Unit 4 - Store Administration & Retail Pricing

Store Administration deals with various aspects which are necessary to sell the goods
to clients without any disruptions. It includes cleanliness of the store premises,
maintenance of the store facade and the display windows etc. Apart from this,
maintaining the record of each level of employees, i.e. keeping the time for the store
staff, to keep track of the holidays and also the shifts that the staff maybe required to
work for, and the staff’s leave records.
Besides this, another important task of the administration involves ensuring that all
the required permissions and licenses to run a retail establishment are procured from
the right authorities. It also includes fulfilment of health and safety norms as required
by the law of the land.

Activities carried out in store:

 Store Administration & Premises Management

 Inventory Management
 Managing Receipts
 Customer Services
 Sales Promotion

Components of Retail Store Administration

 Managing Premises: It includes maintaining the store in good working order.

The customers may be turned off if there are inadequate facilities or poor
maintenance in the store. Customers may judge the store on the basis of
littered parking lot, insufficient air conditioning or dirty restrooms.
 Employee Training: The employees have to be trained to provide proper
customer service and in store procedures such as cash handling and internal
operations and control.
 Managing Promotions & Events: Retail stores generally rely on sales
promotion and other events that take place from time to time to attract
audience and increase sales.
 Data Management & Use of Technology: This includes streamlining store
operations with POS Systems, bar-coding and use of customer relationship
management platforms. Stores can also use data to root out bottlenecks and
discrepancies to increase efficiency and timeliness.

Premise management

Managing premises includes working hours, duration of business hours, opening &
closing responsibilities etc. For example, a lifestyle stores can open late and grocery
supermarkets need to open early every morning. Free standing stores can operate on
choice hours while mall stores will follow the organized hours as decided by the mall
management.
Premise Management also includes maintenance and cleanliness of the retail store.
Store maintenance includes the activities of managing the exterior and interior
physical facilities associated with the retail store. It encompasses all the activities in
the maintenance and the upkeep of physical facilities including air conditioning
equipment, fire fighting equipments, furniture and fixtures, lighting & ventilating
devices, wall displays, signboards, display windows flooring, parking lot, common
areas adjacent to stores including sidewalks etc.

The store manager is also responsible for the safety and security of all customers,
employees & merchandise. EAS or Electronic Artificial Surveillance is a technology-
driven product which helps to increase the profit of the retailer by reducing losses
incurred due to shoplifting. The use of electronic gadgets like CCTV, electronic
barcodes, smart tags & alarm system are very effective in preventing shoplifting.

Inventory Management

Inventory management simply means the methods you use to organize, store and
replace inventory, to keep an adequate supply of goods while minimizing costs.

 Each location where goods are kept will require different methods of inventory
management.

 Keeping an inventory, or stock of goods, is a necessity in retail.

 Customers often prefer to physically touch what they are considering purchasing,
so you must have items on hand. In addition, most customers prefer to have it now,
rather than wait for something to be ordered from a distributor.

 Every minute that is spent down because the supply of raw materials was
interrupted costs the company unplanned expenses

 Inventory control is the technique of maintaining the size of the inventory at some
desired level keeping in view the best economic interest of an organization.

An Effective Inventory Management Should

 Ensure a continuous supply of raw materials to facilitate uninterrupted production

 Maintain sufficient stocks of raw materials in periods of short supply and anticipate
price changes

 Maintain sufficient finished goods inventory for smooth sales operation, and
efficient customer service
Minimize the carrying cost and time.

 Control investment in inventories and keep it at an optimum level

Store Management in Retail
A retail store is usually managed by a store manager of a business manager.
Successful store manager must have an ability to lead and motivate employees. He/
She also need to be sensitive to the customers need, making sure that merchandise is
available and neatly displayed. Store management involves all the discipline
necessary to run a successful business; sales planning and goal setting, overall store
image and merchandise presentation, budgets and expense control, customer service
and sales supervision, personnel administration and development and community
relationships.

 In a large retail store there will be numerous departments, classified for

convenient operations like Apparels, Footwear, Home furnishings and so on.
Each of these departments will be headed by a department manager who
reports to the store manager.

 The departmental operation involves stock management, sales, customer

service, visual merchandising and housekeeping. The department manager is
supported by a team of supervisors, senior customer service persons, and
customer service persons.

