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Retail management

S
Shashankdiv

This document discusses distribution and channels of distribution. It defines distribution as bringing goods from manufacturers to consumers through a series of operations. Distribution involves transportation, warehousing, and other logistics functions. Common channels of distribution include manufacturers selling directly to consumers or through retailers, wholesalers, agents, etc. Wholesalers buy large quantities from producers and sell smaller quantities to retailers. Retailers sell directly to end consumers in smaller quantities. Franchising allows entrepreneurs to use an established brand name and business model in exchange for fees.

Marketing
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Distribution & Retail Management - Prof. Shashank Divekar
DISTRIBUTION Distribution can be defined as an operation, or a series of operations, which physically bring goods manufactured or produced by any particular manufacturer into the hands of the final consumer or user. Distribution is an integral part of marketing. Its function is to distribute or sub-divide the total product of a manufacturer on a geographical basis to various specific markets. Distribution is estimated to account for one-quarter of the price of the consumer goods people buy. Distribution creates time utility and space utility.
DISTRIBUTION Market Logistics Objectives “Getting the right goods at the right place at the right time.. .. At the least cost”.
DISTRIBUTION Market Logistics Primary Activities Secondary Activities 1. Transportation 2. Warehousing 3. Order Processing 4. Inventory Maintenance 5. Product Packaging 6. Product Handling 7. Acquisition 8. Product Scheduling 9. Information Maintenance
CHANNELS OF DISTRIBUTION A Distribution channel is a chain of people and/ or entities involved in the transfer of title or ownership, as the product moves from the producer to the end-consumer. A path through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them that flow in the opposite direction (from consumer to the vendor). The structure of intra-company organisation units and extra- company agents, dealers, wholesalers and retailers through which a commodity, product or service is marketed. - The American Marketing Association
Retailer : The retail outlet distributes the product to the consumer / end-user, for personal, non-business use. Maintains limited stock of goods for sale. Wholesaler : Performs all activities involved in selling goods and services to those who buy for re-sale or business use. Maintains large stocks of goods for distribution. Agent : Is usually a direct representative of the company in the market. He approaches customers, negotiates and closes deals with customers on behalf of the company. Agents rarely stock goods with themselves. CHANNELS OF DISTRIBUTION C&FAs/ CSAs : This category is also known as ‘Facilitators’. C&FAs (Carrying & Forwarding Agents) carry the goods physically but do not pay for it, while CSAs (Consignment Selling Agents) act as C&FA but also perform the selling function and remit the collections to the company.
PHYSICAL DISTRIBUTION FUNCTIONS : 1. Breaking Bulk : Buying in large quantities and selling in small quantities - Reduces costs for both manufacturers as well as buyers. 2. Creating Bulk : Intermediary works as an ‘assembler’. Buys in small quantities and accumulates bulk for the buyer. 3. Creating Assortments : Creation of assortments of merchandise that would otherwise not be available. Offers a variety of products to the buyer. 4. Reducing transactions : The no. of necessary transactions to accomplish the exchanges necessary for economic activity is brought down substantially. 5. Transportation and storage : Intermediaries carry goods and also provide regional and local storage. CHANNELS OF DISTRIBUTION
Manufacturer/ Producer 1 Wholesaler Manufacturer’s Chain Stores Retailer Manufacturer’s Branch Offices Consumer CHANNELS OF DISTRIBUTION
TYPICAL CHANNELS OF DISTRIBUTION For Consumer Goods & Services : Manufacturer Consumer Manufacturer Retailer Consumer Manufacturer Wholesaler Retailer Consumer Manufacturer Agent Consumer CHANNELS OF DISTRIBUTION
Functions of Marketing Channels 1.Provide Distribution Efficiency Thereby leaving the manufacturer free to concentrate on other activities. 2. Salesmanship 3. Assist implementation of a Price Mix 4. Physical distribution & Financing 5. Merchandising 6. Market Intelligence 7. Demand Generation 8. Managing Various Flows in Distribution Physical, title, risk, negotiation, payments and information flow CHANNELS OF DISTRIBUTION
Designing a Physical Distribution System • Articulating distribution objectives • Understand customer expectations in product delivery • Optimising costs • Keeping the system flexible. • Understand competitors distribution policies CHANNELS OF DISTRIBUTION •Specifying the minimum service level desired in product delivery •Evaluating channel alternatives
CHANNELS OF DISTRIBUTION WHOLESALING Wholesaling involves sale and distribution of goods to users other than end consumers. Wholesaling involves selling merchandise to retailers, other wholesalers and merchants, or to industrial, commercial and institutional users. Wholesaling often occurs when large quantities of goods are re-assembled, sorted, then repackaged, and distributed in smaller lots, at a cost significantly lower than the average retail price. Buying of goods in large quantities from producers and selling the same in small quantities to retailers is termed as wholesale trade and the person who carries on wholesale trade is called the "Wholesaler".
