Retail Management

Module 3: Retail operations:

• Retail operations – meaning, components of retail store
operations – (2M/5M/15M)
• Store location, Factors influencing location of store –
(2M/5M)
• Concept of Market area Analysis (2M/5M)
• Trade Area Analysis – Factors influencing trade area
analysis (2M/5M) Factor rating method(location of
stores) – steps involved – (2M/5M)
• Site evaluation in retail management – meaning and
factors influencing selection of site(2M)
• Store Layout – meaning and classification (2M/5M)
• Visual Merchandising – meaning, types and benefits –
(2M/5M) Store designing – meaning and objectives(2M)
• Space planning – meaning and benefits(2M/5M)
• Inventory management- meaning only(2M)
• Merchandise Management (meaning only – 2M)
• Category management (meaning only – 2M)
 RETAIL OPERATIONS
Introduction
In a traditional brick-and-mortar retail store, customers visit a
physical location, browse through merchandise, and make purchases
in person. These stores can range from small boutiques to large
department stores. They typically have a physical storefront, shelves
or displays to showcase products, and staff to assist customers.
Store location and retail operations are two fundamental components
of the retail industry that significantly impact a retailer’s success. The
choice of where to establish a retail store and how to operate it
efficiently are critical decisions that can make or break a business.

Meaning and Definition different terms

Meaning of Retail Operations

Retail operation refers to “the processes and activities involved in
running a retail business which establishes strong relationships with
suppliers, manages inventory levels, and optimizes logistics processes.
Well-trained and engaged employees are essential to the success of
retail operation. ”

Meaning and Definition of Retail Store

A store is “a building or part of a building where things are sold.” In
other words, a store refers to “a large shop, selling the variety of
goods”.
A retail store refers to “a place of business that sells small quantities
of items directly to customers. Store retailers have fixed point of sale

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sites (i.e., retail stores) where they display and sell products to the
general public.”
An online retail store, also known as an e-commerce store, operates
primarily on the internet. Customers browse the store’s website,
select products or services, and make purchases electronically. Online
retailers often use websites and digital marketing to reach a wider
audience and may offer various shipping or delivery options to get
products to customers.
A retail store, often simply referred to as a "store," is a physical or
online business establishment where goods or services are offered for
sale to consumers. These establishments are commonly found in
various industries, including clothing, electronics, groceries, home
goods, and many others. Retail stores are the final point in the supply
chain where products or services are made available to individual
customers for purchase.

Meaning of Location of Store

The term “location of store” refers to “the specific geographic or
physical position where a retail store or business establishment is
situated. Store location refers to any retailer. Store location or dealer
store location, as applicable. The customer’s store location is where
expendable parts are stored after inspection and receiving but before
being issued.”

Factors Influencing Location of Store

The following are some key factors influencing on the location of a
store:

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 1. Customer and the Population: The person who is interested in
doing the retail business, has to do considerable research about
the area before choosing a city or state in which to operate a
retail business. He can learn about the population of the area,
income classes, and median age from any of these sources. He
already knows who is his customers are, so select a location near
where they live, work, and shop.
2. Personal Factors: If a businessman intends to work in their store,
they need to consider work-life balance issues such as the
distance between the store and their home, as well as other
personal considerations. The benefits of becoming the own boss
of self may be obscured if he spends so much time commuting to
and from work.
3. Foot Traffic: A prime location is often characterized by high
levels of foot traffic, which can lead to more potential customers
entering the store.
4. Accessibility and Visibility: The store’s accessibility to customers
is crucial. It should be easily reachable by various modes of
transportation, such as cars, public transit, and pedestrians.
Ample parking space may also be important, especially for brick-
and-mortar stores.
5. Competitor Presence: Retailers may want to consider the
proximity of competitors. Being located near competitors
businesses can be advantageous, but being too close to direct
competitors can be challenging.
6. Location Cost: The cost of leasing or purchasing a location is a
significant factor in the decision. Prime locations in popular
areas may come with higher rental or property costs, which can
impact the store’s profitability.
7. Zoning and Regulations: Local zoning laws and regulations can
influence where a store can be located and what type of

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 activities it can engage in. Retailers must comply with these
regulations.
8. Market Research: Conducting thorough market research can
help retailers Identify the best location for their target market.
This may involve analyzing consumer behavior, trends, and
preferences in a specific area.
9. Infrastructure and Utilities: Access to essential infrastructure,
such as electricity, water, transportation and internet
connectivity, is crucial for the operation of a store
10. Future Growth Potential: Retailers may also consider the
future growth potential of a location. Retailer has to check
whether the area expected to see an increase in population or
economic development that could benefit the business in the
long-run.
11. Security and Safety: The safety of the location for both
customers and employees is a significant concern. Retailers may
assess crime rates and security measures in the area.
12. Cultural and Social Factors: The cultural and social
dynamics of an area can also impact the store’s success.
Understanding the local culture and community values can help
retailers tailor their offerings and marketing strategies.
The location of a store is a complex decision influenced by a
combination of factors, including demographics, accessibility, cost,
competition, market demand, and regulatory considerations.
Successful retailers carefully evaluate these factors to select the most
suitable location for their business.