 The departments will be assisted by support functions both at stores and

regional / head offices.

1. Support Functions
• Inventory: The inventory plays a very crucial role in the operations as it keeps a
check on the stocks in each department. Every Inward and Outward has to go through
the inventory control. They perform “stock take” periodically. Perpetual (regular)
inventory is conducted every month for all the brands of all the concepts. The
inventory team takes care of all the documentations involved in movement to
merchandise to the store and back to the warehouse.

• Information Technology (I.T.): The I.T. at the store is responsible for the
infrastructure and software support at the store. They work along with the other
function to manage data on stocks, sales, price, discounts, inventory, reports, prepare
tax assessment.

• Administration: The Administration department is responsible to manage security,

facilities and maintenance of the store, issue of Gift Vouchers. It is also responsible
for managing customer grievances.

• Cash and Billing: The Cash and Billing department is responsible to facilitate the
billing process. They maintain all records of sales transaction and report to the
appropriate authority. The Cash and Billing department is headed by Chief Cashier
and supported cashiers.

• Marketing: Marketing takes care of various promotional events in the store like
Diwali promotions, Annual day celebrations and Promotions, Christmas promotions
and so on. Marketing supports all the departments in running their internal promotions
by providing communication materials, taking care of visual branding, Institutional
sales, out-store tie-ups.

• Security: The Security department is responsible for the safety and order of the
store. The Security personnel conduct safety checks on employees and customers to
avoid undesirable events. They conduct regular patrolling in the store to safe-guard
the premises and assets, maintain the parking areas, support in valet parking, checking
garments in trial rooms, maintaining staff and visitors movements, the security
personnel reports to the store manager.

• Maintenance: The Maintenance department is responsible for maintenance of

facilities at the store like lights, air conditioners, generators, escalators and elevators.
The Maintenance personnel reports to the Store Manager.

• House-keeping: They are in-charge of maintaining the basic cleanliness and

hygiene standards of the store. The Housekeeping personnel reports to the store
manager.

• Human resource: The HR function is responsible for the workforce management,

like recruitment and induction, training and development, compensation, maintaining
personnel records, career planning, performance management, Industrial and
Employee relations. The Store HR manages the HR functions at the store.

• Commercial: The commercial department is responsible for financial control and

audit of store and warehouse. The department takes care of the cost control, financial
accounts of store, payments like expenses incurred by the company, budgeting, over
heads, budge versus actual analysis, sales analysis, stocks inwards and outwards, and
payments of non-trading items.

• Warehouse: A Warehouse is a commercial building for storage of goods. The

warehouse stocks goods received from the vendor/manufacturer and on requisition is
sent to the store. The warehouse operation largely involves inspection of stocks which
arrive at the ware-house, Tagging and Bar coding, safe keeping and retrieval, dispatch
to stores and customers, handling store returns.

2. Merchandise Management
• Merchandise management attracts people with strong analytical capabilities, an
ability to predict what merchandise will appeal to their target market, and a skill to
negotiate with vendors as well as store management to get things done. Many retailers
have broken this function into merchandising planning and buying functions.

• Buying function of buyers are responsible for knowing customers needs and wants,
monitoring competition and working with vendors to select and purchase
merchandise. They must constantly stay in touch with their store by visiting them, by
talking to sales associates and managers and by monitoring the data.
• Merchandise planners have a more analytical role that buyers do. Their primary
responsibility is to determine how many styles, colours, size and individual items to
purchase. Planners are also responsible for allocating merchandise to the stores.

• Once the merchandise is in the store, planners closely monitor sales and work with
buyers on decisions such as how much additional merchandise to buy if the
merchandise is doing well, or when to mark down the merchandise if sales are below
plans.

3. Project / Store Design

Retailers are finding that clearly defined, comfortable and visually pleasing stores
give them that extra edge over competition. Key elements of store design in future
include easy-to-shop, easy to maintain, flexible store layouts. Talented and creative
architecture students find this department with good growth opportunities.

4. Training of Employees
The expression training denotes to the achievement of knowledge, skills, and
competencies as an upshot of the teaching of vocational or practical skills and
knowledge that narrate to explicit practical competencies.

