Block-4

Retail Operations Management

BLOCK 4 RETAIL OPERATIONS
MANAGEMNT
Having decided the type and category of retail business to embark upon the next
step would be the modus operandi of the new retail business. Retail operations
thus forms the crux to the overall retail business to be successful in a competitive
scenario. All these operations mutually supplement and complement each other to
accomplish the retail objectives of performance and profitability.
This block includes 4 units.
Unit 13 : Operations pertaining to store design, store atmospherics including the
interior and exterior features are discussed at length in the light of customer pull to
the retail outlet. The store space management and its technicalities have been
commented for optimal utilization of the premise. In addition the importance of visual
merchandising has been mentioned.
Unit 14 : Success of a retail store primarily lies on the kind of merchandise and
more specifically the sourcing decisions and the steps involved in the sourcing process
is crucial. Establishing and managing the vendors is another key area of concern
which has been dealt holistically.
Unit 15: Any business small or big, domestic or global irrespective of the size and
nature it has to run and operate by people and processes which is the core of this
unit. This unit stresses the need for people and processes and their role and relevance
for consistent growth and development
Unit 16 : Every product/service is conceived, developed and targeted at a specific
customer segment enabling them to derive value for money and help them make
repeat purchase of the firms offering. Precisely, we conclude this last unit of the
course with Customer Relationship Management (CRM).
Retail Operations
Management

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 Managing Store Operations
UNIT 13 MANAGING STORE OPERATIONS
Objectives
After reading this unit, you should be able to:
 understand what elements make ‘store operations’ for retailers.
 know the role of store operations in retail business.
 get a complete overview of role and composition of a store’s internal and
external atmospherics.
 acquaint with the concept and tools of visual merchandising.
 appreciate the concept and details of store space management.
 be familiar with the techniques of retail space planning and performance
measures.
 identify the issues related with store operations in internet retailing.
Structure
13.1 Introduction
13.2 Importance of Store Operations Planning
13.3 Store Operations: Overview
13.4 The Consumers’ Angle
13.5 Store Design
13.6 Store Atmospherics
13.7 Store Space Management
13.8 Retail Space Performance Measures
13.9 Atmospherics and Internet Retailing
13.10 Summary
13.11 Self-Assessment Questions
13.12 Further Readings and Online Links

13.1 INTRODUCTION
As a shopper, you might have visited a number of small or big retail stores, shopping
malls, shopping complexes, departmental stores, exclusive company outlets and many
such premises in and around your location and had a chance to see and understand
how retailers manage their store space. Creating an appropriate retail store
environment (for optimum shopper experience has a strategic importance for a retailer.
Its significance emerges from the link between shopping behavior and physical
environmental factors. These physical environmental factors influence the perception
of shopping duration spent and the evaluation of merchandise and hence it becomes
important for the retailer. On this basis, retailers can effectively plan and organize
all the aspects related to store operations (includes atmospherics and retail space
management) so as to optimize scarce resources and improve profitability.
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Retail Operations From an operations perspective, the field of retail store operations (Rsop in short)
Management
concerns all of the activities that keep a store functioning well each day. In the best-
run stores, everything is carefully considered, planned, and executed. Operations
includes many aspects, such as store design, display placement, customer service,
money and credit handling, shoplifting prevention, premises maintenance, staff
management, inventory optimization, and dealing with the entire supply chain in a
way to mutually fulfill stakeholders’ objectives.

13.2 IMPORTANCE OF STORE OPERATIONS

PLANNING
Two major components of Rsop are – atmospherics and retail space management.
Both of them relate to improving customer experience and strengthening store’s
profitability. A brief on what these include and how they impact retailer’s objectives
are given below.
Atmospherics refers to the physical characteristics associated with the store that
includes interior and exterior elements, as well as layout planning and display.
Atmospherics plays a major role in attracting customers to the store, improving the
quality of service experience, creating a brand positioning for the outlet, and improving
customer retention rates.
On the contrary, store space management has to do with how retail area is allocated
across departments and retailer’s processes (like billing, storage, display) so that
the productivity based on performance could be optimized. Effective space
management attempts to benefit both customers and employees. There are also
emerging critical issues related to atmospherics in the context of Internet retailing.
The effective use of technology and design element is the key to higher clicks, browsing
time and sales.
The retail sector is divided into two broad categories: organized and unorganized
– an important characteristic that makes this division is the way supply chain is
managed for optimum solutions. This in turn is expected to have an important bearing
on how the store’s operations are managed. While there is normally a lot of
commonality in the structure of a store’s offline and online organization of operations,
their backend fulfillment processes might differ. However, in both cases the end
objective is to optimize both process operations and customer satisfaction.
This unit aims to provide a brief overview of what, how and why of store operations.
The aim is to enable the understanding of the importance and implementation of
this concept in retail business.

13.3 STORE OPERATIONS : OVERVIEW

Rsop covers most store services and jobs within a given store. What Rsop will
indeed include would depend on the type of store and the company’s product planning,
ordering and category management practices. In general, these tasks would envelop
domains like – displaying and pricing items, store ambience (which includes aspects
like store lighting, music, layout & signs, cash and credit related tasks, arrangement
for refunds and returns, store security, staffing inside store, store maintenance and
202 basic supplies like electricity and tagging, handling point of sale (PoS) data.
Sometimes when the scope of work is complex or large, like in large retail set- Managing Store Operations

ups, few of these functions may fall beyond the store operations department to other
departments like finance/accounting, marketing, HR, and IT departments. It must
be noted that retail store’s operations will mostly have similar conceptual components
irrespective of the whether retail is a goods or service retail (for example, grocery
is goods retails while ‘dry-cleaning’ is a service retail).

A category is essentially any group of similar items that a company wants to buy
under the umbrella of a single deal.

Category management practices: is the process of pooling similar products into a

single category and then addressing all business initiatives for that category as a
whole. These initiatives can include the procurement process, merchandising, sales,
product lifecycle management, and other retail efforts.

The rest of the unit is organized around five sections that give a detailed overview
of important Rsop components listed below:

1. Customer’s Angle

2. Store Design Overview

3. Store Atmospherics

4. Store Space Management

5. Internet Retailing Atmospherics

While the unit divides the entire gamut of Rsop activities based on their similarity
of characteristic and overarching purpose into the above-mentioned broad categories,
on ground level, the activities are intricately interwoven with each other and therefore
need to be handled in tandem for effective results.

Activity 1

Visit one large store (area more than 20,000 square feet) and one small store (area
about 5000 square feet) in your area. Identify the 10 most important/prominent
Rsop activities they are doing inside the store. Make a list for each size of store in
the format given below.

Large store activities Small store activities

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Retail Operations
Management 13. 4 THE CONSUMERS’ ANGLE
One of the purposes of designing the retail environment is to encourage or discourage
approach behaviors. Three immediate effects of retail unit environment could be in
the form of stimuli given below:
I. Pleasure-Displeasure: Which entails whether shoppers have perceived the
environment as enjoyable or not enjoyable? For example, playing classical music
in Hindi should enhance shoppers’ enjoyment in specific kind of service settings
in North India, whereas same music might diminish shopping experience in Punjab
retail units.
II. Arousal: Assesses the extent to which environment stimulates the shoppers in
particular environment. Playing slow instrumental music may result in subdued
activity level from customers in service settings such as restaurant relative to
no music or fast music. Therefore, nature of music in specific retail environment
can decrease or increase in arousal.
III. Dominance: Concerns whether customer feels dominant (in control) or
submissive feels (under control) in the service environment. This is a feeling
that could be related to environmental aspects like the height of the ceiling that
makes one feel small (in control). Individuals associate the color red with active,
assertive, and rebellious moods whereas they associate blue with sedate tranquility
and a suppression of feelings. The nature of mood that needs to be portrayed
therefore lies in the right choice of color.
Activity 2
Visit a large store in your city. Observe the five elements of store design given here
and provide a brief detail about each element in 10-15 words. For each element,
observe shopper behavior and try to identify which of the three stimuli mentioned
above is/are provided by each design element.
Design element name and its description Stimulus provided.

13.5 STORE DESIGN

Store design is the architectural setting of a store, which includes its layout and
decorative style. It refers to how both the store exterior and interior look and feel
for potential shoppers. Briefly, it is aimed at creating a specific store image and
conveys to the potential customer “what the store is all about.” While the range of
design elements is large and depends on factors like store’s kind, size and geographical
location (refer unit 8), design is about two components like: store’s atmospherics
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and store space management. A brief overview of the important aspects of each of Managing Store Operations
these components is given in next section. Figure below shows sample arrangements
for two store designs in

13.6 STORE ATMOSPHERICS

Store atmospherics is about stores physical characteristics that are used to develop
the retail stores image and draw potential customers by appealing to them. While
it includes all the physical elements in the store that have been designed to enable
and appeal to customers, it also has implicit connotations for the perceptions drawn
from these elements. Store atmospherics play a very important role in a store’s brand
positioning and subsequent image creation. A few words on what ‘brand positioning’
means here it would be helpful.
The term ‘positioning’ in marketing is used to mean where in the minds of the audience
(here consumers) is the brand placed. This would depend on the brand attributes
that consumers perceive and how they look at benefits (values), the brand provides
for the consumer. Gradually, over few or more interactions with the brand, customers
slowly and steadily associate with the values or ideas portrayed by the brand (via a
large number of touch points) and an image is consistently formed in the consumer’s
mind. A positive image in due course of time drives repeat purchase and brand loyalty.
In a nutshell, store atmospherics is expected to deliver on the following benefits:
 Attract consumers
 Create a unique selling proposition
 Facilitate movement across the store
 Make access to merchandise easy
 Make effective display of merchandise possible
 Reduces store search time from consumers
 Reinforces the communication element
 Enhances retail service quality experience
The two main components of store atmospherics are the exterior atmospherics and
the interior atmospherics (which includes store layout and visual merchandising).
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Retail Operations How each of these elements is planned and executed can have a considerable impact
Management
on shopper’s satisfaction and behavior. These in turn strengthen store’s image and
drive repeat purchase behavior and long-term customer loyalty as mentioned above.
A. Exterior Atmospherics:
This includes all aspects of physical environment found just outside the store. For
new customers it creates the first impression and drives a lot of store traffic and
sales, exterior includes store entrance, doors, windows, name boards, marquee,
window displays, outer colouring and any other decorations. Additionally, aspects
like, building height, shape, surrounding stores and area, parking facilities also make
up for the exterior of any store.
Retail store entrance:
Retail store entrance serves only purpose- aesthetic and functional. aesthetic refers
to the store front matching up to the perception intended to be created by the
retailer: for example, an every day low price (EDLP) store will usually have simple
looking, big sized and bigger number of entrance points. Similarly, up-scale store
entrance may have more ornate and classic look. Functional aspects of store entrance
enables automatic security systems, temperature control and auto-open and close
to let customers in. Doors meant for employees to enter could have some sort of
bio-metric identification facilities. Space near main entrance could also display week-
specific or occasion specific promotional materials like ‘sale promotion’ information.
Store’s doors and windows
These structures, serve functional needs like ventilation, movement of traffic, displays,
special decorations and providing a view to passing by shoppers. Glass windows
are also used for displaying items for attracting shoppers’ attention and creating
the right image for the store in terms of its product categories and type. In several
instances, the space on the glass windows is specially designed and managed by
brand manufacturers and could be available to manufacturers on a paid basis. They
also serve as extra protection from weather and let sunlight come in selectively into
the store for a better ambience. This could be critical for food retailers or salons.
In today’s settings, where many stores are also present in online platform as e-
commerce or m-commerce formats, the concept of omnichannel shopping is becoming
popular, where consumers could decide what products to buy by visiting a local
physical store but order online or vice-versa.
Marquee or name boards
A marquee or a name board is usually a painted, flex printed for neon lighted
large board displaying the name of the store, its logo and few other important
information ( like open and close time) and is placed above the store entrance.
While the main purpose is identification of the store, it also helpful in creating the
right image, make a Unique Identification and create branding and trademarks of
the store’s ownership. Importantly, it provides the store with more visibility and
generates familiarity over repeated visits.
Parking facilities
The use of personal transportation for shopping chore, especially in urban settings,
makes a good parking facility very desirable for store visits. Old areas of the city,
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where markets were built several years ago, when urban traffic was not very high, Managing Store Operations
typically see lack of organised parking space thereby forcing the shoppers to far
of parking spaces. However, in most shopping areas and malls, a structured and
preplanned parking facility is designed and developed either as basement parking
or as a separate building dedicated for parking.
B. Interior Atmospherics:
This includes the entire area inside the store from point-of-purchase to exit of customer.
It has four important components are: the store layout, visual merchandising (design
elements of internal architecture, floors and walls fixtures, displays, labeling, aisle)
and store ambience (music, lightning, temperature control, store cleanliness and use
of different colors), store personnel. These not only create easy access to consumers
and employees but also make the consumer’s stay comfortable for a pleasant
experience and better branding of store.
I. Store layout
Internal arrangement of store in terms of display areas, walking spaces, and modifying
spaces so on for s free movement within the store for customers so that they can
reach to the desired part of the store easily and hassle-free a key concern of a
good store layout. Important factors that determine it are - customer flow patterns,
type of retail store (a grocery store is more packed and staked while in a furniture
store items are spread out more for better display and trials), and the cost of creating
layouts. The store layout not only helps to create the departments and functions
across the store like billing, trail rooms, packing facilities or child play area, but
also ensure safety, good display of products and overall enable a positive shopping
experience. While layouts could be of several types, the three important and
commonly found ones are - grid, race track and mixed or free flow layout.
1. Grid layout is observed in supermarkets, drug shops, and many big box retail
stores when carrying a large variety of goods or when a retail site wants to
make the most of its available space. This layout makes categorizing products
and displaying them easy and shoppers are able to locate their desired items
more easily. However, this layout could also obstruct the line of sight, make
short-cuts difficult and breaks might be required.
2. Race track layout is the choice of retailers when they are dealing with such
products that have to be seen closely, touched and sometimes trialed before
making a purchase decision. Examples of such products include - jewellery,
furniture, apparel, handicraft and electronics.
While this format enables a retailer to enhance the shopping experience, put
promotional materials more effectively and flexibility encourages more browsing
by the customers, It makes the shopping process more time consuming (so a
disadvantage for rushes shoppers). This format is not appropriate where the
store turnover is high but ideal only for high value items.
3. Mixed or free flow layouts used to take care of customer movements, which
are more random with respect to their choice and sequence attending to different
product categories. While this enables more customer choice and flexibility in
browsing routes (such as in duty-free shops and large department stores), it
could also increase confusion and chances of theft.
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Retail Operations Storied Layout
Management
This is very common variant of store layout design among Indian independent and
leading retail chains in organized sector. This layout not only provides the best utilization
of oor area but also permits the retailer to set separate section for particular product
category. Storied layout is very popular among the leading fashion departmental
stores and supermarket in India such as Lifestyle, Shoppers’ Stop, Sarvanas and
Pantaloons. Storied layout saves a substantial amount of initial investment of the
retailer or developer with increased real estate prices in the emerging retail market
in India.

Figure below provides model representations of popular store layouts.

