U N I T 3 : R E TA I L O P E R AT I O N S

CONTENTS
2

o Choice of Store location –

o Influencing Factors,

o Market area analysis – Trade area analysis – Rating

Plan method - Site evaluation.

o Retail Operations: Store Layout and visual

merchandising

o Store designing – Space planning, Retail Operations –

o Inventory management – Merchandise Management –

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Category Management.
 I N T R O D U C T I O N : S T O R E L O C AT I O N :
FA C T O R S A F F E C T I N G T H E
E S TA B L I S H M E N T O F A R E TA I L O U T L E T
-
 M A R K E T A R E A A N A LY S I S
In order to do that I recommend the
following plan:
1. Demographics and Segmentation
2. Target Market
3. Market Need
4. Competition
5. Barriers to Entry
6. Regulation
 T R A D E A R E A A N A LY S I S
Factors to be considered while analyzing trade
area:
1. Total size and density (demand and supply) of the
population.
2. Per capita disposable income.
3. Education level.
4. Family system (joint / nuclear).
5. Occupation (job / professional / own business).
6. Standard of living.
7. Age group distribution
8. Number of residents owning homes.
9. Number of manufactures, suppliers, wholesalers
available.
6

R AT I N G P L A N M E T H O D
O R L O C AT I O N A N A LY S I S .
INTERNAL FACTORS EXTERNAL
. FACTORS
o Facilities o . Political risk
o Feasibility o , governmental
o logistics regulations,
o labor o environmental
regulations
o community
o incentive
o trade zones.
7

S I T E E VA L U AT I O N
While evaluation the site, following are the prime
considerations
o ​• Size and characteristics of population.
o • Level of competition.
o • Access to transportation.
o • Availability of parking.
o • Attributes of nearby stores.
o • Property costs.
o • Length of agreement (if lease).
o • Population trends.
o • Legal restrictions.
S T O R E L AY O U T, D E S I G N
AND VISUAL
MERCHANDISING
 S T O R E L AY O U T,
DESIGN AND VISUAL
MERCHANDISING :
Fronta Ext. Parkin
ge & Display g
Entra space
nce Buildin Locatio
g n
architect
Health ure
Store Acces
&
design s
Safet
y

Store
‘them
e’
Targe Mercha
t ndi se
Custom Mix 4
ers
11
 Store Layout (and Traffic Flow)
• Conflicting objectives:

– Ease of finding merchandise versus varied and

interesting layout

– Giving customers adequate space to shop versus

use expensive space productively
 Free Flow Layout
• Free-Flow Layout is a type of store layout in
which fixtures and merchandise are grouped into
free-flowing patterns on the sales floor.

Advantages Disadvantages
– Allowance for browsing - Loitering encouraged
and wandering freely - Possible confusion
– Increased impulse - Waste of floor space
purchases - Cost
– Visual appeal - Difficulty of cleaning
– Flexibility
30
 Circulation: Free Flow

31
 Free-Flow Layout
•Fixtures and
merchandise grouped
into free-flowing
patterns on the sales
floor – no defined traffic
Storage, Receiving, Marketing pattern

•Works best in
Underwear Dressing Rooms small stores (under
5,000 square feet) in

Hats and Handbags

Accessories which customers

Tops
wish to browse
Stockings

Checkout counter
•Works best when
merchandise is of the
Casual Wear

same type, such as

Clearance Items
Pants

Tops
fashion apparel

Skirts and Dresses

•If there is a great
variety of merchandise,
Jeans

Feature Feature
fails to provide cues as
to where one
Open Display Window Open Display Window department stops and
another starts
 The Disney Store’s Effective Use
of the Free-Flow Design
• Approximately 250 million
consumers visit Disney’s
entertainment retail outlets each
year.
• New store designs showcase
merchandise in an engaging and
contemporary fashion, keeping
pace with evolving retail trends.
• Technological elements - including
a front-of-store media wall that
engages guests with Disney
programming, and interactive
kiosks-setting the stage for the
Disney Store in the 21st century.