In the retail perspectives training is one of the imperative challenges as its impact is to
reduce employee turnover and to increase productivity. High turnover reduces sales
and increases cost. Sales are lost because inexperienced employee lacks the skill and
knowledge about the company policies and merchandise to effectively interact with
customers. Cost increase due to the need to continually recruit and train new
employees. Retail Training caters to the retail industry and trains students for entry-
level merchandising, sales and supervisory positions in the industry.

Training plays an important role in decreasing employee turn-over by creating an

atmosphere of mutual commitment in the firms. When a retailer demonstrates its
commitment to employee development, employee responds by developing loyalty to
the company. Training is particularly important in retail industry because more that 70
percent of retail employees have direct contact with the customer. They are
responsible for helping customers satisfy their need and solve their problems. A well
trained employee will be able to meet the customer’s expectation and satisfy his needs
adequately. Training is crucial as it provides the new employee with valuable
information about the organisation’s culture, as well as information about company’s
product, services and policies. Training for current employees provides retail
personnel with new information and innovative ways to get the task performed faster,
more accurately, and with less stress.

Training for the retail staff is usually conducted in the following areas:

• About the organisation: Here, the employee is informed about the organisation
history, its structure, the policies and procedures, rules objectives and expectations.
• Product knowledge: Product knowledge is very important for a retail sales person.
He/she needs to know the features, process, qualities and benefit of the product that
they are selling. The sales person should also know the current market trends and the
offerings of his competitor. Product knowledge many times is the key factor in the
customer’s decision making process.

• Return and exchange process: The sales person should be aware of the policies on
return and exchange of a product in his store. This enables him to guide the customers
properly in case they have an issue.

• Customer service: To serve the customer efficiently, the sales staff should be aware
of the various ways to ensure the customer is happy shopping at the store and will
return in future. Most retailers attach a lot of importance to customer service
programs. The retailer’s customer service standards are communicated to the staff in
such programs.

• Personal grooming: The sales person is the face of the organisation hence he
should be well groomed at all time. This program will provide information to the staff
regarding the stores grooming standards, uniforms, shoes, personal hygiene.

Receipt Management

Managing receipts involves defining the manner in the retailer is going to receive the
payment for the goods/services sold. That is, the policies involved, procedures and the
practices followed by the retailer to receive payments from their customers and
provide the receipt for the same.
Cash payments are generally preferred by most of the retailers in India, to avoid any
further complexities. But with the emergence of digital and cashless market, even the
smaller retailers have also started accepting Paytm and other modes of cashless
payments. While the established stores can accept either of these forms of payments
like credit cards, debit cards, store co-branded cards, COD or bank cheques etc.

There are several operational decisions related to management of receipts:

 Which method of payments should be chosen?

 Who will be responsible for administrating credit cards?

 What is the policy of late or non payment of merchandise?

 What are the credit terms & conditions?

 What interest should be charged?

 What will be the minimum monthly payment? Etc.

In short, Credit facility offered by the store will definitely have numerous benefits at a
cost if managed properly but if it is absent it can surely leave many customers
dissatisfied.
 Retail Pricing
Setting the right price will result in increased revenue to the retail firm. The prime objective
of retail pricing is to achieve profitability which is influenced by two factors. They are Profit
margin of the offering and cost of merchandising.

Factors Influencing Pricing:

The porter’s model can help to understand the influences of retail pricing.

1. Customer: Customer’s price sensitivity is influenced by many factors. For ex: Café coffee
day offer the coffee at the same price of Rs.35 (minimum) in all its branches of urban and
semi urban areas, though it is a general assumption that semi urban customers won’t
go for highest prices. But in order to maintain, its positioning strategy, coffee day
maintained the same price and attracting its target customers through its ambience.
Segmentation of the customers can also be useful for fixing the appropriate price. There is
some customers look for the benefit of owning the brand rather than the price.
Situations also affect the pricing policy of the firm. A store located in hill station may
fix high price and the same may be accepted by customers.

2. Suppliers: In order to maintain image of the brand and to achieve the goal of the firm,
sometimes the manufactures direct the pricing policy of the retail firm. The conflict
between the retailer and manufacturer may arise when the manufactures decides to
introduce a new model and that hampers the movement of retailer’s old stock.
Reputed Retailers have more bargaining power when they buy bulk items from the
manufacturer. Also sometimes retailers seek, for price guaranteed ie if the prices of
sold items to retailer go down.