Activity 3
Visit at least four retail outlets in your city dealing with different product categories
(for example, grocery, apparel, footwear, books, luxury items etc.) Identify the type
of store layout you see in these retail outlets. Record them. Also, check if different
parts of the same store have different layouts? Identify and note the placement of
important activities like billing, packing, returns, customer care queries handling and
storage. Note them in the given format.
Retail store names Primary layout Other sub-types Location of
& category type of layouts other
within store activities

Retail store 1:

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Retail store 2:

Retail store 3:

Retail store 4:

II. Visual Merchandising

In order to draw customers’ to the products inside a retail shop area, a marketing
technique known as “visual merchandising” is used which makes use of floor designs,
colour, lighting, displays, technology, and other aspects. It covers the elements like
design elements of internal architecture, floors and walls fixtures, displays, labeling,
aisle styles and placements. The ultimate goal is to increase sales by utilizing the
shop area. Its physical manifestation elements include window installations, in-store
displays, interactive displays, shelving and tagging, point-of-sale displays, posters
for information displays, awareness generation and those having promotional deals’
information, and things like mannequin styling.
The purpose of visual merchandising is threefold:
1. To engage the shoppers and get their attention
2. To push them to make the final purchase
3. To create an image for retailer compatible with store’s positioning and
also ensures consistent image across outlets
When buying store fixtures and display merchandise for a retail store, factors like
– ‘product line’ and ‘customer profile’ become important. For example, while wooden
racks or shelves can be effectively used for apparel or packaged FMCG products,
mirrored showcases are preferred for jewelry or gift items since they ensure better
safety and presentation. When it comes to customer profile, such demographic
variables like age, occupation, household income would become important in
determining for example, the level and sophistication of fixtures.
Similarly, the level of competition could be an important determinant for decisions
relating to visual merchandising efforts and investments. Several studies show that
1
Clement, J. (2007). Visual influence on in-store buying decisions: an eye-track experiment on the
visual influence of packaging design. Journal of marketing management, 23(9-10), 917-928. 209
Retail Operations a very high number of buyers’ impressions are based on sight – meaning, what they
Management
see inside the store. Many studies from Indian context too conclude similarly1. This
in turn means that if retailers are able to manage inside the store impressions they
make on potential buyers, they can gain a competitive edge.
It must also be noted that whether one is using racks and shelving from a functional
or aesthetics or for a combined impact, retailers today have a wide variety to choose
from. The fixtures and racks could vary in terms of shapes, product displays they
can support, the material of which they are made, features they come with like tagging
and flipping or how they can be flexibly arranged and altered as per new needs.
Even the manufacturers of these fittings provide a whole lot of customization and
improved features for easy installment, transport and maintenance these not only
maximize store space usage, but also enable retailers to house many related products
at the same location for easy pick-up by shoppers.
Visual Merchandising in India
Unlike the western countries, where visual merchandise receives high priority in
commercial planning of a product, while the Indian retail industry’s understanding
and practice of the concept of visual merchandise is still developing. With the advent
of foreign players and chain stores, independent retailers have to compete purely
on the competitive edge of the merchandise and visual merchandise will be a helpful
tool in projecting the uniqueness of the products and thereby increasing the market
access and sales. It is high time that the Indian retailers are opting for new age
visual merchandise management in place of the traditional practices of display of
merchandise. Still majority of the retailers in unorganized sector extends limited
importance to visual merchandise in the retail marketing mix.
It is relevant and interesting to discuss Raymond’s in this context- in Mumbai.
Raymond’s, the first men’s garment retail chain in India, has always taken visual
merchandising seriously. The management has hired a professional agency for consistent
and picture-perfect window display. They prefer a theme based merchandise display
that does not involve the use of expensive raw materials. They feel that a theme-
based display provides management with required flexibility and incorporating new
ideas. Sometime back they did a window display with a construction theme. However
it had to be scrapped because “it failed to target the right clientele”. They have appointed
a professional agency to train the sales staff of Raymond’s branches all over India by
conducting workshops and slideshows .Management penalizes branch personnel who
skip such training programmes. Most Raymond’s stores ensure’ one huge deep window,
which provides sufficient and attractive scope to display merchandise.
Activity 4
Compare the various components of visual merchandising in Atmospherics
a) Two independent apparel retailers in central business district.
b) A fashion department store
...................................................................................................................
...................................................................................................................

Rathee, V., & Prakash, C. (2017). Influence of Visual Merchandising on Customer Buying Deci-
sion-A Review of Literature Approach. World Wide Journal of Multidisciplinary Research and
210 Development, 3(12), 103-105.
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13.7 STORE SPACE MANAGEMENT

Retailers ought to manage and establish a trade-off between two most important
resources namely retail space and inventory. Given that retailers have limited space
they want to optimally allow it across product category, important processes like
customer service and space for movement of people. Good space allocation benefits
retailers by attracting more consumers and by enabling better display of an optimum
number of products for shoppers.
Accordingly the key objectives are:
1. To obtain high return on the investment made by increasing the
productivity of space - This requires effective utilization of space for
merchandise display and customer movement.
2. To implement a comfortable and rich experience for shoppers
On a more detailed level, we can see that the space management decision also has
an important influence on sub-decisions like:
 Location of various departments
 Arrangements between departments within the shop-floor
 Selecting the layout with customer behavior in mind
 Planned traffic flow of customers
How much weight should be allocated to different product categories, and brand
would depend normally on the following factors:
 Profitability of the merchandise
 Display requirements of the specific item
 Contextual demand depending on seasons or festivals
How much space and where it is allotted would then in turn determine the placement
of various departments, the relative location of the departments, the selection of
layout of the store and how the store traffic could be directed to move. Many
times retailers would like to order stack up their items like in grocery stores or
spread out the items for or ideal view and selection as in furniture stores. Accordingly
retailer’s pickup different racking arrangements and layout formats, a lot of which
could be inspired by the industry practices.
From the operational point of view, retailers would aim to go for space management
that facilitates shipping of items from the back storage area to different locations
across the store. At the same time, retailers want to accommodate the customer
need for being able to browse seamlessly throughout the store and be able to see
a fairly large portion of the store at the same time. While both these objectives
may be to represent tradeoffs, an optimum solution usually takes care of both the
requirements, with customer needs playing the veto if needed. 211
Retail Operations Given that retailers undertake implementation of several processes on their space,
Management
they often face the decision, which involves trade-offs of allotting space – meaning,
allotting more space to one process or activity and less to another or even re-
organizing space allocations from time to time. To take these decisions, they would
use both quantitative measurements of performance and judgmental inputs.
While sales and profitability are considered established quantitative measures of
retail unit’s success and these are used to measure the performance of retail spaces
across processes, qualitative inputs like identifying which activities or processes have
a positive impact on long term or strategic issues like relationship management with
suppliers or customers would play an important role too. For example, in a bank,
although only few customers could ask for session with managers for a more detailed
discussion regarding how to manage their portfolio of investments, this activity would
be a critical activity requiring a dedicated comfortable corner as this would decide
if those seeking such discussions would continue with the bank’s services.
A brief understanding of selected quantitative measures of retail space performance
which indicate the productivity of retail –space are given in the next section.

13.8 RETAIL SPACE PERFORMANCE MEASURES

Retail space performance measures enable the retailer to measure the productivity
of different retail spaces. Such measures include “sales per square meter” or “profit
per meter square”. Sometimes using running length measures like “sales per linear
meter” or “profit per linear meter” makes more sense from quick measurement
perspective, which can avoid the complexity of measuring width of racks. Where
the retail space is actually maintained by volume of storage, like refrigerated areas
or areas that have to be kept humidified, the more appropriate measure is “sales
per cubic meter” or “profit per cubic meter”. Thus, area, running length and volume
are the three most commonly used denominators for measures of retail space
productivity. Each of these measures is briefly outlined below.
A. Sales per Square Meter or Profit per Square per Meter
It measures retail space performance on the basis of sales/profits according to the
area of floor space covered. This measure is conducive to use when only single
layer of merchandise is displayed and various type fixtures are placed. This is a
common measure for the fashion retailing. Take a look at figure at the end of this
section for a better idea.
B. Sales per Linear Meter or Profit per Linear Meter
It measures retail space productivity on the basis of income generated by footage
of shelf space allocated. This measure is more suitable for the stores using multi-
shelved fixtures such as a gondola or racks. It takes into consideration linear meter
value of shelf rather than the area of space exposed in terms of the height value of
shelf.
C. Sales per Cubic Meter or Profit per Cubic Meter
It measures retail space performance on the basis of length, width, and depth of
the fixtures placed in the store. This measure is necessarily used by retailers in the
frozen food business or those who place dump bins on the retail floor.
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Space-to-sales ratio, turn rate and gross margin analysis can help create the most Managing Store Operations
profitable planogram (schema for arranging items across the retail space) for the
retailer. In effect the performance of retail space depends on the levels of sales
and the profitability of the merchandise place within the space and the value of the
retail space.

Figure: Different measures of retail space performance: A- Sales/profits per meter square;
B - Sales/profits per running/linear meter; C - Sales/profits per meter cube

Often, how much space should be allocated across product categories, brands and
SKUs is determined using past sales and profitability data like stated above. Other
factors like seasonality and festival demands are accommodated from time to time.
Retailers also try to maintain a good balance between fast-moving items (example,
everyday consumables like milk and bread) on one hand with slow moving yet
profitable ones on the other (like refrigerators, televisions, laptops).The proportion
of items which come from different product categories is aligned with the image
retailers want to establish and maintain in the consumers’ minds.
From the perspective of retailer’s own size, usually these decisions become more
complex and involving for larger retailer. While both small and large retailers would
conceive and implement retail space allocation decisions are conceived and
implemented at department level (example, household appliances) followed by
category level (example, small equipments like toasters, grill machine) and SKU
level (like Kent 16025 Sandwich Grill 700W), the sheer volume of items to be
handled is manifold for big departmental super market stores.
Additionally, small retailers’ major concern is to ensure the placement of all kinds
of merchandise in the limited shop floor area and to have smooth access to merchandise
for themselves rather than customers, as there might be hardly any provision for
customers to enter store. One of the primary objectives for large-scale retailers
will be to make it operationally manageable and make consumer movements across 213
Retail Operations the store easier and more conducive to locating items easily. Overall, Space allocation
Management
is the process of distributing the right amount of space to the right merchandise at
the right time according to a detailed analysis of customer demand. Sales and
profitability are by far the most used measures for taking space allocation across
departments and product categories.
 Sales as basis of space allocation
Retailers have to decide about the sales data to be used for the allocation of space
among merchandise. Three options available with retailers are historical sales data,
market share and projected sales. Sales could be considered in terms of number
of units sold across a specific span of time or value of the units sold (in the product
category or department being considered) over a specific period (like a day, week,
month or quarter). Usually, determining the value of items sold (measured in currency
units) is easier when there is heterogeneity across SKUs in the range considered.
 Profitability as basis of space allocation
Profits are taken into consideration for determining the optimum allocation of retail
space amongst the product categories. Product profitability is measured by
1) Gross margins (equals ‘sales revenue’ – ‘cost of goods sold’) and
2) Gross margin return on investment or similar measures.
Profitability measures help the retailers to allocate quality and quantity of retail space
to the profitable product categories and departments at priority .It also keeps check
on the retailers ‘unnecessary allocation of large space for the merchandise that would
sell just as well in a limited place.

13.9 ATMOSPHERICS AND INTERNET RETAILING

The development of the web as a retailing medium needs us to understand the
implications of web atmospherics. In context of e-tailing factors like web site
organisation, server performance, product data, a search option, and shopping carts
all contribute to a positive web shopping experience. The easy navigability in the
web site for a shopper who wishes to buy through the net is one of the first facilitating
factors. Server performance directly affects the waiting time that is required for the
obtaining results of searches. The easy access to product data and a click & browser
friendly search option add to the convenience of the consumer.
There is a negative correlation between waiting time and the evaluation of service
satisfaction in brick-and-mortar retail stores. Though this can be mitigated through
store atmospheric variables, the association is strong. Similarly, system response
time is inversely related to computer user satisfaction (i.e., the longer the wait, the
greater the dissatisfaction).

13.10 SUMMARY
Atmospherics and retail space management are important tools for success for retail
business. They contribute to customer acquisition, retention through improved service
experience, reduced costs and higher overall profitability. Atmospherics is referred
214 to as a store’s physical characteristics that are used to evolve the retail store image,
and attract and retain customers. It has four key components - interior and exterior Managing Store Operations
atmospherics, store layout planning and visual merchandising. Interior atmospherics
refers to all aspects of physical environment found inside the store and includes at
tributes like interior flooring, interior store design, level of cleanliness etc.
Exterior atmospherics refers to all aspects of physical environment found outside
the store and includes attributes like nature of store entrance, main board, marquee,
windows display, parking facilities etc. Store layout refers to the interior retail store
arrangement of departments or groupings of merchandise. Visual merchandising,
also referred to as display, is defined as presentation of products in order to sell
them.
Store space management deals with the best possible allocation of the store space
to departments, product categories, storage space and customer space. It is a major
challenge for both owners and managers of the store. Research has also indicated
the multiple uses of colour and how it can be integrated into the entire store design
and layout. It is important to organize the atmospherics as per the recommended
color schemes. Physical materials used in store construction and designing impact
both the cost and presentation of the store interior and exterior. In the context of
Internet e- tailing factors like website organisation, server performance, product
data, a search option, and shopping carts all contribute to a positive web shopping
experience.

13.11 SELF-ASSESSMENT QUESTIONS

1) What constitutes retail store operations? What are the benefits of doing well
on a store’s operations and why? Support your answer with a couple of examples.
2) Define atmospherics. What is its importance in retail marketing mix? Can its
scope of coverage differ across small vs. big retailers? Support your answer
with a few real world examples.
3) What are the key components of atmospherics and discuss each of them?
4) What is the relevance of store layout planning for retail unit? Discuss
5) Define visual merchandising and discuss the important components of visual
merchandise to leverage its benefits.
6) What are the components of merchandise display fixtures and give brief account
of any three?
7) What are the major concerns of store space management and identify any two
commonly used retail space performance measures.
8) How can retailers balance the use of quantitative measures of retail space
performance with qualitative measures? Give two examples to support your
view.

13. 12 FURTHER READINGS AND ONLINE LINKS

Chetan Bajaj, Rajnish Tuli, Nidhi.V. Srivastva (2005) Retail Management, Oxford
University Press.
215
Retail Operations Ghosh, A.(1994) Retail Management, 2nd edition. New York : The Dryden Press.
Management
Kotler, P. (1973-4), Atmospherics as a Marketing Tool, Journal of Retailing 49:
48-63.
Berman and Evan’s (2002), Retail Management: A strategic Approach, ed. 8, New
Delhi Pearson Education.
See “25 Examples of Innovative Coffee Merchandising” – to understand visual
merchandising in real world from this link:
https://www.trendhunter.com/slideshow/coffee-merchandising
For more on store layouts, see: “Modern Retail Rebrands” on this link:
https://www.trendhunter.com/trends/square-one-design
See several impressions of visual merchandising on this link:
https://in.pinterest.com/olwo/visual-merchandising/

216
 Managing Store Operations
UNIT 14 SOURCING AND INVENTORY
MANAGEMENT
Objectives
After reading this unit, you should be able to:
 discuss the significance of sourcing in retailing.
 explain the process of sourcing in a step wise manner.
 elucidate the factors influencing vendor negotiations and vendor relationship
management.
 distinguish the basics of warehousing and stocking.
 understand the overview of inventory management by retailer.
 elaborate the critical factors and process of ordering.
 highlight the shrinkage and its handling.
 acquaint how to carry out performance measurement for retailer.
Structure
14.1 Introduction
14.2 The Sourcing Process
14.3 Factors influencing Vendor Negotiations
14.4 Vendor Relationship Management
14.5 Warehousing and Stocking
14.6 Inventory Management
14.7 How Much to Order and When?
14.8 Shrinkage
14.9 Merchandise Performance
14.10 Summary
14.11 Key Words
14.12 Self- Assessment Questions
14.13 Further Readings