Market Area Analysis

A market area is a surface that indicates the demand or supply
offered at a certain location. It encompasses the places where a

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factory’s products are sent; it is the tributary region from which a
retail outlet draws customers. Market area analysis is essential in
deciding the best location for a retail outlet. It comprises a thorough
evaluation of many aspects in order to choose the most suitable
location for a retail store.

Key components of Market Area Analysis

The following are some of the key components of market area
analysis:

1. Geographic Scope: Determine the primary and secondary market

areas. The primary market area is the core area from which a
retailer derives the majority of its customers, while the
secondary market area represents broader region that
contributes to sales but to a lesser extent.
2. Demographics: Collect and analyze demographic data for the
market area, such as population size, age distribution, income
levels, and ethnicity. This data helps retailers tailor their product
offerings and marketing strategies to the local population’s
preferences.
3. Competition Analysis: Identify competitors in the market area,
their strengths, weaknesses, and market share. This information
helps retailers understand their competitive position and
develop strategies to differentiate themselves.
4. Economic Factors: Consider economic indicators like
unemployment rates, disposable income levels, and overall
economic health to gauge the purchasing power of the market
area.

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 5. Market Trends: Stay updated on trends in consumer behaviour,
shopping habits, and industry-specific developments that may
impact the retail business.

Trade Area Analysis

Retail trade area analysis refers to “a process that a business uses to
attempt to envision and understand where their customers are
coming from and who they is. This involves understanding how many
potential customers exist in an area, what their demographics are,
and how much competition there is from other businesses.”
Trade area analysis is a critical component of retail and location-based
businesses’ strategic planning. It involves the examination and
understanding of the geographic area from which a particular
establishment or store draws its customers and generates sales. Trade
area analysis helps businesses make informed decisions about store
performance, marketing strategies, and expansion plans.

Factors influencing Trade Areas

Trade area analysis should be done on a regular basis to provide
crucial parameters for increasing sales and marketing success. When a
retailer adds additional retailers to his network, the trading area of
surrounding stores may changes.
Changes in product offerings will impact population and demographic
trends, the presence of competitors, changes to highways and roads,
and the development of additional businesses that attract people to
the location.
Á trade area study typically consists of:
a) Mapping present customers in relation to store locations.

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 b) Calculating driving distances and times from customers to retail
locations.
c) Identifying all variables that define and influence trading areas.
d) Creating a model to anticipate trade regions around new sites.
e) Using the data as input for determining market-potential,
customer profiling, site selection, or focused marketing
decisions.

Factor Rating Method

The Factor Rating Method refers to “a tool used to evaluate suppliers.
It involves rating suppliers on a number of factors, such as quality,
delivery, price, and service. The ratings are then used to identify the
best supplier for a particular product or service.”
The factor rating approach I is one of the most extensively used
methods for location analysis. This strategy entails determining the
relevant aspects influencing the location decision, such as labor
availability, land costs, taxes, infrastructure, market access, and
quality of life.

Steps in Factor Rating Method

The factor rating method consists of following six steps:
a) Determine relevant and important factors.
b) Assign a weight to each factor, with all weights totaling 1.00.
c) Determine a common scale for all factors, usually 0 to 100.
d) Score each alternative.
e) Adjust score using weights (multiply factor weight by score
factor); add up scores for each alternative.
f) The alternative with the highest score is considered the best
option.

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 g) Minimum scores may be established to set a particular standard,
though this is not necessary.

Site Evaluation
Site evaluation means “the practice of investigating, evaluating and
reporting basic soil and site conditions which apply to the on site
wastewater treatment and disposal system type and design criteria.”
A retailer must analyze each potential location and individual site on
all attributes in order to arrive at an overall rating for the location and
the specific site. The table contains a checklist of elements that must
be checked for both the general location and the individual site.

Stores Layout
Store layout refers to “the plan of a store’s floor area and the
arrangement of things within that store are referred to as store
layout.” The strategic use of space in a retail store layout whether
physical or digital, influences the consumer experience.
Store layout is also known as a layout design or store design. A retail
store layout is a term used to describe “how retailers set up their
merchandise, product displays and fixtures in a store. Because the
way customers interact with products affects their purchase
behaviours, a retail store layout involves strategically using the space
available to influence the customer experience.”

