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Strategies, Performance Measure, Franchising

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Rishab Jain 2027203
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34 views21 pages

Strategies, Performance Measure, Franchising

Uploaded by

Rishab Jain 2027203
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Retail-Strategies, Performance

Measure, Franchising
STRATEGIES
• Retail strategy is a holistic marketing plan for a
product or a service to reach and influence
the consumers.
• This strategy covers everything from what
retail channels a product or service will be
available in to what should be the price or
sales incentive to be given and how to display
the product in the shelf
Contd…
Retail strategy is developed for product to be distributed
through retail outlets. When a product is sold through a retail
outlet, a number of factors affect the sale of the product.
Some of the factors as already mentioned above are:

• Pricing/discounting of the product


• Incentive structure followed
• Promotions planned
• Placing of the product
• Display attractiveness
• Incentive structure for the retailers
Contd…
These are some of the major factors and is not
inclusive of all.
Strategizing on how to proceed in all these
friends to finally influence the consumer to buy
your product is the development of retail
strategy.
Contd…
• The above mentioned factors are the
controllable variables of a retail strategy as
shown in the picture.

• Apart from planning for these a retail strategy


should also take into account the
uncontrollable factors like seasonality, legal
restrictions, economic conditions etc. in order
for the strategy to be effective.
PERFORMANCE MEASURE
• Understanding which campaigns and strategies drive
the most sales for your retail store can help retailers
build on their successes and minimize missteps.

• An effective way to assess what works best is to adopt


metrics that show the business’s strengths as well as
areas that need improvement.

• Measuring productivity and performance calls for more


than simply checking to see if the business made a
profit each month.
Contd…
• ne simple way to know if the business is healthy is to
compare this year’s same-store sales data to last year’s
revenue.

• But what if your store has been open less than a year?

• It is critical for the success of your business to constantly


work towards improving not only the efficiency of
employees but the productivity of the store’s selling space
and inventory as well.

• This can be achieved by using various retail math


formulas and calculations based on sales.
Contd…
• Too often, small business owners go off of their “gut”
when making strategic decisions. They might base their
decisions solely on the limited opinions of their sales
staff who only work certain days of the week.

• In order to make wise business decisions, you need


comprehensive data that can be used to form a more
cohesive and complete assessment of performance.

• Business owners may have “hunches” about what is


happening in their operations but the data can tell very
different stories. Data can also alert business owners to
trends they are not aware of, which enables them to
make adjustments.
Eight key performance calculations can be used to monitor your retail store. If
you track these metrics on a regular basis, you can grow your business
efficiently.

• Sales per Square Foot


• Sales per Linear Foot of Shelf Space
• Sales by Department or Category
• Inventory Turnover
• GMROI
• Items per Transaction
• Sales per Employee
• Accessory Percentage
Sales per Square Foot
• The sales per square foot data are most commonly used
for planning inventory purchases.

• It can also roughly calculate return on investment and it is


used to determine rent for a retail location.

• When measuring sales per square foot, keep in mind


that selling space does not include the stock room or any
area where products are not displayed.

Total Net Sales ÷ Square Feet of Selling Space = Sales per


Square Foot of Selling Space
Sales per Linear Foot of Shelf Space
• A retail store with wall units and other shelf
space may want to use sales per linear foot of
shelf space to determine a product or product
category’s allotment of space.

Total Net Sales ÷ Linear Feet of Shelving = Sales


per Linear Foot
Sales by Department or Category
• Retailers selling various categories of products
will find the sales by department tool useful in
comparing product categories within a store.

• For example, a woman’s clothing store can see


how the sales of the lingerie department
compared with the rest of the store’s sales.

Category’s Total Net Sales ÷ Store’s Total Net Sales =


Category’s % of Total Store Sales
Inventory Turnover
• Cash is king in retail and the biggest drain on your cash
is your inventory. Selling big-ticket items is a potential
way to generate profits but only when consumers by
the products.

• Otherwise, they can be costly investments for the


retailer. Measuring your turnover is one way to know if
you are overstocked or even under-stocked on an
item.

Sales (at retail value) ÷ Average Inventory Value (at retail


value)
GMROI
• Known as Gross Margin Return on Investment,
this calculation has become popular because
it combines a couple of metrics into one and
gives a more accurate picture of profitability
compared to inventory turnover.

Gross Margin (dollars) ÷ Average Inventory (at


cost)
Items per Transaction
• Also known as sales per customer, the sales per
transaction number tells a retailer what is the
average transaction in dollars.

• A store dependent on its salespeople to make a


sale will use this formula in measuring the
productivity of staff.

Gross Sales ÷ Number of Transactions = Sales per


Transaction
Sales per Employee
• When factoring sales per employee, retailers need to take into
consideration whether the store has full-time or part-time workers.

• Convert the hours worked by part-time employees during the period to an


equivalent number of full-time workers.

• This form of measuring productivity is an excellent tool for determining


the number of sales a business needs to generate when increasing staffing
levels.

Net Sales ÷ Number of Employees = Sales per Employee

• These are just a few of the ways to measure a retail store’s performance.
As retailers track these numbers month after month and year after year, it
becomes easier to understand where the sales are generated, by which
employees and how the store’s merchandising can maximize sales growth
Accessory Percentage
• Since the profit comes from the second item we sell and not the
first, then accessorizing the sale is paramount.

• This is an easy calculation. Simply divide the total sales by the


accessory sales.

• This will tell you how well your employees are doing at adding
on the sale as well similar to the Items per transaction above.

• Depending on your products, an ideal range for this metric is 10%.

Net Sales ÷ Accessory Sales = Accessory % of Sales


FRANCHISING
• In its most basic terms, franchising is a model for
expanding a business and distributing goods and
services through a licensing relationship.

• A franchisee (you, or the location owner) pays an


initial fee and ongoing royalties to a franchisor
(the brand or “corporate”) in order to use an
existing company’s trademark, logo, and system
of business, as well as the right to sell its products
and have constant support from the franchisor.
Contd…
• In terms of entrepreneurship, franchising is the opportunity to work
for yourself but not by yourself.

• There are two main forms of franchising. One is product and trade
name franchising, where a franchisor sells or licenses the right to
use a particular company name or trademark.

• The other type is business format franchising, where the franchisor


provides a full range of services and support to the franchisee.

• That can include business processes, inventory ordering, etc. Most


often, franchise businesses use a hybrid model incorporating both
these forms.
Contd…
• Launching a business is tough and not for the faint of heart. Not
only must a retail entrepreneur come up with the idea, write
the business plan, secure investors, source products, find a
location, hire employees and spread the word through marketing,
advertising, and social media, but there’s a chance that a single
misstep could cause the entire business to fail. Starting a business
usually involves some level of risk.

• This isn’t to say that opening a franchise doesn’t come with its own
risks, but one of the benefits of opening a franchise rather than a
sole proprietorship is the higher chance of success
Contd…
According to Franchising.com, here are some other
benefits to opening a retail franchise:

• Training and Support


• Location Scouting
• Brand Recognition
• Group Purchasing Power
• Peer Support
• Faster Opening

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