14. 1 INTRODUCTION
In a retail store, one finds dozens of product categories, hundreds of brands and
thousands of stock keeping units (SKUs) placed on the shelf. These come from several
suppliers/vendors and the number could be in thousands for truly big hypermarket
format stores like Walmart. A retailer buys from suppliers/vendors of products after a
lot of deliberation about quantity, quality and pricing considerations. This means a lot
of the retailer’s time and effort goes into negotiations for purchase with many vendors.
Thus, merchandise sourcing is a complex and tedious process.
217
Retail Operations The golden rule of sourcing is to buy quality merchandise at the most competitive price
Management
and then sell it to the customers at a reasonable profit. Without thorough planning and
strategy, a retailer cannot be successful in this critical function of retailing. Therefore, it
is essential to understand the significance of sourcing of goods and its method. Today,
the procurement function deals with more than regular set of annual negotiations with
large manufacturers of selected brands. Rather, the attention of retailers is focused on
procurement from medium and small manufacturers (primarily in the category of SMEs)
and buying raw materials for their own in-house production of private labels. These
and other trends have important impacts on procurement processes within retailer’s
organization. Even new team, procurement structures, skills, new approaches and tools
are becoming relevant and essential.
14.2 THE SOURCING PROCESS
Sourcing is a process involving several steps which are discussed below:
A. Determining the Categories:
The retailer must first determine the categories in his store. Each category may have
distinct features and therefore different points of attention from buying point of view.
Categories in a bicycle store can be men’s bicycles, ladies bicycle, sports and health
bicycles and kids bicycle. However, you must realize that different categories of
bicycles may not need so many vendors as is needed for grocery stores. Diverse
categories of a supermarket or departmental store need many vendors to supply the
required products.
B. Estimating future demand
Once the retailers have established the product categories for its store, they will estimate
the future demand for these categories for their geographical area. In case the retailer
has past data from his own store or industry data, they can use this data to extrapolate
the expected future sale quantities. Sometimes they must substantiate this data with
data available from other sources like consulting reports, expert interviews published
on internet or data about the future performance of the economy obtained from authentic
sources like university, government, industry or consulting research reports. Retailers
could also post information about the prospective products/ categories on the various
search engines like Yahoo, Google, e-commerce websites and gauge the number of
inquiries by the web surfers. They could use other web services like chat sites, social
media platforms or consumer forums. Based on the feedback gathered a retailer can
take decision in this regard.
C. Identifying the Vendors or Sources of Supply
Very often, we find retailer sourcing certain categories from the authorized dealers.
For instance in a supermarket, products like detergent bars, cigarettes, and similar
products may be procured from authorized dealers of the respective brands. As a
retailer depending upon your turnover, you may also like to procure it directly from the
manufacturer. On the other hand, products like food grains and other edibles may be
sourced either from the whole seller or directly from the food grain mandi (local
wholesale stores).
D. Develop Evaluation Criteria
In this step, the procurement team would use an evaluation framework (this may be
218
self-constructed or following industry practice) that would have a set of evaluation Sourcing and Inventory
Management
criteria and a corresponding weight for the criteria according to criteria priority. Examples
of criteria would be – product quality, product price, transport time, transport cost,
product packaging. Further, if the vendor meets a requirement – say, product quality,
with a score of 7 (on a scale of 1 to 10 – 10 being best) and the priority of this
requirement is 3 (on a scale of 1 to 5 – 5 meaning most required), then the final score
for the vendor on given criteria would be 7*3= 21. This helps to amplify and assess the
differences among vendors on more granular levels.
E. Interaction with selected Vendors
The retail procurement team would then normally conduct a bunch of interactions
with selected vendors (this is especially important when the vendors, products or
retailer settings are new or changed). These interactions include vendor briefings
to discuss stated retailer’s requirements, vendor’s capabilities (example, for supply)
to ensure a common understanding and some level of assurances. Retailers could
also ask the selected vendors to give a solution overview to the organization’s
current business and technological requirements. Additionally, each vendor would
provide an overview of benefits to retailer from his services. Sometimes, vendors
are asked to provide a “demo” to display the functioning and capabilities of their
solution.
F. Complete Vendor Selection
At the conclusion of the evaluation process, the team will identify one or few vendors
as primary option (the winner) and few others as secondary alternative. This is important
in the case where individual vendor capacities to supply are much lower than the retailer’s
total requirement. Such an arrangement would also help to mitigate the risk where a
specific vendor is not able to supply as promised due to unexpected breakdown of
infrastructure, contractual terms or other external exigencies. This step gets concluded
with drawing up of formal contract statements, duly signed by both parties, which acts
as an important reference document for either party at all stages of implementation. A
contract would clearly give all the important prerequisites, terms and conditions of the
contract and to provide precise information on what goods and/or services the vendor
should provide, at what cost and transport terms.
In case of sourcing from international destinations a retailer must be cautious about the
country of origin, foreign currency fluctuations and taxes.
Example: Apparels retailer’s sources of supply
Retailers like Wal-Mart are going for global sourcing of their products. International
sourcing is an area still new for India although some players have been doing it for quite
a number of years. While going for International sourcing the retailer has to be very
sure about the rules and regulations of foreign trade, issues related to foreign currency
and transport. As a retailer once you decide to source merchandise internationally you
should be confident about the credibility of the supplier and the expected return on
investment.
It is worthwhile for the retailer to go through the financial statements of the various
vendors. This will help in ascertaining the financial worth of the vendors. It also helps
the retailer study and visualise the financial position of all the individual vendors.
219
Retail Operations Activity 1
Management
Make a visit to a small retail outlet and a large multiband store in your city/ location.
Compile brief details on their sourcing process – like the items they sources from
vendors, location of their vendors, mode of transport and its frequency of such
transactions. Also, find out if they have a dedicated team to take care of the sourcing
activities. Record your answers in the following format.
Details Small retailer Large retailer
about
Items
sourced

Location of
vendors

Mode of
transport

Frequency of
transactions

Sourcing
team

14.3 FACTORS INFLUENCING VENDOR

NEGOTIATIONS
Negotiating with vendors for sourcing merchandise is a comprehensive and an in depth
process, which involves time, effort and meticulous documentation. It is useful to know
the broad factors, which must be considered in this process. Selected important factors
are discussed below:
1. Complete Information: A retailer or merchandise buyer should have complete
information about the vendor – location, size, years of existence, track record
of supplying products etc. These could become strong bargaining and
supportive basis in immediate as well as strategic decisions.
2. Situation analysis of a Product: It is desirable to do a real, ground level
assessment for understanding the ground realities of the vendor-supplied
product in the market. Each vendor has an image in the market, formed over
hundreds of transactions with his/her buyers, which makes his products sell to
the customer – knowing this can be very valuable to retail buyers.
3. Target setting of contact items: While negotiating retailer has to keep in
mind various aspects of the contract such as terms and conditions of payment,
freight, transportation, delivery, terms for goods return etc. Based on his
experience, retailer will have a list of negotiation points to be competed with
220 the vendor. Making sure the checklist is well addressed will help retailer to
 make the best deal as well as have assurance regarding quality of the goods, Sourcing and Inventory
Management
on-time delivery and surety about the redress of grievances (if needed).
4. Deadlines for Delivery: In retail business, not to be out of stock is
important and therefore meeting deadlines for product deliveries and
payments should be clarified and confirmed at the time of negotiation. A
clear deadline confirmed and acknowledged by both the parties removes
any chances of misunderstanding and conflict between the two parties. This
is more in the interest of the retailer since any misunderstanding on such
issues definitely will be loss incurring for the retailer due to out-of-stocks
and lost consumers.
A brief list of vendor selection criteria are mentioned below:
 Quality of good/service
 Cost of items
 Transportation costs
 Service features
 Discounts for volume and early payments
 On-time delivery of items
 Financial strength of vendor
 Strength of customer references
 Vendor’s communication systems
 Trustworthiness of vendor
 Regulatory compliance by vendor
 Achievement of sustainability targets of retailer
 Readiness to participate in product development
 Vendor’s production capacity
Making assumptions by the retailer regarding any terms and conditions of sourcing at
the time of negotiation could prove counter-productive. Rather, each aspect of the
contract ought to be discussed, clarified, confirmed, written down and duly signed by
both the parties for safety. This removes any doubt or misconception in the minds of
any of the parties.
Retailers must take care not to spoil relationships with vendors as they are the supply
chain partners. Good relationship with vendors during the course of business based
transactions or otherwise is a long-term strategic asset for retailers. Vendors can support
retailers in not only supplying products but also in product development and lending
credit when needed.
Activity 2
Make a visit to a small retail outlet and a large multiband store in your city/ location.
Identify two product categories for each retailer. Compile a brief report on their vendor
selection process for each of these retailers by identifying the three most important
221
Retail Operations factors that determine which vendor(s) have high likelihood of selection. For each
Management
factor, provide a one line reason for its importance as mentioned by the retailer. Use
the given format for this activity.
Small retailer Large retailer
Category1- (name) Eg. Footwear …
Factor* 1

Factor 2

Factor 3

Repeat for category 2

* Vendor selection factor

14.4 VENDOR RELATIONSHIP MANAGEMENT

(VRM)
Vendor relationship management (VRM) is strengthening of “buyer-vendor relationships”
to achieve mutually beneficial goals, establish trust to enable a longtime connect. An
efficient VRM can provide several strategic and operational benefits – like, quality
increments, improved total cost of ownership of goods, innovations, smooth flow of
data and mitigation of supply chain risks.
VRM is more than managing an up-to-date database of vendors and communicating
with them regularly. In fact, via VRM, retailers can know their vendors better, making
them an active partner in your business operations. In addition to keeping basic vendor
information, VRM involves things like efficient vendor on boarding, transparent vendor
performance reviews and robust risk mitigation. While several of these processes are
handled offline by retailers (especially small ones in developing nations like India), the
processes are shifting from offline records and standalone computer systems to cloud
based software. Latter gives high number of new features (like real time collaboration,
automated vendor enrollment and payments), which can be implemented faster, and
error free thereby bringing agility, higher effectiveness in transactions and lowering
costs.

One of the emerging aspects of retailer-vendor relationship is vendor-managed inventory

or VMI. VMI is an inventory management technique in which a supplier of goods,
usually the manufacturer or the vendor, is responsible for optimizing the inventory held
by a distributor (retailer in our case). VMI requires a communication link—typically
electronic data interchange (EDI), or an Internet based platform, that provides the
supplier with the retailer’s sales and inventory data (usually in real-time) based on
which supplier plans inventory movements. In a related arrangement called vendor-
owned inventory management (VOIM), the vendor retains replenishment and
maintenance responsibilities for the inventory items residing on the retail store shelves,
until the item is sold to the end consumer.
222
Few of the best practices to manage a good and lasting relationship with Sourcing and Inventory
Management
vendors are:
1. To have frequent and open communication,
2. Establish feedback channels, have dedicated team
3. To address vendors’ concerns related to operational and payments,
4. Conducting annual vendor scorecards that include key performance index or kpis,
5. Plan and share demand forecasts and concerns as early as possible,
6. Include vendors in product development
7. Have a systematic plan for vendor business strengthening (when retailers are more
powerful and financially stronger).
The figure below provides a brief idea on cloud capabilities when it comes to
VRM practices.

Source:https://kissflow.com/procurement/vendor-management/vendor-relationship-
management/

Activity 3
Make a visit to a medium sized retailer in your city/location that has an online presence
via e-commerce– a website or a mobile application. Study its online platform and
make a list of retailer’s activities (at least four) that are conducted for the potential
consumer by online platform. For each activity, find out with the retailer, what are his
corresponding backend arrangements with retailer’s vendors. Also, identify how
223
Retail Operations retailer plans to strengthen vendor relationships in identified domains. Use the given
Management
format.
Details of retailer (name, location, product categories, IT platform)
Activity 1 name Description of activity here:
Backend
arrangements with
vendors
Plan for
strengthening
relationship
Repeat for 3 more activities

Impact of Life Cycle on Sourcing

While sourcing merchandise the buyer needs to be sure about his decision regarding
the quantum of purchase. This confidence of the decision comes from the experience
the buyer has. This is because most of the product categories generally follow the
typical life cycle of a category. However, variations in the life cycle stages can take
place due to seasonal changes fad or fashion. While seasonal changes may be easier to
assess or forecast, those that are driven by fashion or fad are typically trickier. Between
fashion and fad – fashions exist for a much longer duration and are more predictable
than fads.

Therefore, whenever a retailer is planning for sourcing his merchandise he must take
into consideration the prospect of changes in the preferences, lifestyle of the target
customers and upcoming seasonal or festive changes before deciding on specific
categories as well as assortment and quantities to be purchased.

It is worth understanding that the demand of staple merchandise is more consistent and
usually follows a smooth trend. Stable/basic merchandise shows a continuous and
consistent demand. While, it is possible that demand of some of the staple brands of
merchandise declined over a period due to new brands and substitutes; the demand
for product category remains stable. The demand in such cases is affected by other
factors like population, income or mega-trends in lifestyle changes and the consequent
changes in favor for certain products.

An example for vendor management:

Walmart, was one of the first big retailers to have innovated in the vendor management
area. They partnered with manufacturers like P&G to lay out a vendor managed inventory
system. It allowed vendors access to sales data so they could better forecast product
needs, sync this with their production and delivery accordingly. Walmart’s extensive
manufacturer relationships, network of distribution hubs, and fleet of trucks helped it
to keep its cost low, enabling it to become a consistent discount retailer. What we can
see is that, even if retailers are nowhere near Walmart’s size, they can still gain from
managing vendor networks and resulting seamless product flow for improved productivity
and large savings.
224
 Sourcing and Inventory
14.5 WAREHOUSING AND STOCKING Management

This is the last step in the sourcing of merchandise process. Receiving the merchandise
and then stocking is perhaps one of the critical functions of sourcing. This involves
various tasks such a receiving the goods, checking the invoice, matching the goods
received with goods ordered list, adding the goods received to stocks. Finally making
payment and planning for its entry in the store .At this point, it is the duty of the retailer
to check for damaged goods, unordered goods and any deficient goods (ordered but
not delivered). Since generally payments’ are not made in advance, the retailer has a
better chance of getting his fresh grievance redressed early. In case the retailer has a
chain of stores, stocking becomes much more critical as it precedes distribution to
various stores in different quantities and may be at different times too.
In store merchandise handling is an important issue, which needs to be dealt with a lot
of care. Retailer has to be cautious about the quality and quantity of merchandise
delivered vis-à-vis the order. At this stage, risks includes less than agreed quantity is
delivered, embezzlement of existing stocks by collusion between vendor and store
staff, theft by other parties, damaged goods or damaged packaging etc.
Few suggestive practices for optimum merchandise handling include:
1. Product shipments be received in a set procedure to ensure everything
arrives in good condition and in the proper quantity (checking activity
to be jointly carried out by a team of retailer and vendor staff)
2. Products be routed in an efficient manner to right store location (may be
shelves, storage, or holding area)
3. Product details be recorded in inventory system for tracking (viewable
by both parties)
4. Damaged goods be returned according to standard operating procedures.
Allocating Merchandise to Stores:
After the merchandise is received, the next important task is to allocate the products to
different stores belonging to the same chain (assuming a chain store) or to different
departments in a single store. While allocating merchandise to different stores retailer
generally uses the historical sales information. However it is very important to pay due
attention to the current supply and demand situation so as to maintain proper inventory
situation. The retailer also has to keep in mind the geographic and, demographic factors
influencing each of the stores. It means that due to the concentration of specific
community or people of specific region in a particular area demand for the specific
category type of products rises in a specific season or month due to some festival or
custom. Therefore, demand for that specific category of products will be more in that
particular store than other stores in the chain.
Another factor, which plays an important role while allocating merchandise, is the
generation of percentage of total sales. It works like this- in case a retail chain has ten
stores in a particular area/location and demand for a product has suddenly risen across
in all the areas. In such a case, the demand for a particular product will dramatically
rise however, with the limited supplies the retailer has to take a decision regarding
allocation of merchandise. Decision will then be taken based on percentage of sales
225
Retail Operations generated by individual stores. The store generating maximum amount of sales will
Management
have the authority to demand more percentage of the product.
Each store has to keep adequate stocks to generate confidence in the customers. It
has been generally felt that under stocked stores attract lesser number of customers.
Under any circumstances, customers must not feel that just because the store is relatively
small or is not doing well, therefore it is not well stocked. In case the retailer wants to
generate sales through a push strategy, then he has to keep large quantities of the
stock. On the other hand, if the strategy is to generate sales through pull strategy then
larger display of merchandise is desirable.
Activity 4
During a weekend, visit to a small retail outlet and a large multiband store in your city/
location. Identify two product categories and compile a concise report on ‘merchandise
handling’ practices for these retailers on the basis of these aspects: check on product
shipments received, products routing, product details recording, important aspects of
inventory system for tracking & return process and policies for damaged goods. Use
the given format.
Details of small retailer (name, location, product categories)
Merchandise handling’ practices
1. Check on product
shipments received
2. Products routing,
product details
recording
3. Inventory system
for tracking
4. Return process
and policies for
damaged goods
Repeat for 2nd retailer

14.6 INVENTORY MANAGEMENT

Inventory management is the process of ordering, handling, storing, and using a
company’s stock of assets like raw materials and components, semi-finished goods or
stock items ready for sale. For a retailer, inventory primarily means the stock of items
received from vendors and kept either in back-of-the-store warehouse or on the retail
store’s shelves. When a retailer is dealing with private label items, the inventory will
also include items at semi-finished stage. The chief essence of inventory management
boils down to having the right amount of stock, in the right place, at the right time.
Importance of inventory management for retail business has important financial and
market related benefits. Few of them are mentioned below:
1. Enhancing customer experience: Retail is a promise to consumers of finding
226 the products they are looking for from the store. Thus, not having enough stock to
 fulfill orders already taken by retailer for which payments are made can lead to Sourcing and Inventory
Management
negative experience for consumers.
2. Improving cash flow: Locking too much cash into inventory at once means it’s
not available for other expenses - like payroll or marketing. Thus while inventory
is necessary, it must be optimally decided as per the need so as to save finances
for other critical activities.
3. Avoiding shrinkage: If inventory requirements are correctly made, this will help
in avoiding over-purchasing of wrong inventory items (which are selling slowly).
This can also protect from these items becoming expired, spoiled, or stolen.
4. Optimizing fulfillment tasks: When inventory is available, it can be picked,
packed and shipped off to customers more quickly, easily and lead to satisfied
customers.
5. Saving on warehousing space and staff: When inventory quantities are kept in
the right amounts, they are optimized for fulfilling customer requirements on time
and take only the minimum space from warehouse. In the same context, staff
requirements for taking care of inventory could be optimized.
Today a lot of IT intervention and support in supply chain tracking and monitoring
inventory with different stakeholders is available which help in streamlining the process
and making information about stocks at different locations known to all relevant parties
involved. One such technology is radio frequency identification or RFID.