Types of Store Layout

There is no right or wrong way to layout the retail store, but it is
necessary to consider target customers of the business. Store layouts
are designed to influence customer behaviour and create a pleasant

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shopping experience. The following are some common types of store
layouts discussed as below:
1. Grid Layout: The grid-layout is a traditional form of store layout,
in which the counters and fixtures are placed in long rows or
runs. A grid layout is a common type of store layout that
organizes the store’s interior in a grid- like pattern with long,
parallel aisles and shelving or displays on both sides. This layout
is characterized by its straightforward and efficient design,
making it easy for customers to navigate and locate products.
2. Loop or Race track or Perimeter Layout: A loop layout, also
known as a racetrack or perimeter layout, is a type of store
layout where the main walkways form a continuous loop around
the store’s perimeter. This layout is characterized by its use of a
circular or looped pathway that encourages shoppers to move
around the entire store, passing most of the merchandise on
display.
3. Free-flow Layout: A free-flow layout is a type of store layout that
lacks a fixed or structured design. Unlike grid or loop layouts,
which have organized aisles and pathways, a free-flow layout
embraces a more open and flexible arrangement. In other
words, products are organized asymmetrically in free form. It
promotes free movement and is frequently utilized in
department stores to encourage customers to walk around and
shop.
4. Angular Layout: A more suitable term for angular store layout
would be “curved store layout.” The term “angular” can be
deceiving because this store layout contains rounded product
displays, curved walls and corners, and other curved store
fixtures to keep customers flowing. This retail layout’s free-
standing product displays develop an image of higher-quality
items, making it perfect for luxury retailers.

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 5. Straight Layout: A straight layout, also known as a straight-line
layout or axial layout, is a straightforward and simple store
layout design in which the main aisles run in a straight line from
the store’s entrance to its rear. This type of layout is
characterized by its minimalistic and efficient structure. Straight
layouts are commonly used in various types of retail
establishments, including convenience stores, smaller grocery
stores, and specialty shops where efficiency and quick shopping
are prioritized.
6. Mixed Layout: A mixed store layout, as the name suggests,
combines elements from various other store layout types to
create a unique and customized shopping environment. In other
words, a dynamic mix of diagonal, straight, and angular store
layouts can help you create a compelling in-store experience
where customers naturally flow from one area to another. This
approach allows retailers to adapt their store design to the
specific needs of their business, their target audience, and the
types of products they sell.

Visual Merchandising
Visual merchandising is the art of exhibiting products in an outlet
store to increase sales and attract customers’ attention. Products are
displayed in a way that highlights their attributes and qualities.
Everything, which customers see inside and outside of retail business
is referred to as visual merchandising. Visual merchandising is a
marketing and retail strategy that focuses on enhancing the visual
appeal of a retail environment to attract customers, encourage
purchasing, and create a memorable shopping experience.

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Meaning of Visual Merchandising
Visual merchandising refers to “a marketing practice that uses floor
plans, colour, lighting, displays, technology, and other elements to
attract customer attention. Its ultimate purpose is to use the retail
space to generate more sales.”

Benefits of Visual Merchandising

The visual merchandising is very useful for retailers to attract the
customers and other benefits are presented below:
1. Increased Sales: Effective visual merchandising can lead to
increased sales by attracting attention to products and
encouraging impulse purchases.
2. Brand Identity: It helps reinforce a brand’s identity and
personality, creating a consistent and memorable shopping
experience.
3. Improved Customer Experience: Visual merchandising enhances
the overall shopping experience, making it more enjoyable and
engaging for customers.
4. Competitive Advantage: Unique and creative visual displays can
set a retailer apart from competitors, making the store more
attractive to shoppers.
5. Better Product Showcase: Properly merchandised products are
more likely to be noticed and appreciated by customers, leading
to increased sales of specific items.
6. Clear Communication: Signage and displays convey important
information, such as prices, promotions, and product features,
effectively communicating with customers.

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 7. Enhanced Store Traffic: Eye-catching displays and window
designs can draw in foot traffic, increasing the number of
potential customers.

Store Design
Store design, or retail store design, comprises all aspects of store
design, from store façade, fascia, and signage to interior elements
such as furnishings, merchandising, display, lighting, graphic design,
point of sale, and décor. In simple words, store design or layout
design, refers to how retailers arrange product displays, fixtures, and
products in-store.

Meaning of Store Design

Store design refers to “the process of planning, organizing, and
arranging the objectives physical layout, aesthetics, and functionality
of a retail or commercial space. It involves creating an environment
that is visually appealing, functional, and conducive to achieving
specific business objectives.”

