rs 3.5 crores.

Merchandise Management

Merchandise management is another very important aspect as far as retailing is concerned. At the end
of the day it all boils down to store lay out efficiency and in increasing the profitability of the stores. It is
very important to keep tab on the investment and look behind at sales. Its not always the top line that
matters, the bottom line has also to be taken care of. The efficiency of the merchandise allotment could
be done by measuring the following:
Gross Margin Return in Inventory Investment (GMROI):
(Gross Margin/Net sales)*(Net Sales/Average Inventory at Cost)
In books an average retailers earns a gross margin of 15-20 %. But since ours is a start up , the expected
gross margin is 12%
Gross margin on net sales = 12% of Rs 3.4 crores= 4080000
Net Sales/ Annual Inventory = 4000000
GMROI = 1.02= 102%

Gross Margin Return on Sq Ft (GMROF):

Gross Margin/Area of store in Sq. ft.
This figure comes out to be approximately 784.5

Space Management

In such book outlets it is necessary to optimize the selling space. It is therefore necessary to optimize
this space as . Assuming there is 60 % utilization of the space for merchandise display, the space
management. So the available space for sale = 60 % of 50000 sq ft across 7 cities= 30000 sq ft
So the Sales/Sq. ft. = 35000000/ 30000= Rs. 1167

Staff Management

Another important parameter is to measure the staff efficiencies. This can be achieved by measuring the
net sales per Employee and the Space covered per employee. Given that ‘Inspirations’ is planning on
having a maximum of 8 employees per location, so the total no. of employees become 56.
Net Sales per employee: Rs 35000000/56= Rs 625000 annually
Space Covered : 50000/ 56= 892.85 sq ft.

HURDLES AND ROAD AHEAD

The brand ‘Inspirations’ is a niche brand and would find a bit difficulty in appealing to its striking mass.
Again the results from the test market may not be 100 % true and so there are chances of big failure
after having invested so heavily. Another major hurdle is getting a space in the major malls of these big
cities. It would cost real high and would have a huge toll on the investment.

However against all odds this model is most likely to work given the success of similar retail formats like
Crossword. After the successful launch in these 7 cities, the company may plan on to go to other Tier
one cities. Tire 2 cities can only be attempted given there is huge working capital at disposal. There
would be need of changing the format before entering into these cities. As a part of future investment,
the company should plan on its advertising spend and arrange for a book reading sessions by famous
authors. This would not just give it an extra support but go a long way in creating huge brand equity for
‘Inspirations’.