14.7 HOW MUCH TO ORDER AND WHEN?

The primary questions faced by retailer for managing inventory are:
1. How much to order (category wise)
2. When to place orders.
A retailer should always develop a mechanism in this regard, since this is a critical
issue. Broadly, retailer needs to focus on the following:
a. Average current demand for individual items. Also called SKU (stock keeping
unit) – for example, retailer can find demand/day by using a weekly average
measure.
b. Future SKU demand obtained by using forecasting techniques like linear or
non-linear trend forecasting methods
c. For items affected by seasonality or other fluctuations, retailer can use special
forecasting methods, which use seasonality index
d. For optimum restocking what sort of ordering policy or rules would suffice –
For example, this involves setting parameter values for economic order quantity
method.
In order to take these three decisions we need to get some vital information for which
we need to have the following critical info:
1) Inventory Report:
This describes each SKU and summarizes the inventory position. 227
Retail Operations An inventory report gives vital information from the retailer’s point of view. A
Management
retailer based on’ this information can calculate how much of specific merchandise
should be purchased to meet customer demands for a relevant period. It also
gives vital indication regarding shrinkage1if any as well as the movement in the
market demand conditions – example, demanding going up or down. Based on
the inventory report a retailer can always take necessary steps to add stocks
before they reach alarmingly low levels. Moreover, it also gives a clear picture as
to what sort of assortment should the retailer order, how much of each constituent
of the assortment of the ordered, so as to meet the demand.
Product Availability Report: This indicates that in a month on an average how
much the product was available when required by the customer.
This report enables the retailer to understand the vital statistics regarding availability
of products in the store. One of the most critical factors for the success of any
store is the availability of a product as and when demanded by the customer.
However, at times it is just possible that a specific product is not available in the
specific size or denomination as required by the customer. Going through this
report a retailer can very well apprised himself/herself about the trends in the
market and consumer preferences. For instance, if a supermarket owner finds that
100 grams pack of Parle G biscuits were not available for a considerable number
of times, an indication is given by this data. In this data is code related with the
inventory report data regarding the same brand of biscuits, a vital clue can be
derived as to which pack size is not moving vis-à-vis the hundred grams pack.
2) Reordering level: It is the amount of inventory below which the availability
should not go down. At this point order is placed with the supplier.
Each supplier/vendor needs x number of days or weeks from the order received
by supplier/vendor to reach the retailer’s warehouse or store. This is called lead
time. On the other hand, every retailer has his limitation of space and money.
Based on these two considerations retailer can fix the level of stock which, once
reached at the retailer’s end, an order, of that merchandise will automatically be
placed with the supplier. This is known as the reordering level. For example, a
grocery retailer want to keep 500 units of an SKU in the detergent category, but
at any point he does not want to have lower than 50 units on the shelf. He would
know the rate at which sales happen (say 15 units per day) and the lead-time (say
a week). So in this case, the stock reaches 50+ (15*7) = 155 units, an order will
be automatically triggered.
One more consideration here can be the inventory turnover2 of the retailer.
Therefore, reordering level for the same merchandise can be different for different
retailers even if they are based in the same city or maybe in the same area.
3) Order quantity: This is very subjective and varies from one retailer to another,
even when they look similar in operations. It’s based on the frequency of
consumption and delivery lead time.
Once again, order quantity is based on the four factors namely
i. Frequency of sale and inventory turnover level

1
Inventory shrinkage. An accounting term, it refers to inventory items that have been stolen,
damaged beyond saleable repair or otherwise lost between the point of purchase and point of
228 sale.
 ii. Storage capacity Sourcing and Inventory
Management
iii. Capacity of the retailer to block funds in the specific merchandise
iv. Anticipation if any, for shortage of the specific merchandise

14.8 SHRINKAGE
It is the reduction in inventory caused by shoplifting, misplacement or damaging of
merchandise. Such shrinkages can be measured by comparing purchase records with
available inventory physically in the store. Amount of shrinkage would affect the ‘quantity
decision ‘of sourcing merchandise.
In places where shrinkage through customer and employee theft becomes problematic,
retailers would adopt steps to minimize such happenings. Nowadays, a visual surveillance
is in place which is helpful and is found in majority of the stores. Retailer has realized
that the cost of shoplifting could reduce their profit and worsen their business’s bottom
line. This can be very detrimental to those retailers who already operate on thin margins.
Tracking systems using RFID has been successfully adopted in the stores commonly in
the western nations. However, in India while its use is picking up (it has still not become
a common phenomenon due to the exorbitant costs involved3
While discussing the issue of shrinkage, it is important and one should not forget the
scope of shrinkage in transit. There have been instances that goods have disappeared
while the goods where in transit in small quantities to avoid recognition in the first
instance by the retailer. According to ‘The Global Retail Theft Barometer 2009’, India
ranks No. 1 in retail shrinkage among nine countries surveyed in Asia Pacific. Here the
pilferage can be between the vendor and the transporter as well as any third party and
the transporter. Further support to this is available in the above-mentioned report,
which says, that nearly 10 per cent of shrinkage occurs at the supply-vendor level,
most of which can be combated with effective tracking and inventory management
tools (like RFID).
To avoid such thefts the retailer must go for only credible transport agencies. Moreover,
it is important that the vendors also share responsibility. This however has to be
communicated to the vendor at the time of executing the contract of purchase

14.9 MERCHANDISE PERFORMANCE

Merchandise planning process is an ongoing process. Retailers usually have several
departments and carry tens of categories in each department. They must constantly examine
performance not only across departments and categories but also across SKUs and
vendors. This will help in establishing its profitability across these divisions and take
decisions regarding future investments. Those departments, categories or SKUs, which
are not profitable, may be dropped, making place for ones which are more profitable.
For this, a retailer can go for the following:
1) Sales analysis: by which retailer can
 compare their actual sales and targeted sales

2
Inventory turn over: Measures how many times your inventory is sold over a given time period 229
Retail Operations  compute average inventory investment
Management
 finding inventory turnover ratio
 finding what portion of inventory is sold using ‘sell through rate’;
2) Profit analysis using gross margin return on investments or GMROI
3) ABC analysis.
4) Alternatively, retailers can also use a complex method of weighing the vendors on
a multi attribute basis to assess which ones provide enough business and margins
– for details of this refer to an earlier section no. 14.3 & 14.4 in this unit.
A brief overview is discussed below:
I. Sales Analysis Tools:
A. Comparing actual to targeted sales: Generally the retailer compares the
actual sales over a pre-determined period with the targeted sales for the same
period. If retailer has a chain of outlets, he may aggregate this over all the
stores for a particular category as well as do the exercise store-wise. For
example, if the targeted sales (based on past experience and forecasted values)
was to sell 1500 units in a week, and the actual sales was 1200 for store 1
and 1600 for store 2, then actual by target (actual as a percentage of targeted)
would be 80% and 106% respectively for stores 1 and 2.
B. Average inventory investment: This measure, average inventory estimates
the mean financial value (investment) or units of an SKU or items in a category
during two or more specified periods. It tells the retailer about how much he
has invested in the said goods on an every-day (or week or month) basis.
Thus, average inventory measures the average volume (or invested value) of
inventory kept on-hand throughout a given period.
Average inventory is the mean value of inventory within a certain period, and
is computed by averaging the starting or beginning inventory (BI) value and
ending inventory (EI) values over a specified period. Thus, it is computed as:
{(BI) + (EI)}/2. For example, if beginning of week inventory value= 1000
units and end of week inventory value = 1500 (meaning, that over the week
sales as well as purchases have happened), then the average inventory =
2500/2 = 1250 units. This means, on an average, the store carried 1250 units
per day in that week.
C. Inventory turnover ratio: Inventory turnover measures how many times
your inventory is sold over a given time period. The metric shows how
effectively inventory is managed on two counts – the purchases and sales
made. It is calculated by dividing cost of goods sold by average inventory
value or units of goods sold by average inventory in units.
For example, if the sales in the above mentioned example is 5000 units then
the inventory turnover ratio will be = 5000/1250 = 4.0, which means the
inventory is sold 4 times in this period. Compared with this, if the sales was

3
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230 retail.m19-2-12
 only 1250, then, ratio will be = 1250/1250 = 1.0 which means the average Sourcing and Inventory
Management
inventory is sold only once. Higher this ratio better is the sales performance
and the purchase decisions.
D. Sell through rate: This method takes the amount of inventory a retailer
receives, and compares it against what is actually sold over a given period.
It’s usually expressed as a percentage. For example, if for an inventory of
1000 units, sales for a period are 700 units, then the sell through rate is 70%.
What this figure immediately shows is how quickly the inventory is paying off.
While it is important to note that retailers always want to keep substantially
more inventory then the expected sales, so that any consumer can find enough
choice and doesn’t feel left with small number of unsold SKUs. This measure
is also useful when comparing one product or variant against another or when
comparing the sell-through of a specific product from one month to another
or across different store locations. Low sell through rates mean that either
items were overbought (in quantity) or priced too high, while high sell through
rates indicate you may have under bought or priced too low.
2) Profit analysis using Gross Margin Return on Investment (GMROI)
This ratio is to measure the profitability of retailer’s inventory over a given period.
It gives the gross profit a retailer makes for every units of investment in inventory
that has been purchased. Gross margin itself is the market price – cost of the good
(also called cost of goods sold or COGS). Gross margin from each unit multiplied
over the total number of units sold will give the retailer total gross margin from
sales. For example, if the retailer sold 1000 units over a week, for which he paid
Rs. 50 per unit to the vendor and the market price was Rs. 75, then the gross
margin per unit will be Rs. 75 – Rs. 50 = Rs. 25 and the total gross margin will be
Rs. 25,000. During this period, if the average inventory was worth Rs. 8,000,
then GMROI will be = 25,000/ 8,000 = 3.125 meaning that for every unit of
rupee invested in this period, a return of 3.125 is earned.
3) ABC analysis
This method helps to identify your most valuable inventory. It works on the Pareto
principle –that is, the 80/20 rule. In the context of a retailer, this would mean that
around 80% of sales would typically come from 20% of a company’s total
inventory.ABC analysis uses this theory to sort inventory into three types:
1. A inventory. Where inventory shows the highest value –where, typically,
20% stocks bring in 80% of sales/profits. These are items with highest profit
margins and/or most sales revenue.
2. B inventory. Is where, inventory sells regularly, but doesn’t provide as much
value as A in profit margins–this could also be due to higher carrying or servicing
costs.
3. C inventory. C type is that category of inventory that does not sell as much
as A or B, therefore generates the least revenue and is generally least valuable
(also this one is mostly low on margins), so that the overall profits are low and
slow to achieve.
ABC analysis helps identify the key players in a retail business’s inventory. A inventory,
for example should rarely (if ever) be out-of-stock and be given the highest priority 231
Retail Operations and focus. While C inventory may not warrant quite so much attention and items in this
Management
category may even be discontinued. If C inventory items are not selling in the bigger
market, it may mean that they are obsolete items and candidates for discontinuation.
However, if C items are selling elsewhere well but show dismal performance with the
current retailer, some other reason may be causing low sales, and they need to be
checked by retailer before taking a ‘drop item’ decision.
Activity 5
Make a visit to a medium sized grocery store in your locality. Talk to the retailer about
different product categories he keeps. Select two categories with the help of the retailer
which are his best performers, two, which are medium performers, and two which are
low performers. Find out about the approximate % of his investments in these categories
and the corresponding profit percentage that he is able to achieve from the three
categories. Then report all these details here in an ABC analysis format.
Retailer details:
Category names % of total investment % of total profits
A

14.10 SUMMARY
Sourcing, warehousing and inventory management are critical functions of retailing and
constitute the core of retailer’s merchandising activities and business. This unit initially
speaks about the process of sourcing. In this process, it is important to thoroughly
assess vendor capabilities against a pre-determined checklist and conduct short-listing
vendors for procurement. Factors like product quality, price and terms of delivery of
merchandise normally carries the maximum weight. A retailer develops a mechanism
based on his business and funds to indicate how much to order and when to order.
Shrinkage is one of the risks, which all the retailers are facing as of today. Once the
merchandise is received, the retailer must pay attention to allocating it to the store(s).
Sourcing is a large-scale purchase decision of a recurring nature. Retailers undertake
measurements to monitor their merchandise performance using analysis of sales, profits,
inventory turnover done across vendors, departments and product categories.

14.11 KEY WORDS

Reordering Level : The level of stocks at which the retailer will order for
merchandise.
Shrinkage : Reduction in stocks due to shoplifting, pilferage etc.

232 SKU : Stock-Keeping Unit.

Sourcing : the function of purchasing goods from vendors for Sourcing and Inventory
Management
further selling.
Vendor Relationship : is strengthening of “buyer-vendor relationships” to
Management (VRM) achieve mutually beneficial goals
Electronic Data : Using electronic platforms for transfer of data and
Interchange (EDI) reports
Vendor-Owned Inventory : the vendor retains replenishment and maintenance
Management (VOIM) responsibilities for the inventory
Warehousing : Receiving merchandise from vendors and storing them
safely
Stocking : Storing safely of stocks to be sold ether in warehouse
or in stores.
Inventory Management : the process of ordering, handling, storing, and using a
company’s stock of assets like raw materials and
components
Shrinkage : the reduction in inventory caused by shoplifting,
misplacement or damaging of merchandise.
Radio Frequency : is a form of wireless communication that incorporates
Identification or RFID the use of electromagnetic or electrostatic coupling in
the radio frequency portion of the electromagnetic
spectrum to uniquely identify an object, animal or
person.
Inventory Report : summarizes the inventory position at the level of SKUs.
Product Availability : Indicates how much the product was available when
Report asked by the customer on an average in a given time.
Reordering level : The lower quantity of stocks availability at which a
new order is placed
Order Quantity : The units of an SKU for which a purchase order needs
to be put
Sales Analysis : Making investigations on sales already completed to
know its performance against pre-determined metrics.
Average Inventory : estimates the mean financial value (investment) or units
Investment of an SKU or items in a category during two or more
specified periods.
Inventory Turnover : measures how many times your inventory is sold over
Ratio a given time period.
Sell Through Rate : Compares amount of inventory a retailer receives with
what is actually sold over a given period.
Gross Margin Return on : ratio to measure the profitability of retailer’s inventory
Investments or GMROI over a given period.
233
Retail Operations ABC Analysis : Helps to identify your most valuable inventory and
Management
works on the Pareto principle –that is, the 80/20 rule.

14.12 SELF-ASSESSMENT QUESTIONS

1. Why collecting information about the merchandise sources/vendors a tedious task?
Discuss
2. How will you explore the possibility of having long-term relationship with the vendor?
What are the benefits of long-term relationships with vendors – identify any 4
benefits.
3. How can we assess the performance of vendors on a regular basis? Explain your
answer in terms of key performance indicators.
4. What measures can we take to minimize shrinkage?’
5. What are the main factors, which should guide allocation of merchandise to stores
in case of a chain of stores?
6. With examples explain what points should be kept in mind before entering into a
negotiation with the vendor?
7. How can the inventory performance be measured? Explain the measure with an
elaborate example from grocery retail.
8. What is ABC analysis? How can its use help retailers to become more profitable?
Can it enhance customer experience too?