33
 Grid Layout
Grid Layout is a type of store layout in which counters and fixtures are placed
in long rows or “runs,” usually at right angles, throughout the store.
• Efficient use of space
• Simple and predictable to navigate
• Focal points at aisle ends

Advantages Disadvantages
• Low cost •Plain and uninteresting
• Customer familiarity •Limited browsing
• Merchandise exposure •Stimulation of rushed
• Ease of cleaning shopping behavior
• Simplified security •Limited creativity in decor
• Possibility of self-service

34
 Circulation: Grid Layout

35
Grid (Straight)
Design •Best used in retail environments in
which majority of customers shop the
entire store

•Can be confusing and frustrating

because it is difficult to see over the
fixtures to other merchandise

•Should be employed carefully;

forcing customers to back of large
store may frustrate and cause them to
look elsewhere

•Most familiar examples for

supermarkets and pharmacies
 Loop Layout
• Loop Layout is a type of store layout in which a
major customer aisle begins at the entrance, loops
through the store, usually in the shape of a circle,
square, ar rectangle, and then returns the customer
the front of the store.
• Advantages
• Exposes customers to the greatest amount of
merchandise

37
 Circulation: Loop Layout

38
Curving/Loop (Racetrack) Design
•Major customer aisle(s) begins at
entrance, loops through the store
(usually in shape of circle, square or
rectangle) and returns customer to
front of store

•Exposes shoppers to the greatest

possible amount of merchandise by
encouraging browsing and cross-
shopping
 Racetrack Layout
Major and minor loops with multiple entrances & multiple
sight lines, draws shopper around the store, encourages
exploration, impulse buying

Location of departments men’s vs. women’s

impulse goods – near entrances, to the right, escalators, point-of-sale
demand/destination – upper floors, back corners; complementary – adjacent
Display areas – bulk-of-stock + feature areas (walls, promotional areas, point- of-sale areas,
feature fixtures, windows)
Fixtures– feature fixtures – four-way, free-standing/mannequins, glass cases
+ gondolas, rounders & straight racks for bulk-of-stock & sale merchandise
 Spine Layout
• Spine Layout is a type of store layout in which
a single main aisle runs from the front to the
back of the store, transporting customers in
both directions, and where on either side of
this spine, merchandise departments using
either a free-flow or grid pattern branch off
toward the back aisle walls.

42
Spine Layout
• Variation of grid, loop and free-form layouts

•Based on single main aisle running from

the front to the back of the store
(transporting customers in both directions)

•On either side of spine, merchandise

departments branch off toward the back or
side walls

•Heavily used by medium-sized specialty

stores ranging from 2,000 – 10,000 square feet

•In fashion stores the spine is often subtly

offset by a change in floor coloring or surface
and is not perceived as an aisle
 FOR FEW MORE
L AY O U T S
SOURCES : https://www.smartsheet.com/store-layout
 Visual Merchandising and Store Layout
• Consider the following questions:
– Is your store layout successful?
– Does it create interest and allow your customers to
move through your store in a manner that is
natural, comfortable and intuitive?
– Does it foster longer shop times and
encourage browsing?
– Does it pull customers through the store?
– Does the store layout introduce your shoppers to
large quantities of your featured merchandise?
– Do the lines of sight increase your
customers’ perception of your store’s size?
 Visual Merchandising and Store Layout
• Communication is the essence of retail.
• For example, you communicate your offering, you
communicate your pricing, and you communicate a certain
level of customer service.
• But successful store layout takes communication to a whole
other level.
• A successful store layout communicates that you are
customer friendly.
• A store layout can communicate that you want your
customer’s to linger longer in your store.
• A successful store layout can communicate that your store
is senior friendly.
• Can you think of more issues which are communicated?
30 5 M O S T I M P O R TA N T
ELEMENTS OF VISUAL
MERCHANDISING:
o Remember, the COLOR is king.

o Create a focal point

o tell a story.

o Expose a customer TO the maximum

amount of merchandise

o Use empty space wisely.