CHANNELS OF DISTRIBUTION IMPORTANCE OF WHOLESALING 1.Providing retailers access to various products 2.Providing suppliers/ manufacturers access to markets 3.Providing stocking and warehousing services 4.Value-addition to the distribution process by participating in promotion, financing, payment collection and market intelligence. 5.Sometimes wholesalers also share part of the business risks.
CHANNELS OF DISTRIBUTION FUNCTIONS OF WHOLESALING The primary functions performed by the wholesalers are : 1.He collects varieties of goods from different producers. 2.He performs the warehousing function. This fills up the time gap between the production and consumption. 3.He distributes the assembled goods to the retailer or to the consumer directly. He thus helps in the dispersion process of marketing. 4.He helps in the transportation of goods from the place of production to his godown and further to the retailer. 5.Bulk-breaking
CHANNELS OF DISTRIBUTION FUNCTIONS OF WHOLESALING 6.He provides financial assistance to the retailers by supplying products on credit. 7.He helps in proper grading of goods as per quality, size and colour. 8.He involves all the risks associated with the ownership as he makes bulk purchases and makes arrangement for assembling and warehousing. 9.Financing & Risk bearing 10.Services & training to industrial buyers
CHANNELS OF DISTRIBUTION RETAILER Any business entity selling products and services to end- consumers is ‘retailing’. Retailing includes all activities involved in selling and/ or renting consumer products and services directly to ultimate consumers for their personal or home consumption. A retailer purchases goods or products in large quantities directly from manufacturers or through a wholesaler, and sells in smaller quantities to the consumer for a profit. Retailing can be done in either fixed locations, mobile outlets or online.
CHANNELS OF DISTRIBUTION RETAILER 1.Retailing creates time, place and possession utility. 2.Makes a wide variety of goods available to consumers. 3.Plays a valuable role in creating a product and brand image. 4.Retailer is a vital communication link between the manufacturer and the end-user. 5.Personalised service and customising as and when required. Importance of Retailing :
CHANNELS OF DISTRIBUTION RETAILER Functions of Retailing : 1.Breaking Bulk 2.Sorting and categorising of goods 3.Offer advise and guidance to help customers make the right choices. 4.Holding stock 5.Credit services 6.Training and after-sales service to end-users
CHANNELS OF DISTRIBUTION Types of Retailers : Retailers are classified based on the following factors : • Ownership • Merchandise Offered • Format of Stores / Selling Method
Types of Retailers : CHANNELS OF DISTRIBUTION Classification based on Merchandise Offered : •General Stores •Departmental Stores •Variety Stores •Speciality Stores •Category Stores
Types of Retailers : CHANNELS OF DISTRIBUTION Classification based on Format/ Method of selling : •Warehouse Stores •Vending Machines •Street Vendors •Corporate Chains •Discount Stores •Hypermarkets/ Supermarkets •Malls •E-Tailers •Consumer Co-operatives
Types of Retailers : CHANNELS OF DISTRIBUTION Classification Based on Ownership : 1.Independent Retailer/ Entrepreneur 2.Existing Retail Business 3.Franchise 4.Dealership 5.Network Marketing
RETAILING FRANCHISING Franchising is a business model in which A parent company allows entrepreneurs to use a successful company's strategies, techniques and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade- name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.