14.13 REFERENCES/FURTHER READINGS

Berman Barry, Evans Joel R, (2002) Retail Management- A Strategic Approach 8th
Ed (Prentice Hall of India)
Dunne Patrick M, Lusch Robert F, Griffith David A, (2002) Retailing 4th Ed, (Thomson
South Western).
Levy Michael, Weitz Barton A (2001) Retailing Management, 5th Ed, (McGraw-Hill
Irwin).
Sinha,Piyush Kumar and UniyalDwarika, Retail Management - An Asian Perspective,
Thomson Learning, Singapore, 2005.
https://retail.economictimes.indiatimes.com/
https://www.cnbc.com/retail/

234
 Sourcing and Inventory
UNIT 15 MANAGING PEOPLE AND Management

PROCESSES
Objectives
After reading this unit you should be able to:
 understand the concept of retail management mix.
 understand the steps in people management.
 understand and ascertain the concept of process management in retail mix.
 elaborate the steps in process management.
Structure
15.1 Introduction to Important Essential Element in Retail Mix
15.1.1 Retail Mix– Elements of Service Mix
15.2 People: An important Element of Retail Mix
15.3 People Management: A key to Success in Retail Management
15.4 Essential Skills for people Management
15.5 Process Management: Essential element in Retail Mix
15.6 Importance of Process Management in Retail Management
15.6.1 Simplified model of Process
15.6.2 Interlink between People and Process Management
15.6.3 Benefits of WELL Managed People & Processes
15.7 Summary
15.8 Self-Assessment Questions
15.9 References/Further Readings

15.1 INTRODUCTION TO IMPORTANT ESSENTIAL

ELEMENT IN RETAIL MIX
Indian retail sector is fifth largest in the world, projected to grow at 9% over 2019-
2030, and is expected to reach US $ 1.8 trillion by 20301. Despite covid’19 pandemic
and other challenges, the Indian consumption story is robust, driven by affluence,
accessibility, awareness, attitudes and behaviour, the household consumption has
multiplied to US $ 1.63-1.75 (Rs. 130-140 trillion) trillion in 2022. Indian retail sector
alsoinclude third- highest number of e-tail shoppers, following the giants China and the
US. Retail sector is one of the pillars of India’s economy and accounts for approximately
10% of its GDP. The spectacular growth of Indian economy in last few decades is on the
backbone of the retail sector – its employees and people working in retail sector. Today
Indian retail sector employees over 43 million people making it second largest employer.
Since retail is more of a service sector, the concept of marketing mix involves the
combination of 4Ps (Product, Price, Place and Promotion) along with the extended
3Ps (People, Process and Physical Evidence). The primary 4Ps are covered in the
block 1 and 2 of this course. Among the extended Ps,physical evidence is already 235
Retail Operations covered in Unit 12 of block 3, and some parts of process management are covered in
Management
Unit 13 and 14 of block 4. In this unit we would focus on the people management and
also throw some light on process management in successful retail business.

PLACE
l Retail
l Wholesale
l Mail order
l Internet
l Direct Sales
PRODUCT l Peer to Peer PRICE
l Design l Mul -Channel Strategies:
l Technology Skimming
l Usefulness Penetra on
l Convenience Psychological
l Value Cost-Plus
l Quality Loss leader, etc.
l Packaging
l Branding
l Accessories
l Warran es

PROMOTION
Physical l Special Offers
Environment l Adver sing
l Smart l Endorsements
l Run-down l User trials
l Interface l Direct mailing
l Comfort l Leaflets/posters
l Facili es l Free gi s
l Compe ons
l Joint ventures

Process People
l Especially relevant to l Employees
service industries l Management
l How are services l Culture
consumed? l Customer Service

Figure 15.1 : Elements of Retail Mix

15.1.1 Retail Mix – Elements of Service Mix

Retail marketing mix is dened as the mix of various elements and methods required to
identify, formulate, and execute retail marketing strategy. Retail managers, target to
create an optimum mix of retail-mix and coordinate all the Ps to create a distinct image
of the store, various products, and services in the consumer’s mind. The mix may vary
on basis of the types of market, target customers, nature of retailer, and the type of
product/ service along with product line- length and width. It can also be considered
as the mix of retailing activities and coordination of all plans and actions, in order to
boost sales and earn optimum prots. As we can see in gure 15.1, with multiple
elements for each P, it is called the mix of mixes. All these sub-elements are the various
marketing decisions and act as the guiding force for business processes. All the retail
mix decisions if performed and executed properly, must add up to the rm’s marketing
mix and led to attainment of marketing objectives.
The retail mix must be guided by three basic principles:
a) The mix must be consistent with the expectations of target customers. The
market research to identify the target market, study of its characteristics, proper

1
236 https://www.ibef.org/industry/retail-india
 segmentation, targeting and positioning must be the foundation for the retail Managing People and
Processes
mix decisions.
b) Synergistic effect of the elements must be ensured through a judicious mix of
the elements and sub-elements. For e.g.,when planning a sales promotion the
advertising decisions must include the message in it, and this must reach the
audience before the launch of the sales promotion.
c) The retail mix must give the organization’s a competitive advantage over its
competitors, along with boosting strengths and taking care of the weaknesses.
A good retail mix must help in identifying and exploiting the opportunities and
protect the organisation from threats in the business environment.
Retail marketing mix is a mix of mixes, the variables of product (merchandise and
assortment) along with the services, offered at different prices, communication through
promotion mix like advertising, personal selling etc., store location, design, layout,
visual presentations etc. adjusted as per the dynamism of the environment.

15.2 PEOPLE : AN IMPORTANT ELEMENT OF

RETAIL -MIX
People intensiveness is the biggest trait of the retail industry, both on service provider
side as well as service receiver side. As mentioned earlier, currently retail industry in
India employees over 43 million people (in the organised sector), making it second
biggest employer. When we talk about people management in retail sector, we need to
focus on both types of people categories (provider and customers), but for the sake of
better understanding, we only consider ‘employees and employers’ in organisations as
PEOPLE in retail mix.
Managing people in retail environment is not an easy task, employers always look
for well-trained, hardworking teams, they work towards maintaining a healthy and
safe environment in the organisation. The challenge is to manage differing personalities,
maintain work schedules as complex as 24x7, along with smooth maintenance of
various business processes. To ensure the success, on top of such a demanding
array of responsibilities, retail managers must be organized, patient, empathetic, and
determined.
The following five best practices are recommended for the successful people management
in retail sector.Getting started on the right foot enhances the possibility of finding the
right fit for the job, attract best talent and create the right perception about successful
retail business.
1. Sourcing and finding the right employees:The first step towards people
management is finding the right people, people with the desired skill set, attitude,
and experience. Liaison with recruiters, colleges and universities, placement
agencies and other relevant sources, would ensure that the right people become
part of the recruitment and selection process. The job descriptions, position
specific pay, qualifications, terms and conditions of employment, along with
scope for future growth must be well drafted and clearly presented to the
prospects. The interview and selection procedure must be organised,
transparent, consistent, and unbiased, not just allowing the best to come
towards the organisation, but also to create the right brand image. 237
Retail Operations 2. Create a healthy retail environment and cohesive team: The organization
Management
culture plays a huge role in deciding the well-being of the employees and
cohesiveness in the teams. The policies and procedures, organisational
structure, communication between various levels of management, conflict
resolutions, compensation policies etc. are important in ensuring the individual’s
growth as well as growth of the organisation.
3. Right set of goals, targets: With determination and competency, the senior
management must set the right set of goals for individuals as well as the teams.
These goals must result in motivating the employees and keeping their morale
high. Since retail jobs involves a lot of customers dealing, therefore the behaviour
and people management skills of employees are critical. Training of the staff in
cross roles, so that there is seamless transition during long hours and 24x7
functioning of the organisation. Retail environment is normally hectic and
unpredictable, hence the employees need to be treated well, so that they can
take care of customers efficiently.
4. Effective and Calm Communication: Retail is all about communication
with the customers, both in terms of identifying their needs and also suggesting
the solution.Hence, for successful retail business people must be trained in
effective communication, providing the relevant information at the right time,
handling queries and objections, and persuading the customers to buy the
best solutions for their problems. Similarly, the employees must be
communicating with their seniors and juniors in such a way there is positive
and constructive feedback given, and performance appraised. The retail sector
with its dynamism is very stressful place from time to time, making rational
and calm communication, avoiding over-reaction in difficult situations is
important skill.
5. Provide Support and Benefits: Often retail management environment is
difficult; it is important that we provide the right benefits to the staff. There
should be honesty in organisation’s /stores performance, team, and individual’s
performance, and ensure that the people in the organization knows the
management have their back. It’s important to provide the right benefits to
make sure the staff is well taken care of. The common benefits include providing
insurance, extra paid time off, schedule flexibility, adding store discounts,
supporting employee mental health, or paying performance-based bonuses
etc.
Modern retail software/automation has helped management of retail stores, including
people and process management. This conjunction of information technology saves
the time, improves efficiency and productivity among the employees, and enhance the
efficiency of service delivery. During upgradation of the operations, we can improve
the operations digitally. E-Commerce, inventory management, payroll, pricing, and so
much more can be more effectively managed with the help of the right technology.

15.3 PEOPLE MANAGEMENT : A KEY TO

SUCCESS IN RETAIL MANAGEMENT
People management is the most important aspect and element of retail marketing mix.
We know people management refers to the practice of recruiting, training, engaging,
238
and retaining people and placing them at the right place in the organisation. It is a sub- Managing People and
Processes
category of Human resource management (HRM), and it includes all the processes in
the HRM. It is also the process of hiring, leading, and developing team members to
support the organization’s overall mission. People managers handle all people-related
tasks involving new talent, employee engagement, and career development.It also
includes the capacity of the staff and the efficiency and availability.The staff should be
capable and efficient to carry out the functions of the store smoothly. The interaction of
the staff with customers should be professional, well behaved and helpful.If a particular
product needs internal marketing, it is the people who make sure that the internal
marketing is done in accordance with the marketing rules and also ensures that the
message reaches the right people/ customers. The following 5Cs are essential to
successful people management:
1. Creation: Creation, i.e., genesis of the organisation, its vision and mission,
including the company culture. The culture starts with the very first step into
business plan and takes a concrete shape with the first hire. Meritocracy
must be overtly visible, talent acquisition processes must be thorough and
backed by a strong employer brand. With engaging candidate experience,
informative onboarding and clear road mapping techniques utilized to build loyalty,
people manager can ensure that employees are ready to grow with the company,
and face challenges in business environment. Creating their own workforce,
with the desired attitude and commitment towards the organisation’s vision.

Figure 15.2: VUCA of Retail Industry

2. Comprehension: The culture in retail sector must appreciate the differences

innate to each person in a workplace, this is necessary for designing the right
set of motivation, compensation and training plans and policies. The
239
Retail Operations comprehensiveness in understanding, appreciating the people, skills, culture,
Management
and society, helps the retail ecosystem to flourish. People as customers must
be handled by the people in humanistic way and not in mechanised manner.
3. Communication: Communication is the key to success in any retail
organisation. The organisation culture must ensure that the employees have
the confidence that their voice would be heard, and they can speak up in all
situations. When people have the confidence in culture and leadership, there
is open communication, the conflict resolution is effective. The perception of
the workplace and company is positive, which automatically attracts better
talent and reduce the turnover. Communication is often considered only
speaking or writing, ignoring the fact that listening is an important and critical
part in its effectiveness.
4. Collaboration: Collaborative, positive internal environment, and work culture,
is visible in the team cohesiveness, mutual trust, and shared vision for the
organisation.The people when valued as the most important asset, transforms
all other assets as the contributors towards overall success of the organisation.
People management team must work towards fostering a spirit of collaboration
between, various team members, and among all stakeholders of the business.
This must be done in such a way, that the employees value their role and
contribution in the success of the organisation, much beyond their daily roles.
The collaboration must make them understand their importance in shaping the
future of the organisation, and value their contribution.
5. Confront: Organisations regularly face opportunities and challenges/ threats
in the ever-dynamicVUCA (Volatile, Uncertain, Complex and Ambiguity)
business environment. People management involves the power of confrontation
or facing the ups-and -down in the business environment. Overcoming
challenges is an integral and important component of building a successful
organisational culture. Effective people management strategy must be prepared
to find resolutions for all types of challenges (interpersonal-intrapersonal,
environmental, or competitive) regardless of the internal composition/ nature
of the organisation. People management team must be proactive in taking
necessary and appropriate disciplinary action as per the need. People in an
organisation decides the resilience of the organisation.

15.4 ESSENTIAL SKILLS FOR PEOPLE

MANAGEMENT
The success of any retail organisation whether traditional brick-and-mortar, modern
e-commerce based or hybrid, depends on the right set of people at the right places.
The other element of marketing mix- product, price, promotion, place, process and
physical evidence, depends on the right people for their success. Following are the
skills essential for successful people management in any retail organisation:
1. Cohesiveness and Trust-Building:Teamwork works- is the biggest
indicator of the productive work environments. The success of the organisation
depends on the sense of camaraderie, and the organisational culture, which
percolates from top management to lower management. Gaining the trust of
individuals and employees is big challenge for the people management task
240
 force. Active listening, empathy, and conducive culture to speak, are some of Managing People and
Processes
the basic requirements for building trust. Understanding the aspirations, goals,
skills, and talent, before forming the teams, would result in internally cohesive
teams, which can work towards attainment of the organisational success.
Patience and flexibility during conflicts, handling progress blockers, and
empowering people with the skills and motivation, needed during hardship,
people managers can build engaged and dedicated teams.

Figure 15.3: Significant People Management Skills

2. Active listening2 and Mediationas part of Organisational culture:When

people are the centre of function, communication strategy is the most important
lubricant for smooth functioning. Conflicts arising due to miscommunication,
difference of opinion, difference in temperament and lifestyles, are common
at retail organisations/ and complex workplaces like hybrid retail chains.
However, when managed properly, these conflicts can result in an environment
where all employees feel that their opinions are valued, and their contribution
is critical in the success of organisation. Successful people management
involves taking an active role in mediating conflicts before these reach a point
where it becomes insurmountable. Through active listening and mediation,
people manager must incorporate every employee’s point-of-view and create
a path forward for everyone associated with the organisation. This results in
creating a culture of understanding, omni-representation and accountability
for all,leading the teams towards success.Active listening, along with genuine
empathy, and appreciation,tied with actionable steps during communications
and conflict handling would ensure that all employees feel validated and
respected in the workplace.
2
People managers must learn to activel y listen, maintain eye-contact, give verbal cues, and ask
questions to show that they are engaged with the employee. 241
Retail Operations 3. Knowledge-Setting and Organization: Workplaces are constantly
Management
evolving, and so should the entire teams — including managers. Having access
to high-quality data about projects, company, and employee performance
over periods of time is crucial to streamline the success in an organization.
Demonstrating the ability to stay upto date is also important for proving self-
awareness to team members, and by consistently learning new skills and
capabilities that can be applied to the workplace, managers can foster a spirit
of quality career development.Preparation is the key to people management.
4. Visionary/ Dynamic Leadership:Staying on top of routine tasks and related
emerging challenges, or alternatively constantly needing to catch-up and letting
ongoing responsibilities slide to tackle emerging tasks, is something that is
recognized and resonate throughout the team in retail ecosystem. Great people
managers actively look for ways to streamline processes, reduce clutter and
accomplish tasks before they pile up, while paying attention to employee
workloads and adjusting as per the needs. Employees should have access to
the resources, they need to stay organized from the moment they are
onboarded. Figure 15.3 gives a comprehensive list of skills necessary for
good people management.