Objectives of Store Design

The main objectives of store design are to enhance the overall
shopping experience for customers, ultimately increase sales and
profitability. The following are the objectives of store design
discussed below:
1. Attracting Customers: The primary goal of a store design is to
attract potential customers into the store. This is achieved
through eye-catching storefronts signage, and exterior
aesthetics that grab the attention of passer-by.

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 2. Creating a Memorable Experience: Store design aims to create a
memorable and positive shopping experience for customers.
This includes factors such as interior design, lighting, music, and
overall ambiance, all of which can influence how customers
perceive the brand and their willingness to return.
3. Optimizing Space: Efficient space utilization is crucial in store
design. The layout should maximize the use of available space to
showcase products effectively and allow for smooth customer
flow. This can lead to increased sales and reduced congestion.
4. Brand Identity: Store design should reflect and reinforce the
brand’s identity and values. The design elements, colour
schemes, and overall aesthetics should align with the brand
image, creating a consistent and recognizable identity.
5. Customer Engagement: Store design can encourage customer
engagement and interaction. This includes the arrangement of
interactive displays, product demonstrations, and customer
service areas to enhance the shopping experience and build
relationships with customers.
6. Ease of Navigation: The store layout should be intuitive and
make it easy for customers to find what they are looking for.
This reduces frustration and enhances the overall shopping
experience.
7. Loss Prevention: Store design also considers security and loss
prevention. It involves the placement of security cameras,
mirrors, and anti-theft, measures to deter shoplifting and ensure
a safe shopping environment.

Space Planning
The process of designing a retail store layout that influences a
customer’s shopping experience is referred to as retail space planning.

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In other words, space planning refers to the strategic and systematic
process of designing and organizing the physical layout and interior
arrangement of a retail or commercial space.

Meaning of Space Planning

Space planning refers to “the process of designing and organizing
interior spaces to effectively utilize them for their intended purpose.
It involves arranging furniture, equipment, and other elements within
a space to maximize functionality, aesthetics, and efficiency. Space
planning is crucial in various settings, including homes, offices, retail
spaces, healthcare facilities, and more.”

Benefits of Space Planning

1. Efficient Space Utilization: Space planning ensures that the
available space is used efficiently to showcase products,
facilitate customer flow, and minimize congestion.
2. Improved Customer Experience: A well-planned store layout and
interior design can create an inviting and easy-to-navigate
shopping environment.
3. Enhanced Merchandising: Space planning involves strategically
placing products and displays to attract customers’ attention
and encourage purchase.
4. Brand Consistency: The layout, design, and overall aesthetics of
the store should align with the brand’s identity.
5. Increased Sales and Profitability: Effective planning can lead to
increased sales by optimizing product placement, cross-selling
opportunities, and customer engagement.
6. Inventory Management: Space planning plays a role in inventory
management by determining where and how products are

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 displayed and stored within the store. This can help prevent
overstocking or under stocking issues.
7. Safety and Accessibility: Store planning should also consider
safety and accessibility aspects. Proper aisle width, emergency
exits, and accessibility for customers with disabilities are crucial
considerations.

Inventory Management
Meaning and Definition of Inventory Management
Inventory management in business refers to “the processes of
handling orders, manufacturing, storing, and selling raw materials and
finished goods. It ensures that the appropriate commodities arrive in
the right quantity, at the right time, and at the right price.”
In other words, “the process of ordering, storing, using, and selling a
company’s inventory is referred to as inventory management. This
comprises raw material, component, and finished product
management, as well as the warehousing and processing of such
commodities.”

Merchandise Management
Merchandise management is the process through which every retailer
plans and controls the inventory of their retail store. It is the process
by which a retailer decides which items to keep in their store, how
much of the item to keep on hand to meet customer demand, where
the products should be displayed in the store to increase sales, and
how to price these items to maximize sales and profits.

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Meaning and Definition of Merchandising Management
Merchandising Management is “a business procedure in which
retailers assess consumer preferences to determine what things to
carry and how to display the products in the store. When retailers
efficiently manage their businesses merchandise, they can attract
customers and improve sales.”

Category Management
Category Management is “the process of managing retail businesses
that merchandise category results rather than individual brand or
model contributions. It groups retailer efforts (promotional, price, and
display) into categories with the goal of analyzing financial and
marketing performance separately.”
In other words, a Category Management is “an arrangement of goods
that a consumer considers to be appropriate alternatives to one
another. Goods are classified based on commonalities in consumer
likes, preferences, liking, and disliking, such as junk food, barbeque,
razors, burgers, baked confectionery, sweets, and so on.

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