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o Background:
o XYZ Fashion Retailers is a mid-sized apparel store chain with 50
outlets across the country. The company has been operating
successfully for 10 years and has a strong customer base, known
for offering trendy and affordable clothing. However, XYZ has
noticed an increasing number of out of stock for its best-selling
items and overstock situations for others, causing missed sales
opportunities and increased holding costs.
32

Step 1: Defining Merchandise Policy

•XYZ defines its merchandise policy based on its target
customers—young adults between 18 and 35 who prioritize
fashion trends and affordability.
•The company repositions its stores to maintain an image of
“trendy yet affordable,” focusing on customer service and
fast fashion.
•They aim to boost sales by 15% in the next financial year
while maintaining a 30% gross margin.
33

Step 2: Collecting Historical Information

•XYZ analyzes historical sales data from the past 3 years,
identifying which items consistently sell out and which ones
remain on the shelves for too long.
•They gather information about past purchase orders, stock
levels, and sales trends during peak seasons (e.g., holidays,
back-to-school).
•They note that summer collections are popular, while winter
coats have been overstocked in certain regions.
34
Step 3: Identifying Components of Planning
1.Customers:
1. XYZ identifies loyal customers through its loyalty program. These
customers usually purchase casual summer wear and accessories but tend
to avoid expensive, formal clothing.
2.Departments:
1. The company decides to focus more on the summer casual section, reduce
the inventory of formal wear, and create sub-departments like athleisure
and accessories.
3.Vendors:
1. Historical data shows that Vendor A consistently delivers trendy items on
time, while Vendor B often delays shipments. XYZ decides to shift more
orders to Vendor A.
4.Current Trends:
1. By analyzing trade publications and competitors, XYZ learns that eco-
friendly fashion is a growing trend. They decide to introduce a new
sustainable clothing line.
5.Advertising:
1. XYZ pairs merchandise planning with advertising, planning promotions
around the new eco-friendly line. Last year’s “Summer Sale” promotion was
very successful, so they allocate a larger ad budget for this year’s summer
promotions.
35

Step 4: Creating a Long-Term Plan

•XYZ creates a merchandise plan for the next 6 months, forecasting a 20%
increase in summer casual wear sales, a 10% decrease in formal wear inventory,
and a new eco-friendly clothing line rollout.
•They set a purchasing budget based on these predictions and adjust their
inventory management system to reduce stockouts for popular items and
minimize overstock.
36
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38

1. Category Definition
•This involves defining the scope and boundaries of the
category. It answers the question: What products or
services fall under this category? The goal is to group
items that are related and could benefit from a cohesive
strategy.

2. Assess the Role of the Category

•Once the category is defined, its role in the overall
business strategy is assessed. Is this a profit-driving
category? Is it essential for customer satisfaction? This
step helps determine the priority and focus of the
category within the business.
39

3. Evaluate Performance
•Performance analysis looks at the historical and current
metrics of the category, such as sales, profitability, market
share, and customer trends. This gives insight into how well
the category is performing and where improvements can be
made.

4. Set Objectives & Targets

•After evaluating the performance, the next step is to set
measurable objectives for the category. These could include
increasing sales, improving customer satisfaction, or
reducing costs. Targets provide a clear goal for the
category's future.
40

5. Devise Strategies
•Strategies are developed to achieve the set
objectives. This could involve pricing adjustments,
promotional activities, product placement, supplier
negotiations, or introducing new products.
6. Set Category Tactics
•Tactics are the specific actions that will support
the strategies. For example, implementing
discounts, shelf placement optimization, launching
marketing campaigns, or adjusting stock levels are
tactical actions that align with the strategies.
41

7. Implementation
•The strategies and tactics are put into action in
this phase. Coordination among different teams
(marketing, supply chain, procurement) is crucial
for successful implementation.
8. Review
•The final step involves reviewing the outcomes
and measuring them against the objectives and
targets set earlier. Continuous improvement is
important, and this step may lead to adjustments
in the strategy for better performance.
42

U N I T 4 : R E TA I L M A R K E T I N G M I X
Product: Decisions Related to Selection of Goods (Merchandise Management Revisited)
Decisions Related to Delivery of Service.

Pricing: Influencing Factors – Approaches to Pricing – Price Sensitivity - Value Pricing –

Markdown Pricing.