15.5 PROCESS MANAGEMENT : ESSENTIAL

ELEMENT IN RETAIL MIX
Another element of the retail marketing-mix is the process defined as, “a series of
steps and decisions involved in the way a work is completed.” Processes are an
integral part of our daily life both professionally as well as personally. The way things
are done is called a process, as it is a series or set of activities that interact with each
other to produce the desired result. The process may occur once or can be recurrent
or periodic. When we talk about retail management, we are more concerned with the
regular, routine processes, involved in the business management.
Processes are important because they describe how things are done, and also provide
monitoring and evaluation benchmarks for making the functioning better. These also
provide inputs on degree of success, efficiency, and effectivity of the tasks. Hence, if
we focus on the right processes, in the right way, we can design and execute the way
towards success. Without well-defined processes, it is not possible to do the task with
equal efficiency twice or repetitively, whereas with properly defined processes the
service provided to the customer can remain consistent, not affected by the person
performing it. The success of retail is dependent on consistency of quality in products
and services, which is the output of existing processes at different stages of production,
inventory management and marketing.
Retail management is a combination of many internal and external processes such as
market research, inventory management, transportation and warehousing, offline and
online presentation of products and services, store operations, packaging, financial
and accounting etc. along with the human resource processes like training, compensation,
motivation, and relationship management with customers to name a few. All these
processes in the retail management processes feed each other through the inputs and
outputs of data and information and their symbiotic synergies work towards improving
the customer experience and ensure customer satisfaction.
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As presented in figure 15.4, a typical retail manangment process in an organisaiton, Managing People and
Processes
regulates who carries out which activities, at what time, and with what resouces. Process
management looks at every business process individually and also looks at the complex
network of processes combined into bigger complex processes, and then the
organisation as a whole. The process must result in clearly defined roles, responsibilities
and accountabilities. It analyzes currently existing systems, issues and challenges, and
identified the bottlenecks, barriers and threats. Each stage in the retail process is
combinations of various small processes, which require different skills for successful
completion. Bigger the retail organisation, more complex the business process
management systems.

Figure 15.4 : A Typical Retail Management Process

This simplified model helps us to understand that the ‘retail process’ is a network of
smaller multiple processes at each stage of the retail management process. The basic
aim of the retail process is to take care of the 7Rs i.e., right product, in the right
quantity, of the right condition, at the right time and right place, to the right customer
and at the right price, so that the customer need is satisfactorily fulfilled. The chances of
satisfied and happy customer repeating a purchase are much higher and also acts as
the most cost-effective advertisements for the business. The planning of processes,
their execution, reframing and redesigning must be on the basis of the understanding of
the customers’ needs and wants, along with collaborations between the manufacturers
and wholesalers. This would also involve listing of the capabilities inherent in the
organisation, and analysing the organisation’s position with respect to the competitiors,
based on the business environment conditions. Processes at each stage of management
must converge towards attainment of the organisational goal and contribute towards
the success of the organisation.
Process management encompasses all aspects of the business, as seen in the above
figure. Large multinational organisations use process management software to automate
their systems, update the processes real time and efficiently handle businesses around
the globe; while smaller organisations with limited product lines and market coverage,
still use traditional methods of flowcharts and process manuals. Usually, good business
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Retail Operations plans include some inputs on business process managements. Here we look at some
Management
examples of process management in retail ecosystem:
1. In Human Resource Department the process of Onboarding of New
Employees: After the recruitment and selection process (which at times can
be easily outsourced) the selected candidates need to be onboarded, and this
process can be very haphazard, chaotic and time consuming if not streamlined
and properly defined. When process management is in place the forms,
documents, and other needed information can be submitted electronically and
smoothly. Automation of the HR process can also include filtering the data,
matching the skills to the position, sending messages and scheduling interviews.
And later facilitating employee’s onboarding.
2. Customer Service in retail stores: When there is need for specialised
customer services, retail stores have systems in place which consists of many
processes. Verification of purchase information, updated terms and conditions
of sales, possible solutions in case of conflicts, and handling of refunds and
credit notes. Customer service is an integral part of the retail business and
hence seamless CRM, and customer service processes can play a key role in
its success.
3. Logistics and Warehousing Management:With the increased product line
the complexity in warehousing also increases. It is important to maintain the
right quantity of various products and their assortments, at the right places in
retail network. Inventory management, order processing both for buy and
sell, warehousing, transportation and delivery and logistics management, each
of these would have multiple processes in order to function smoothly. Also,
these processes would be interlinked, interconnected and interdependent on
each other to complete the business system.

15.6 IMPORTANCE OF PROCESS MANAGEMENT

IN RETAIL MANAGEMENT
Retail management, the process of running and managing retail store’s day-to-day
activities involved the selling of goods and services to customers. The overarching goal
is to ensure that the process results in customer satisfaction and built long term
relationships with the customers. A good retail process enables a company-wide
understanding of the organisational vision, mission, the internal process landscape. The
overall retail process looks at every stage in overall business process, and individually
as a whole, to create a more efficient organisation, and satisfied customers. Process
management, a systematic approach to ensure effective and efficient sales, a methodology
to align different departmental goals and objectives with the overall objectives. Process
management is not just useful for the organisation, but also for the customers, it must
result in easing the process of finding the right product, at right price conveniently.

15.6.1 Simplified Model of Process

Process management is an integral part of the overall organisational strategy called as
process management strategy. In long-term this strategy constantly monitors business
processes and try to maintain optimal efficiency for the organisation. The typical
simplified retail process consists of the following stages:
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1. Plan:The first stage in any process is called the planning. In retail management we Managing People and
Processes
need to plan and decide many initiatives. Let’s take a small example: Imagine
Person A want to open a small retail shop in the neighbourhood. The first step
would be to identify the demand for various products and decide what product
assortment would be beneficial to begin with. The decisions related to what, when
and how much is taken in this stage.
2. Buy:The next step in the retail process is to buy the inventory and setup a shop.
The merchandise planning, the price negotiation, credit facility etc are decided
during this stage of the process.
3. Move:This stage consists of supply chain management and inventory management
systems. Move can be as simple as buying some products from the wholesaler
and selling at the shop, or it can be a complex software-based program with
multiple products, multiple categories, multiple locations etc. Depending on the
nature and size of the organisation, it can be simple as well as complex.
4. Market: This stage in the process is all about brand and product management.
Decisions related to qualityand quantity, along with the terms and conditions of
delivery, credit facility and other activities required for smooth conduct of the
business.

Figure 15.5: Stages in Retail Management Process

5. Sell:The last stage in the process is called the sales and tender management stage.
This stage involves both the after sales services and relationship management. The
process of installation, activation, maintenance and after sales services play a key
role in customer relationship management.
The key roles of process management in retailing are, to improve the business through
internal co-ordination, store operations, human resource optimum utilization, planning
of logistics and inventory and financial and administrative management.

15.6.2 Interlink between People and Process Management

There exist a strong relationship between people and processes. The success of people
and process mangagement is strongly related to the each other. Processes are designed
by people for the people and aim at efficient use of all resources including human
resource. The competency, skills and motivation level of the people involved in the
process of business process designing would decide the quality of processes and the
hence the quality of the system.
As with any managerial practice, consistency in implemetnation of the various
procedures and processes result in consistency in service delivery. The processes
designed by well trained and skilled people using the state- of- art technology and
automation softwares gives the organisation an edge over its competitors. Hence we
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Retail Operations can say that the quality, designing and implementation of business processes is dependent
Management
on the people involved.
Similarly, existence of right systems and processes, can attract the best talent towards
the organisation. If an organisation have well defined processes and procedures for
employee onboadring, placements, training, performance measurement, compensation
and motivation, the people are likely to more engaged, dedicated and committed to
the organisation. Whereas in contrast existence of cumbersome, confusing and
subjective processes can lead to confusion and conflicts, which in turn leads to
disagreements, low motivation and high turnover. Processes helps in getting everyone
on the same plane, which leaves less room for disagreements in routine business
dealings. There are plenty of other areas in which retailers can implement processes
like cleaning schedules, cash handling policies, dress codes, inventory receiving, stocking,
and dealing with unhappy customers etc. Modern software has reduced the subjectivity
in the processes to a very large extent.

Figure 11. 5: Process Management in retail

Organisational culture is made of many elements, but people and processes are the
most important and critical elements, which must be handled with care to ensure the
success of an organisation. Some of the commonly found benefits to well management
people and processes are:

15.6.3 Benefits of WELL Managed People & Processes

1. Smooth and streamlined business decisions: With the right business processes
being handled by the right people, through systematic implementation, an
organisation can reduce the order processing time, streamline the processes
and achieve efficiency. People do not waste energy on repetitive tasks and
minimize errors due to human inefficiency, and there is inherent cost-
effectiveness in smooth and streamlined actions.
2. Enhanced productivity: Just like a well oiled machine, a retail organization too
functions efficiently when the system is properly defined through processes.
Automated processes also prevents loss of data, reduce time and fatigue, and
hence leads to optimum utilisation of resources. This results in enhanced
productivity and competitive advantage both for the customers as well as the
people associated with the organisation like employees, owners and other
246 stakeholders.
 3. Reduced costs and risks: People play a key role in the success of any Managing People and
Processes
organisation. Reduced turnover, high morale and motivation levels, good
organisational culture and visionary leadership, also conveys existence of good
quality processes. The synergy created by the combination of right people
and processes, reduces the cost, and also mitigates the risk involved at various
stages of business process management. This cost effectiveness is important
contributor towards the enhanced efficiency of the management systems and
improved profits for the organisation.

15.7 SUMMARY
In this unit we discussed the two very important elements of retail marketing mix i.e.,
people and processes. Effective management of people involves much more than just
leading and control. Right from acquiring the talented, high-quality people, to managing
them through right placement, compensation and motivation, people management is a
complex dynamic and ever evolving stream of management. People management skills
is dedicated towards genuine desire to promote employees’ career goals and interests
along with aiding development across the workplace. Successful managers must be
able to recognize their own strengths and weaknesses, communicate effectively, create
the right teams, motivate their team,conflict resolutions and create an conducive
environment for constructive feedback and communication.
Another important element of marketing mix covered in this unit is the process. Process,
defined as the way of doing a work is the building block of system. How people are
responsible for processes and how processes contribute towards attracting talented
people, keeping them motivated and dedicated in long run is also elaborated. The last
sections highlighted the benefits of process management in retail and also the relationship
between people and process management.

15.8 SELF-ASSESSMENT QUESTIONS

After reading the unit, its now time for checking the progress. Try to answer the following
questions. Some questions may require use of additional online resources.
1. What is retail marketing mix? Explain the elements of retail marketing mix? Justify
the existence of extended marketing mix elements for retail sector?
2. Retail marketing mix is called the mix of mixes. With the help of suitable example
from popular retail chain, explain the given statement?
3. People management is art as well as science. Do you agree with the statement?
Justify your answer with the help of suitable examples from retail industry?
4. What are the 5Cs in people management? What skills are essential for successful
people management in an organisation?
5. Automation through advancement of technology has improved the process
management in retail organisations. In light of this statement, explain the retail
ecosystem and the process management systems in India.
6. Write a note marketing-mix for e-retail (e-commerce) business. How is people
and process management different from the traditional retail stores?
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Retail Operations 7. a) Try to prepare a process flowchart for ‘conflict management’ among team
Management
members in a retail store with no branch dealing in FMCG?
b) Can you modify the above flowchart , if the store moves to hybrid retail
business?

15.9 REFERENCES/FURTHER READINGS

Bhuvaneswari, V., & Krishnan, J. (2015). A review of literature on impulse buying
behaviour of consumers in brick & mortar and click only stores. International journal
of management research and social science, 2(3), 84-90.
Dahiya J., Malik, R., & Dhale, K. (2012) Branding and Its Impact on Retail Sales of
Motor Spirit, High Speed Diesel and Branded Fuels at BPCL Retail Outlets, Journal
of Management and Information Technology, Vol. 4(1), 59– 77.
Kusuma, B., Prasad, N. D., & Rao, M. S. (2013). A study on organized retailing and
its challenges and retail customer services. Innovative Journal of Business and
Management, 2(5), 97-102.
Malik, R. & Deshwal, P. (2012). An Empirical Study of Consumer Buying Behaviour
in Indian Markets, Researcher’s Voice, Vol:2(2), 26- 34.
Malik, R. (2013). A Study of Sectoral Analysis of Retail Industry in India, Intellectual
Resonance DCAC Journal of Interdisciplinary Studies, Vol. 1 (2), 132-140.
Prasad, C. J., & Reddy, D. R. (2007). A study on the role of demographic and
psychographic dynamics in food and grocery retailing. Vision, 11(4), 21-30.
Vaja, M. B. R. (2015). Retail management. International Journal of Research and
Analytics Reviews, 2(1), 22-28.
https://www.trrain.org/wp-content/uploads/2017/12/The-Retail-Employees-Day-
impact-report-for-web.pdf
https://www.thehindu.com/business/Industry/25-million-new-jobs-in-indian-retail-
sector-by-2030-study/article34020291.ece

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 Managing People and
UNIT 16 CUSTOMER RELATIONSHIP Processes

MANAGEMENT (CRM)
Objectives
After going through this unit, you should be able to:
 explain the term customer relationship management CRM
 understand the evolution and need of customer relationship management
 analyze the key objectives of CRM and discuss the various types of CRM
efforts;
 appreciate the necessity and significance of CRM in an organization
 discuss the CRM components and their relevance
 explain the impact of CRM on retail store and its benefits
 have awareness of some famous CRM software being used by retailers.
Structure
16.1 Customer Relationship Management (CRM): An Introduction
16.2 Evolution of CRM
16.3 Need and Importance of CRM
16.4 The Primary Objectives of CRM are to
16.5 Growth and Scope of Retailing in India
16.6 Why is CRM necessary for an Organization?
16.7 Role of CRM Components
16.8 Impact of CRM on Retail Store
16.9 Personalization and CRM Software: The PROS and CONS
16.10 Benefits of Using CRM software in Retail Stores
16.11 Some Well –Known CRM software implemented by Retailers
16.12 Major issues and Problems in CRM
16.13 Role of CRM Affiliation in Retailing Sector
16.14 Summary / Conclusion
16.15 Self – Assessment Questions
16.16 Further Readings

16.1 CUSTOMER RELATIONSHIP MANAGEMENT

AN INTRODUCTION
The acronym CRM stands for Customer Relationship Management is the combination
of practices, strategies and technologies that companies use to manage and analyze
customer interactions and data throughout the customer lifecycle.

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Retail Operations Thus CRM systems typically include a variety of tools and functionalities to manage
Management
different aspects of customer interactions, such as customer data management, sales
automation, marketing automation, and customer service management. These tools
allow businesses to streamline their customer interactions and provide a more consistent
and personalized experience across all touch points. The goal is to improve customer
service relationships and assist in customer retention and drive sales growth.
One can presume that Customer Relationship Management (CRM) is a strategy that
focuses on managing interactions with customers and improving the overall customer
experience. It involves using technology and data analysis to gain insights into customer
behavior, preferences, and needs, and using that information to build long-term
relationships with customers.

16.2 EVOLUTION OF CRM

Customer Relationship Management (CRM) has evolved over the years from being a
simple customer database management system to a strategic tool for businesses. In the
past, businesses used to store customer data in a simple spreadsheet, which was only
used for basic record keeping. However, as competition increased and customer
expectations rose, businesses needed a more sophisticated way of managing their
interactions with customers.
CRM systems began to emerge in the 1980s as a way of managing customer data
more efficiently. These early systems were mainly used by sales and marketing teams
to track customer interactions and sales leads. Over time, CRM systems became
more sophisticated, incorporating features such as marketing automation, customer
service management, and analytics.
Today, CRM systems are a critical component of most businesses’ technology stack.
They help companies to manage all aspects of their customer interactions, from marketing
and sales to customer support and retention. Modern CRM systems also leverage
technologies such as AI and machine learning to provide personalized customer
experiences and insights into customer behaviour.

16.3 NEED AND IMPORTANCE OF CRM

The need for CRM has grown as customer expectations have raised. Today’s customers
expect personalized experiences and fast, responsive service across all channels. To
meet these expectations, businesses need to have a complete view of their customers’
interactions and preferences.
CRM systems help businesses to achieve this by providing a single source of truth for
all customer interactions. This allows businesses to provide personalized service and
targeted marketing based on customer behaviour and preferences. Additionally, CRM
systems help businesses to identify and respond to customer issues quickly, improving
customer satisfaction and retention.
CRM systems also provide valuable insights into customer behaviour, allowing
businesses to identify trends and patterns that can inform business strategy. For example,
a CRM system may reveal that a particular product is popular among a certain
demographic, or that customers in a particular region are more likely to make repeat
250
purchases. This information can help businesses to refine their marketing and sales Customer Relationship
Management (CRM)
strategies, leading to increased revenue and profitability.
To sum up, the evolution of CRM has been driven by the need for businesses to
manage their customer interactions more efficiently and effectively. Today’s CRM
systems are powerful tools that help businesses to provide personalized, responsive
service and gain valuable insights into customer behaviour.