3. Competitor: It affects the freedom to fix price. The range varies from being perfect to
monopoly. Retailers generally avoid price based strategy because it may end up in price war.

4. Government: There are legal issues relating to price discrimination. The retailer can
charge different price to different customer only when the distance is the justifying
factor.

Vertical Price Fixing: The retailer to set price at manufacturer suggested price.

Horizontal agreement: - agreement between retailer competitors

Predatory pricing- This pricing is considered as illegal as it intends to drive away the
competition.
Retail pricing strategies:
1. EDLP- Every Day Low Pricing:

It is popularized by Wal Mart, Home Depot. In India, this strategy is followed by Big Bazar.
But the bulk volume is necessary to negotiate with the manufacturer for price concession so
that it can be offered at reduced price to the customer. Low prices are stable and not
subject to one time sale. The strategy is that it continues to offer products below MRP.

Advantages: Less reliance on price reduction to change, Reduced Advertisement,

Informed customer service, Better Inventory management.

2. High – Low Pricing:

Prices that are sometimes above their Competitors EDLP. It uses Advertisement to promote
frequent sales. Also use ‘sale’ to respond increased competition. Advantages: some
merchandise can be used to target different segments; Enthusiasm is created among
customers (impulse Purchase), Image of quality is created (high price- no compromise
on quality); EDLP is difficult to implement, so it has advantage over that.

3. Loss Leader Pricing:

Fast moving products offered at low price as to attract buyers and to persuade them to buy
other products also.

4. Skimming:

Sets relatively high price for a product or service at first and then lower price over time.
Effective only when the firm is facing inelastic demand.

5. Penetration Pricing:

Setting a relatively low initial entry price so as to increase market share. The retailer
has to be very careful with this strategy as it may establish long term price expectation and
that makes it difficult to eventually raise prices. The solution is to set the initial price
at the long term price but include an initial discount coupon.

6. Price lining:

Refers to the offering of merchandise at a no. of specific but pre-determined prices. Prices
may be held constant over a period of time eg. 79.50, 109.50, 149.50

7. Psychological pricing:

Intended to have special appeal to customers.

 Prestige pricing: high prices to convey distinct and exclusive image for the
product. Charging high price for a product where it is judged this in itself give it
prestige. For e.g.: TAJ
  Reference Pricing: uses consumers frame of reference that is established through
previous experience of purchasing eg: sports items.
 Traditional Pricing: uses historical /long standing prices ( sports products)
 Odd-Even pricing: eg: $ 9.95 to denote lower price or a “good deal” $ 10.00 –imply
high quality.
 Multiple Unit pricing–encourage additional sales and increase profits. Gross margin
that is sacrificed in a multiple unit sales is more than offset by the savings that occur
from reduced selling and handling expenses.
 Bundle Pricing: Practice of offering two or more different products at one price. Used
to increase both unit and rupee sales by brining traffic in to the shop.
 Pre-emptive Pricing: setting low prices in order to discourage or deter potential new
entrants
 Extinction pricing: Has overall objective of eliminating competition and involves
setting very low prices in the short term in order to undercut competition.

Controlling cost and reducing inventory loss:

Inventory management simply means the methods you use to organize, store and replace
inventory, to keep an adequate supply of goods while minimizing costs.

 Each location where goods are kept will require different methods of inventory
management.
 Keeping an inventory, or stock of goods, is a necessity in retail.
 Customers often prefer to physically touch what they are considering purchasing, so
you must have items on hand. In addition, most customers prefer to have it now,
rather than wait for something to be ordered from a distributor.
 Every minute that is spent down because the supply of raw materials was interrupted
costs the company unplanned expenses.
 Inventory control is the technique of maintaining the size of the inventory at some
desired level keeping in view the best economic interest of an organization.

An Effective Inventory Management Should

 Ensure a continuous supply of raw materials to facilitate uninterrupted production

 Maintain sufficient stocks of raw materials in periods of short supply and anticipate
price changes.
 Maintain sufficient finished goods inventory for smooth sales operation, and efficient
customer service.
 Minimize the carrying cost and time.
 Control investment in inventories and keep it at an optimum level.