Place: Supply Channel-SCM Principles – Retail Logistics – Computerized Replenishment

System- Corporate Replenishment Policies.

Promotion: Setting objectives – Communication Effects - Promotional Mix

43
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DECISION RELATED TO SELECTION OF GOODS

(PRODUCT)
1. Developing Merchandise Assortment Plans: Better assortment planning at the
store level.
2. Increasing Store Promotion Profitability: Enhancing promotion effectiveness to
boost profitability.
3. Improving Turns: Maximizing stock turnover rates.
4. Better Pricing Decisions: Optimizing pricing for improved profit margins.
5. Cost & Profitability Analysis: Determining the cost and profitability of each
product category.
6. Setting Merchandise Bud gets & Plans: Establishing budgets and plans with
appropriate methods and considerations.
47

7.Control Techniques:
1. Break-even analysis.
2. Economic Order Quantity (EOQ).
3. Re-order levels and Just-in-Time (JIT) techniques.
4. Cyclical provisions and stock control procedures.
5. Rate of stock turn and Direct Product Profitability (DPP)
8.Stock-Holding & Stock-Taking Methods:
6. Appraisal of stock-holding methods.
7. Analysis and control of stock losses.
9.Principles of Stock Presentation:
8. Product positioning and management.
10.Information Technology in Merchandise Management:
• 1.Application of IT to optimize merchandise management.
48

11.Branch & Department Control:

• Profitability control and evaluation across branches and departments.
12.Supplier Selection:
• Assessment and selection of suppliers based on merchandise and location.
13.Distribution Channel Evaluation:
• Selection and evaluation of distribution channels.
Information Technology in Selection & Ordering:
Application of IT to improve the selection and ordering process.
49

Pricing – Influencing factors – approaches to pricing – price

sensitivity - Value pricing – Markdown pricing.

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50 INFLUENCING FACTORS
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Markdown pricing
Markdown pricing is a common pricing strategy in the ecommerce and retail
industries. It involves reducing the price of a product to clear out stock, make room for
new inventory, or to boost sales. Markdown pricing is a valuable tool for businesses to
manage inventory, boost sales, and increase profits.
58

Place: Supply Channel-SCM Principles – Retail Logistics –

Computerized Replenishment System- Corporate
Replenishment Policies.

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59

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 Retail Supply Chain
60
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Computerized Replenishment System- IN RETAIL

A computerized replenishment system in retail is a technology-driven

approach to managing inventory and ensuring that products are
restocked at the right time and in the right quantities. This
system automates the process of monitoring inventory levels, sales
trends, and order placements, making it a crucial tool for efficient
supply chain management and enhanced customer satisfaction in
retail settings.
62
63 Setting Promotional Strategies
64

SELF STUDY TOPICS

• HUMAN RESOURSES AND ITS

FUNCTIONS
• RECRUITMENT AND TRAINING
• TYPES PERFORMANCE APPRAISAL.
65

Unit 5: IMPACT OF IT IN RETAILING

Non store retailing (E tailing) The impact of Information
Technology in retailing - Integrated systems and networking
– EDI – Bar coding – Electronic article surveillance –
Electronic shelf labels – customer database management
system. Legal aspects in retailing. Social issues in retailing.
Ethical issues in retailing.

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66

The impact
of
Informatio
n
Technology
in retailing
67
Integrated systems and networking

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68
Legal aspects in retailing
1. Consumer Protection Act,
2019
2. Shops and Establishments Act
3. Legal Metrology Act, 2009
4. Goods and Services Tax (GST)
Act, 2017
5. Competition Act, 2002
6. Food Safety and Standards
Act, 2006
7. Foreign Direct Investment
(FDI)
8. Policy Information
Technology Act, 2000
9. Intellectual Property Rights
(IPR)
10. Laws Drugs and Cosmetics
Act, 1940
11. Employee Provident Fund
(EPF) and Miscellaneous
Provisions Act, 1952
12. Contract Labour (Regulation
and Abolition) Act, 1970
13. Environmental Protection Act,
1986
69

Social issues in retailing

70

SELF STUDY:

Ethical Issues in Retailing

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