16.3.1 The Indian Scenario

In India, since the last decade and a half CRM has gained immense importance and is
being adopted and implemented by businesses across sectors both domestically and
globally. The frequent volatility in the market place has lead to fluctuations in the
business environment. Thus the strategy of seller market previously has now become
the buyer market approach thereby the main focus in the current times is on the customer
needs and wants in the whole transaction process of buying and selling is gaining critical
importance It is at this juncture that in a complex and competitive market situation the
need for CRM becomes essential and central for firms to take notice of its role,
responsibilities and significance and to consider it as a strategic tool for growth and
sustenance.
CRM has a major role in all the sectors of an economy. However, the need and
importance may vary from sector to sector but it’s for certain that it is omnipresent in
every business. It is pertinent to mention that CRM is more prominent and visible in
the retail sector.
CRM systems compile customer data across different channels, or points of contact,
between the customer and the company, which could include the company’s website,
telephone, live chat, direct mail, marketing materials and social networks. CRM systems
can also give customer-facing staff member’s detailed information on customers’ personal
information, purchase history, buying preferences and concerns.

16.4 OBJECTIVES OF CRM

1. Improve Customer Experience: CRM systems are designed to help businesses
provide a better customer experience across all touch points. By collecting and
analyzing customer data, businesses can gain insights into customer behavior,
preferences, and needs. This information can be used to personalize
communications, offers, and services, thereby increasing customer satisfaction and
loyalty.
2. Increase Customer Retention: CRM systems allow businesses to build long-
term relationships with customers by providing personalized and consistent
interactions across all channels. This can help increase customer retention and
reduce customer churn.
3. Boost Sales: By tracking customer interactions and analyzing customer data,
businesses can identify opportunities to upsell or cross-sell products and services.
This can help increase sales and revenue.
4. Streamline Operations: CRM systems can help businesses streamline their
operations by automating tasks such as lead generation, sales tracking, and customer
service. This can help reduce costs and improve efficiency. 251
Retail Operations 5. Gain Insights: By collecting and analyzing customer data, businesses can gain
Management
insights into customer behavior, preferences, and needs. This information can be
used to improve product and service offerings, identify new market opportunities,
and optimize marketing and sales strategies.
The focus of this unit is specific to the role of CRM in retail business. Therefore
it becomes vital to have basic knowledge about retailing in Indian scenario

16.5 GROWTH AND SCOPE OF RETAILING IN

INDIA
The retailing in India is one of the pillars of the economy and accounts for about 10
percent of its GDP. It is also considered as one of the largest industry contributing to
the Indian economy which is capable of generating employment prospects to skilled
and unskilled workforce in more significant numbers.
Traditionally, the retail outlets in India were relatively small and managed by a single
owner or by a few members of the family. Even though retail stores in India are often
relatively small, they have more authority. The individual/family without any influence
primarily enjoys ownership of the establishment.
Even thou you are familiar with the term retailing and its activities yet it becomes essential
to first understand what is retailing is all about and its characteristics. Retailing, is a
business activity where the owner purchases the goods and commodities in bulk from
the manufactures/producer/ wholesaler and resells them to the customer/end user. Today,
retail sector has evolved in strength and stature by appealing to every section of the
society by establishing new innovative and contemporary formats which were never
heard before.
Retail businesses endure intense competition due to globalization, liberalization,
sophistication, and market saturation. Retail sectors include both organized and
unorganized businesses. While the unorganized sector is less regulated and has no
restrictions, the organized sector is more controlled with many rules and regulations
and more tax enforceability.
The consumer’s expanding demands and wants, and their enhanced disposable income
with the fast changing tastes and preferences and rapid shift in lifestyle are the key
drivers of the trend toward increased retail outlet demand. The Indian retail sector is
experiencing fierce rivalry from both established Indian firms and also due to the entry
of global retailers who are making a dent on the Indian soil.
The Indian retail titans have turned to new technological measures to retain customers
due to the intense competition in organized retail. Therefore its vital for every organization
should have an excellent customer relationship management tool/system in place.
Maintaining both business-to-business (B2B) and business-to-customer (B2C)
relationships assumes crucial for commercial enterprises. Maintaining relationships with
all the parties involved in the business, including customers, suppliers, and service
providers, and all other stakeholders etc is vital. Various customer relationship marketing
strategies are apt and appropriate for firms based on the nature of business its size and
scope, its customers and other market/environment factors. However, the optimal course
of action must be carefully analyzed.
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Retailers are using CRM tactics to increase the value of their current consumers and Customer Relationship
Management (CRM)
shift them from casual to committed patrons, strengthening the relationship between
the customer and the company.
Indian players use a range of loyalty programs to promote CRM activities. Some of
the top player’s loyalty programs include the following:
 Big Bazaar successfully used Everyday Low Pricing;
 Reliance Fresh’s program is dubbed “Reliance One”; with the name
 “Club West,” Westside offers two different club membership options.
 Pantaloons offer “green cards” in three different categories.
The company collects complete sales data. With only one click, a company can fully
compile all sales-related data and the data so gathered is handled accurately and
genuinely. The information so obtained is analyzed for the firm’s future advantage and
its communication with the customers. Thus all this information helps the company in its
future decision making. All stakeholders involved in the organization, both internal and
external, are adequately communicated with. Eventually, the information at hand is
shared and can be accessed enterprise wide by all the employees to accomplish the
objectives and goals of the business.

16.6 WHY IS CRM NECESSARY FOR AN

ORGANIZATION?
To manage and analyze customer interactions and data across the customer lifecycle,
businesses employ a combination of practices, strategies, and technologies known as
customer relationship management (CRM). The purpose is to strengthen interactions
with customers to promote client retention and increase sales. CRM systems gather
customer information from various contact points between them and the business,
such as the company’s website, phone line, live chat, direct mail, marketing materials,
and social media. CRM systems can also give staff workers who deal with consumer’s
in-depth knowledge of their data, purchasing history, shopping preferences, and issues.
CRM is necessary for all organizations, whether they operate brick-and-mortar stores
or online. No company can thrive long-term without preserving a positive relationship
with its customers.
Retail companies have always been one of the most significant pillars of the commercial
sector. Maintaining a positive relationship with customers is relatively easier for retail
establishments that stand alone. This is primarily because of their regular interactions
with customers, which makes it much simpler for organizations to build strong bonds
with them.
Marketing efforts once used to focus mainly on boosting consumer loyalty to a brand
or service. More committed customers were supposed to make more purchases, again
and again, grow more tolerant of price increases, and ultimately be more profitable for
the business. With new trends in the retailing sector, this traditional route does not
always work as it worked earlier. A retail consumer who is so committed may continually
search for the most outstanding deal on various products from a retailer through different
channels of the retailer, intending to take advantage of every discount and promotional
253
Retail Operations offer, and may not end up purchasing anything. In the long run, this customer costs the
Management
retailer money compared to being a source of revenue. Establishing unique strategies
for interacting with each type of customer is a critical element of CRM.

16.7 ROLE OF CRM COMPONENTS

At its most basic level, CRM software compiles customer data and stores it in a single
CRM database for easier management and access by company users. CRM systems
have a lot of extra features added to them throughout time to increase their utility.
Some of these features include the ability for managers to monitor performance and
productivity based on data logged within the system, as well as the ability to automate
various workflow automation processes, such as tasks, calendars, and alerts, depending
on system capabilities. Other features include recording customer interactions via email,
phone, social media, or other channels.

16.7.1 Marketing Automation: At various stages of the lead generation lifecycle,

CRM platforms with marketing automation features can automate repetitive operations
to improve marketing efforts. For instance, the system might send email marketing
content automatically as sales prospects are added to convert a sales lead into a paying
customer.
16.7.2 Sales Automation: Tools for sales force automation keep track of customer
interactions and automate some important sales cycle tasks to pursue leads, acquire
new clients, and foster client loyalty. By organizing customer and prospect information
in a way that enables retailers to establish stronger relationships with them and expand
their base of customers more quickly, customer relationship management solutions
assist in customer acquisition, securing their business, and maintaining their satisfaction
levels. CRM systems begin by gathering information about a shopper from their website,
email, phone, social media, and other sources.
16.7.3 Contact Centre Automation: Contact center automation, intended to lessen
the monotonous portions of a contact center agent’s job, may include a pre-recorded
voice that helps with client problem-solving and information sharing. To shorten call
times and streamline customer service procedures, various software tools that interact
with the agent’s desktop tools can fulfil consumer demands. Chatbots and other
automated contact center solutions can enhance the user experience for customers.
16.7.4 Location-based Services or Geo-Location Technology: Some CRM
systems include the capability to develop geographic marketing campaigns based on
the physical locations of consumers, occasionally connecting with well-known GPS
(global positioning system)-based apps. Geo-location technology can also be utilized
as a networking or contact management tool to discover sales prospects based on a
site.
16.7.5 Process Automation: CRM solutions enable firms to streamline routine chores,
freeing staff to concentrate on innovative and higher-level work. CRM allows for tracking
sales leads, giving sales teams a central location to enter, monitor, and analyze lead
data.
16.7.6 Human Resource Administration (HRM): CRM systems support the
254 tracking of employee data within a business, including contact details, performance
evaluations, and benefits. This makes it possible for the HR division to manage the Customer Relationship
Management (CRM)
internal staff more skilfully.
16.7.7 Analytics: By evaluating user data and assisting in creating focused marketing
initiatives, CRM analytics helps increase customer satisfaction rates. CRM platforms
have integrated AI technologies, such as Sales force Einstein, to automate repetitive
tasks, identify buying patterns and forecast future customer behaviours.
Along with storing personal information like a client’s communication preferences, it
may automatically draw in additional data, including current company activity headlines.
CRM technology organizes this data to provide retailers with a complete record of
people and organizations, enabling the business to better comprehend their relationships
over time.
According to Peel (2002), CRM initiatives have gained attention from many organizations
as there has been a gradual shift away from just focusing on customer acquisition to
more customer retention initiatives, which leads to a reduction strategy that testifies to
the necessity of good CRM initiatives and procedures.
Most companies believe that customer retention is the value of customer relationship
management initiatives, even though most businesses employ these programs to bring
in new customers. In various corporate environments, Ang and Buttle (2006) empirically
demonstrated that “a 5% increase in customer retention can generate an increase in
customer net present value of between 25% and 95%.”

16.8 IMPACT OF CRM ON RETAIL STORE

1. Customers are prone to returning to the same retail outlet when they receive a
product or service that exceeds their expectations. The retailer will retain customers
if it provides features like free home delivery or a loyalty program with a membership
card that make the customer feel valued. CRM programs help to identify, keep,
and grow the customer base of valuable customers. Using pricing signals encourages
less profitable customers to stick around and become more profitable in the future.
Lower customer churn and more profits result from higher retention—long-term
customer relationships lower acquisition expenses for the firm. When the cost of
acquiring a new customer is high, this can be important.
2. Furthermore, long-term customer relationships can raise a company’s efficiency in
terms of profitability as purchase volume rises and relationship costs fall. While
retention-based CRM programs can offer many intangible advantages, companies
can profit from them. It is less expensive to keep your current customers than to
look for new ones. Retention and profitability are positively correlated, and the
correlation is unquestionably inversely correlated. High customer volume or repeat
business may suggest some amount of satisfaction. However, because it might
indicate factors other than customer satisfaction, purchasing behaviour is only one
aspect of customer loyalty.
3. CRM depends on the idea of customer value. “It alludes to the financial worth of
a client’s connection to a business, measured as a contribution margin or net profit.”
Beyond its capacity to assess marketing efficacy, customer value offers significant
decision assistance as marketing metric. By placing the value of the client at the
forefront of its decision-making process, a business can measure and optimize its
marketing efforts. 255
Retail Operations 4. Managing clients successfully over the long term is necessary, given the competitive
Management
environment and unstable economies characterizing the modern world. Now more
than ever, it is a critical issue. Today retailers face the massive challenge of earning
and retaining a customer for a lifetime. Customer value was previously primarily
based on how profitable they were in terms of sales. Customer value, however,
can also be dependent on how consumers behave in terms of referrals (their
participation in referral programs launched by the retailer), knowledge sharing
(information or comments they share about some other retailer’s best practices),
and influence over other customers through reviews and blogs.
5. Retailers are under immense pressure to find a compelling reason to keep customers
glued to their business for a long time and ensure they bring in revenue perpetually.
Analyzing the shopper behavioural data allows retail store analysts to connect the
dots to know precisely what customers prefer to buy. Which channel (be it a
website, mobile shopping app, or physical store) do they prefer to use for what
kind of purchases? This eventually helps the retailers target the customers based
on the insights they receive from the patterns of customer preferences.
6. Thus, it points out that, though data is readily available and the number doubles
every 18 months, businesses are overloaded. Maintaining such data under multiple
headings becomes onerous in an era like ours, where data has revolutionized
digitalization. But it is crucial to separate such data to dig deep and understand
shoppers’ purchase behaviour and purchasing patterns. This helps retailers identify
where their consumers fit in and their expectations, enabling them to develop
strategies to serve their customers best. In retail, when we maintain such a database,
it becomes possible for retailers to establish segments.

16.9 PERSONALIZATION AND CRM SOFTWARE:

THE PROS AND CONS
Personalization is the key to all these requirements, wholly based on the effective
utilization of behavioural data available to retailers about their customers. To entice
customers to return to a store regularly, retailers must provide personalized product
recommendations and give the impression that they have their customers’ best interests
at heart. It is essential in an industry like retail, where the operating margin is so small.
The emergence of new trends, such as social media and app development, presents
retailers with fresh CRM difficulties.
Therefore, a marketing-driven CRM installation is identified by CRM operational and
analytical activities and procedures. They could, for instance, comprise segmentation,
relationship economics, customer requirements analysis, satisfaction and loyalty
measurements, and customer satisfaction and loyalty metrics. In retailing, these include
value proposition management, campaign management, channel management, referral
management, and loyalty management.
Operational CRM entails various tasks and procedures, including value proposition
management, campaign management, channel management, referral management, and
loyalty management. Not just that, but also understanding how vital customers are to
the business and how to cater to their diverse needs. When retailers can acquire the
needed shopper data with the help of a CRM solution, monitoring operations becomes
technically simple. They can use this information to align their campaigns in a relatively
256 focused and systematic manner.
For instance, if the retailer is aware of a customer who used their website to browse a Customer Relationship
Management (CRM)
particular product category or choose a specific service and then wants to return it, the
appropriate action will be taken against that item depending on the “reason for return”
and whether it is allowed under their return policy.
But exactly how a CRM process works? What are the steps involved in that?
A CRM process can be described as simple: the first step is to collect the customer’s
basic information, such as name, address, gender, and age. However, transaction data
such as date, time, item, value, etc., are crucial at every point of contact with the
customer. Information is frequently required to complete these data and produce a
meaningful correlation to the applications. Marketers employ these data and information
to track customer interests and preferences, which needs to be skilfully analysed.
Additionally, they make an effort to relate purchasing trends using transaction records.
CRM initiatives enable businesses to gather helpful client information.
The focus then shifts to understanding how to please them and determining how and
why customers connect with the company. CRM initiatives increase the interaction
between businesses and consumers by creating technical and non-technical
communication networks. The use of sophisticated modelling and data mining techniques,
as well as behaviour prediction and use of historical customer data to forecast future
behaviour. Making marketing decisions heavily relies on the tendency that a specific
type of customer is likely to purchase a particular product, as determined by product
affinity analysis, and that a particular type of customer frequently purchases certain
products along with other specific products, as determined by product propensity-to-
buy analysis. CRM data mining activities give retailers insights and knowledge about
their most valued consumers, which increases sales to the highest level possible. The
retailer will be able to build a strong relationship with the customer and subsequently
influence their purchasing decisions if they are provided with up-to-date information
by the store about loyalty programs and promotional offers.
By finding smaller, more homogeneous groups of customers, also known as customer
segments or sub-segments, CRM initiatives allow the company to further this process.
The retailer can make personalized contacts with customized offers that more closely
meet the demands of each subgroup after identifying the customer sub-segments and
understanding their wants.
Retailers have had a great deal of success gathering data at the customer level. By
tracking customer purchases and responses to marketing initiatives, it is possible to
acquire a sense of consumer attitudes, preferences, and expectations. Once a retailer
develops an engagement strategy, the CRM they employ should be capable of
recognizing the consumers to determine who is eligible for the various rewards, levels,
and advantages of a loyalty program. Long-term customers may also be rewarded
with points and prizes, encouraging them to remain loyal to the company. Customer
commitment will improve due to loyalty, boosting sales and profitability. For instance,
Tesco bases its marketing approach on its Loyalty Card, a crucial planning tool.
Although it’s frequently a top priority, rewarding customer loyalty is also important. A
retail CRM might be of the most significant assistance once a store has attracted a
customer and is prepared to concentrate on cultivating loyalty. Serving a broader
audience now requires being accessible through a variety of channels. Additionally,
retailers must be present where their customers are in the retail industry.
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Retail Operations
Management 16.10 BENEFITS OF USING CRM SOFTWARE IN
RETAIL STORES
It is certain and true that CRM software provides retailers with a centralized repository
to ensure that the entire communication channel operates efficiently. One needs to use
the information to improve, identify which customers the retailer needs to stay in touch
with, and ensure that essential customers don’t slip through the cracks. When they
continuously develop such data to address customer needs, complaints, and challenges
that they often confront, the accuracy gets better with time. Managing a retail chain of
any size is challenging where so many departments and employees work simultaneously.
As a result, cooperation and teamwork are crucial, which can only be done with an
effective CRM.
For an effective CRM strategy implementation, frontline store staff and other backend
employees’ participation are essential. It allows each person to update their task boards
and the customers they are working with, enabling them to understand and not cancel
a scheduled action and giving them a certain level of clarity. It aids in time management
and completing tasks with a due date. The foundation of CRM implementation is the
customer’s perception of value, which may be modified favorably or unfavourably by
the behaviour of the retail staff. Particularly for companies in the service sector like
retail, employee satisfaction substantially impacts customer satisfaction.

16.11 SOME WELL-KNOWN CRM SOFTWARE

IMPLEMENTED BY RETAILERS
16.11.1 Nutshell:
It is a full-featured sales and marketing solution that virtually any organization can use
because of its extensive feature set. The retailer’s front-end lead collection system can
be fully connected with Nutshell’s CRM, which also effortlessly adds new contacts
and opportunities to its top reporting and sales automation tools. This makes it simple
to manage customers throughout the customer acquisition process and access detailed
analytics information for the retailer’s entire operation.
The platform’s filtering capabilities make it stand out. Using tags and custom fields, one
can categorize and separate existing contacts in Nutshell. The interactive map feature
makes it easy to find all potential customers in a specific region and export them into a
segmented list with just one click. Since this tool connects directly to the retailer’s
CRM data, it is possible to understand each customer’s historical relationship thoroughly
and link marketing initiatives to sales results more quickly. Customer data will no longer
diverge between CRM and email marketing software. Nutshell Marketing also has an
optional email marketing automation package, enabling customers to create, deliver,
and track marketing emails and automatic drip campaigns.
Features of Nutshell:
Briefly outlines for the salespeople what they must do to advance each lead (along with
some helpful direction from the boss). Automated reminders help speed up the on
boarding of new sales agents by ensuring that each assignment is completed by the due
date. From the shopper’s pipeline stage, Nutshell’s potent personal email sequences
can be automatically activated. The algorithm is programmed to stop as soon as the
prospect responds. Nutshell ensures a good follow-up with the customers from the
258 retailer’s first interaction to the final email after closing the sale.
Nutshell enables sales managers and company leaders to precisely assess the state of Customer Relationship
Management (CRM)
their sales funnel and make focused improvements by establishing consistency in how
and when leads travel from stage to stage.
The broad view, an interactive tool for managing the sales pipeline, is a remarkable
feature of Nutshell. This platform allows dragging and dropping leads to the following
sales stage and marking leads as won, lost, or cancelled. It enables speedy identication
of what must be done next and provides for monitoring the state of the company’s
sales funnel in general.
The most common method of managing pipelines is list view. In this CRM, pipeline
leads can be viewed as rows and sorted by columns based on the lead’s age, stage,
condence, value, and other factors. Numerous software connectors provided by
Nutshell enable businesses to access all their data and manage their operations using
only one tool. Intercom, Livechat, and Zendesk are just a few of the software integrations
that Nutshell has created and proven to aid in the more effective operation of sales and
marketing teams.

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Retail Operations “Nutshell” enables search engine optimization (SEO) services to reach more high-
Management
value prospects and convert them into committed customers. With all the tools a business
needs to increase its traffic and online visibility, from keyword research to customized
content, it enables them to acquire a custom approach designed for a particular company.
Both consumers and businesses use search engines to discover goods, services, and
solutions to their problems. Retailers can reach their ideal customers with a search
engine optimization (SEO) strategy when actively looking for the retailer’s goods or
services. To rank higher than their rivals and increase their online visibility, expert SEO
services can help to optimize every section of the website for search engines. The title
tags, meta descriptions, URLs, internal links, and other on-page components of a
retailer’s website are all optimized with SEO management services.
By using SEO services to improve the website’s off-page details, businesses can draw
in reputable external links to help them develop their back link profile. The website’s
technical aspects might be improved with a faster page load time, making it simpler for
search engines to crawl, assisting with mobile device compatibility, and more. By
enhancing their internet rankings, retailers’ websites will appear more frequently in
search results, even if users don’t click on them. This implies that more individuals will
start identifying and linking the retailer company to the goods and services they’re
looking for online. The adaptable social media marketing services from Nutshell make
it possible to reach ideal customers where they spend their leisure time, helping to
keep the company at the front of their minds. The development, editing, and promotion
of unique, SEO-friendly material are handled by the Nutshell team of skilled copywriters
and editors using content marketing services. The support team may assist with all
retailers’ needs, including blog creation and video production for product or service
promotion. They help publish worthwhile, high-quality material that responds to the
audience’s inquiries and entices them to become committed customers.
16.11.2 Zoho CRM
This ia another software used by retailers to gather information from their websites,
automatically manage targeted email lists depending on user behaviour, and create
customized campaigns for customers and email lists. With the help of this potent mix,
firms may track and communicate with customers automatically based on how they
use the website, make purchases, and use other relevant services. With Zoho’s integrated
Google Ads interface, one can go one step further and monitor the effectiveness of
marketing campaigns right from the CRM.
In CRM, emails can be set to send at a specific time or at the ideal time to get in touch
with each contact. to reach an extensive consumer base, such as when mass-mailing
customized follow-up emails to customers of a retailer or business updates. Workflows
can include all these processes for a one-time setup. Even auto-responders can be
made to ensure that no client goes unanswered. Within the organization, the role of
CRM is very much vital. One may want their emails to be accessible to every user in
their CRM, or one may wish to keep them confidential and only make them visible to
a small number of key decision-makers, depending on the responsibilities of the CRM’s
users and the nature of their email exchanges.
To swiftly configure email-sharing rights for new employees or update them when
users change roles in the CRM system, Zoho CRM makes it simple to define the
email-sharing policy at the organizational level for each position and update the policy
for users in bulk. A typical store can integrate the email inbox with the CRM using the
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Zoho Sales Inbox. No matter what email a customer uses, SalesInbox arranges their Customer Relationship
Management (CRM)
communications following the CRM pipeline, allowing them to keep on top of the most
important deals. Drag and drop emails across the columns to add contacts or make
deals. Receive immediate notications when recipients open the emails and set reminders
to follow up once more if no response has been received.
It allows connecting the retailer’s social media accounts on platforms like Facebook,
Twitter, LinkedIn, and Instagram to be able to track brand-related interactions. The
business-relevant keywords may be searched using Zoho CRM, indicating whether
the accounts employing such terms are current customers, prospects, or brand-new
prospects. Then, to save these new contacts in the CRM database, one can set up
automatic lead creation, reply in real-time to posts, and reply in real-time. Each contact’s
social media interactions are kept, so it is possible to monitor how potential customers
feel about the company.
The company can use Zoho CRM software to ensure that problems like outdated
shipping addresses or past-due payments never come in the way of customer happiness.
The sales team at the retailer can access the data they require through a specic link
with Zoho Inventory. Eliminate the need to search through various apps or put the
customer on hold by getting immediate access to information such as order contents,
shipment status, and unpaid amounts. Retailers can continually provide their sales crew
with targets to inspire them.

16.11.3 Easy Territory Management by using Zoho CRM:

With the help of Zoho CRM’s sales performance tools, you can create dashboards
with unique perspectives of the pending, continuing, and achieved quotas. By making
forecasts based on territories or hierarchies, one may track how a region, product, or
team is performing. The sales representatives have access to forecast history once a
quota has been met to view previous aggregate quotas and transaction amounts. The
software enables to set of attainable objectives for the teams based on the aggregate
information from the predictions and gives the top achievers challenging goals. To
assist the sales staff in gaining knowledge that will guide their activities, Zoho CRM
enables retailers to categorize clients according to geographies, goods, or other pertinent
261
Retail Operations factors. Create a territory that automatically populates when new contacts are added
Management
that satisfy the rules by setting up rules based on nation, state, district, or product lines
whenever a connection is registered with an account. If retailers come across several
billing addresses or remote areas, they can manually add any associated contacts or
accounts.

16.11.4 AI-Powered Sales Assistant

Predicting which leads and deals might be most valuable to the retailer might be
challenging. Using actual data from Zia, their very own AI-powered sales assistant,
Zoho enables targeting these efforts. To calculate a probability score for each lead and
contract, she examines each encounter a shop has with its prospects, considering their
response time and the stage of their sales cycle. This gives the store a list of the leads
and deals most likely to result in sales, ranked according to priority.

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 Customer Relationship
16.12 MAJOR ISSUES AND PROBLEMS IN CRM Management (CRM)

While CRM can be a powerful tool for businesses to improve customer relationships
and drive growth and revenue, there are also some common issues and problems that
can arise when implementing CRM. Some of the major issues and problems in CRM
include:
1 Data quality: One of the biggest challenges in CRM is ensuring the quality of the
data that is collected and used. Poor data quality can lead to inaccurate insights,
ineffective marketing campaigns, and missed sales opportunities. It is important
for businesses to have processes in place to ensure data accuracy, completeness,
and consistency.
2 Integration: CRM systems often need to integrate with other business systems,
such as marketing automation, sales enablement, and customer support. Integrating
these systems can be challenging, particularly if they use different data structures
and formats. It is important for businesses to carefully plan and test integrations to
ensure that data is flowing correctly between systems.
3 User adoption: CRM systems can be complex and require significant training to
use effectively. Low user adoption can lead to poor data quality and limited insights,
as well as wasted investment in the CRM system. It is important for businesses to
provide training and support to users, and to design the CRM system with user
experience in mind.
4 Privacy and security: CRM systems often contain sensitive customer data, such as
personal information and purchase history. It is important for businesses to have
robust privacy and security policies in place to protect this data from unauthorized
access and misuse.
5 Cost: Implementing and maintaining a CRM system can be costly, particularly for
small and medium-sized businesses. It is important for businesses to carefully
evaluate the costs and benefits of implementing a CRM system, and to choose a
system that is appropriate for their needs and budget.
Overall, CRM can be a powerful tool for businesses to improve customer relationships
and drive growth and revenue. However, businesses must be aware of the common
issues and problems in CRM, and take steps to mitigate these risks in order to realize
the full potential of their CRM system

16.13 ROLE OF CRM AFFILIATION IN RETAILING

SECTOR
CRM (Customer Relationship Management) Affiliation plays a crucial role in the retailing
sector by helping businesses build strong relationships with customers and increase
customer loyalty. CRM Affiliation involves partnering with other businesses or
organizations to offer additional products or services to customers.
In the retailing sector, CRM Affiliation can take several forms, such as loyalty programs,
co-branding, and cross-selling. For example, a clothing retailer may partner with a
shoe retailer to offer discounts or special promotions to customers who purchase from
both stores. This encourages customers to return to both stores and increases their
overall spend.
263
Retail Operations The role of CRM Affiliation in retailing includes the following:
Management
1 Increasing customer loyalty: By offering additional products or services through
CRM Affiliation, businesses can increase customer loyalty and encourage repeat
purchases.
2 Driving sales: CRM Affiliation can help businesses drive sales by offering customers
incentives to purchase from multiple retailers or to purchase additional products
or services.
3 Improving customer experience: CRM Affiliation can improve the customer
experience by offering a wider range of products or services, making it more
convenient for customers to shop.
4 Building partnerships: CRM Affiliation can help businesses build partnerships with
other businesses or organizations, which can lead to new opportunities for growth
and expansion.
5 Differentiating from competitors: By offering unique CRM Affiliation programs,
businesses can differentiate themselves from competitors and attract new customers.
Overall, CRM Affiliation plays a significant role in the retailing sector by helping
businesses increase customer loyalty, drive sales, and improve the overall customer
experience. By building partnerships and offering additional products or services,
businesses can gain a competitive advantage in the marketplace and achieve long-term
success.

16.14 SUMMARY/CONCLUSION
However, implementing this CRM software need not necessarily lead to instantaneous
success. According to a new McKinsey report, retailers cannot recover their investments
in loyalty programs. This is primarily because less than 50% of customers increase
their spending after signing up for a loyalty program. Multiple conversations with the
academic community about the effectiveness of loyalty programs in retail have included
the practitioners’ conundrum. The main hurdles were the following elements: the calibre
of consumer data, coordinating people and procedures, the scarcity of qualified
professionals, and determining the timeliness of client requests. It might be challenging
to use the available data in the best way possible by employing the appropriate
technology, connecting customer information to consumer preferences, and obtaining
accurate real-time data. Through customer relationship management, it is possible to
understand the customers’ goals in a manner comparable to how the product or service
was initially presented to them. Another indicator of customer satisfaction is work ethic
pride, which typically inspires personnel to meet customer wants and expectations.
However, employee mishaps, delays in delivering goods or services, or other flaws
could harm a customer’s future interactions with the company. By identifying and fixing
these problems, CRM can improve customer efficiency ratios. This is because satisfied
consumers typically make more purchases than unsatisfied customers. There is a
consequent decrease in the relative cost per customer, which again results in positive
economics and profitability. Customer relationship management techniques that
encourage client retention can benefit a company. According to empirical data, it can
support an organization’s prosperity by promoting its financial health. CRM initiatives
must incorporate a customer-centric management strategy that recognizes and
264
categorizes profitable clients while promoting client satisfaction and loyalty. Both the Customer Relationship
Management (CRM)
company and the customers win from this. Due to its effectiveness, it enables the
effective use of labour and technological resources to meet even more consumer wants
and may thus serve a more extensive and better market.

16.15 SELF ASSESSMENT QUESTIONS

1. Do you feel that effective deployment and utilization of CRM software increase
customer retention? Explain in detail with any of the known CRM software.
2. Do you feel the CRM software used by organized retailers to target customers
could be deployed in mom-and-pop stores?
3. What is your opinion on the role of CRM software in omnichannel retail stores?
Do you think a retail revolution is possible with this customer data management
software?
4. What are a retailer’s basic expectations when investing in CRM software? Do
you think all retailers could reap the utmost benefit from it?
5. Explain the different components of typical CRM software. Quote examples
wherever required.

16.16 FURTHER READINGS

Behúnová, A., Behún, M., Knapčíková, L., & Zemanová, L. (2022, June). Relationship
Marketing: A Modern Marketing Strategy as a Tool to Increase the Competitiveness
of the Company in the Market. In 6th EAI International Conference on Management
of Manufacturing Systems (pp. 241-255). Cham: Springer International Publishing.
Chaturvedi, A., & Chaturvedi, M. (2022). Transforming CRM Through Artificial
Intelligence. In Adoption and Implementation of AI in Customer Relationship
Management (pp. 54-69). IGI Global.
Dibb, S., & Meadows, M. (2004). Relationship marketing and CRM: a financial services
case study. Journal of strategic marketing, 12(2), 111-125.
Luck, D., & Lancaster, G. (2003). E CRM: customer relationship marketing in the
hotel industry. Managerial Auditing Journal.
Maggon, M. (2022). A bibliometric analysis of Journal of Relationship Marketing (2002–
2019). Journal of Relationship Marketing, 21(4), 324-351.
Mitussis, D., O’Malley, L., & Patterson, M. (2006). Mapping the re engagement of
CRM with relationship marketing. European journal of Marketing, 40(5/6), 572-589.
Pearce, M. (2022). Customer Relationship Management.
Sheth, J. N. (2002). The future of relationship marketing. Journal of services
marketing, 16(7), 590-592.
Thaichon, P., & Ratten, V. (Eds.). (2020). Transforming relationship marketing: Strategies
and business models in the digital age. Routledge.

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