Advantages of franchising To the franchisee : 1.Immediate name recognition 2.Tried, tested and successful products/ offerings 3.Standard building design/ décor 4.Detailed techniques in running and promoting the business 5.Training of employees 6.Ongoing help in promoting and upgrading the products 7.Lower financial risk and smaller gestation period due to an established brand and goodwill. RETAILING
Disadvantages of franchising To the franchisee : 1.Considerable capital allocation : In order to build infrastructure and décor as per the franchisor’s specifications. 2.Lesser operational freedom and autonomy : Since all operations are directed and monitored by the franchisor. 3.Benefits could be superficial/ illusory : Unless the franchisor is a well-established brand and product, the benefits of franchising arrangements could be limited or non-existent to the franchisee. 4.Reduced margins : On-going royalty payments as well as share in revenues/ profits can lead to reduced margins for the franchisee. RETAILING
Advantages of franchising To the franchisor : 1.Capitalised expansion : Rather than investing own or borrowed funds and human efforts for expansion, franchising facilitates faster expansion with the franchisee’s funds. 2.Brand development : The faster multi-unit expansion serves to supplement and expand the brand geographically. 3.Economies of scale : Larger volumes generated by multi- unit expansion results in higher volumes of purchases and leverage with suppliers and vendors. 4.Continuing revenue streams : Continuing royalty serves as a steady cash inflow. RETAILING
Disadvantages of franchising To the franchisor : 1.Greater risk of losing brand value and goodwill due to mistakes or poor customer service on part of the franchisee. 2.Risks associated with sharing of confidential information, techniques, trade secrets etc. with the franchisee. 3.Legal hassles : Franchising agreement involves lot of legal formalities as well as government regulation, paperwork etc. 4.Limited control : Since a franchisee is an outsider to the parent organisation, the franchisor has limited control over the way business is carried out. RETAILING
Why is location so important for a retail outlet ? •Location determines a large part of the capital investment •Location affects transportation costs •Location affects labour and HR costs •Location determines customer traffic •Location affects volume of business RETAILING
Retail Location Decision Location is typically the prime consideration in a customer’s store choice decision. Locations are also used to develop a sustainable competitive advantage. An ideal location for a retail outlet is determined by •Target market •Competition •Costs Location of the retail store affects all aspects of business, such as : •Attracting customers •Convenience for labour/ employees •Transportation and logistics •Safety and security RETAILING
Secondary Factors determining locations : •Demographics/ Target customers •Competition •Merchant Associations •City rules/ by-laws •Future Growth Primary Factors determining locations : •Business Requirements (Type of merchandise) •Accessibility •Traffic/ Footfalls •Availability •Costs (Acquisition, maintenance & security) •Unique business requirements Lighting & display Fire safety Sanitation service Children Disabled persons RETAILING
LEVELS OF RETAIL LOCATION DECISION CITY CHOICE •Trading area •Population & Growth trends •Economic Conditions •Purchasing power •Trade potential •Competition LOCALITY CHOICE •Shopping District •Competition •Accessibility •Civic body rules & Restrictions •Expanding localities •Law & Order SITE CHOICE •Cost & Capacity •Passing Customer Traffic •Interception Potential •Complementary Outlets •Parking & Convenience •Visibility RETAILING
STORE DESIGN Store design, architecture and layout are critical factors for the success of any form of retail business. The physical environment determines the shopping behaviour, mood and hours spent by the customers. Space, atmosphere, placement and illumination are important since these affect the perception and interest generated in the merchandise. Carefully designed physical atmosphere : •Attracts customers •Enhances display effects •Generates interest in the merchandise •Improves quality of shopping experiences •Helps customer retention efforts •Helps brand positioning for the store RETAILING
STORE DESIGN Key Components of Retail Atmosphere : 1.Exterior Atmosphere 2.Interior Atmosphere 3.Store Layout 4.Visual Merchandising External Atmosphere : This includes all elements of physical environment found outside the store, including the exterior, entrance, approach road, traffic, windows, lighting, signages etc. Storefront is considered very important in competitive markets as strong differentiating factors. It is equally important for attracting new shoppers in unknown markets. RETAILING
STORE DESIGN Elements of Exterior Atmosphere : •Storefront •Building Size and Height •Visibility •Surrounding Stores and marketplace •Approach •Marquee •Parking Facilities •Entrance •Display Windows •Illumination •Uniqueness RETAILING
STORE DESIGN Interior Atmosphere includes all elements of physical environment found inside the store. Its importance lies in the fact that it determines to a great extent the time spent, behaviour of the visitors and the sales. The internal retail environment contains various stimuli that play upon the customer’s senses and influence the shopping behaviour. The important aspects of internal environment are : •Cleanliness, fragrance and freshness of air •Floorings •Wall colours and Textures •Lighting •Fixtures •Width of aisles •Personnel & Service quality •Merchandise and display •Vertical Transportation RETAILING
STORE DESIGN Store Layout is the internal retail store arrangement of departments and groupings of merchandise. A carefully planned, customer-friendly layout encourages the customers to move around the store and shop for more than what they have planned for. The main objective of the layout should be : 1.Facilitating smooth and easy movement through the store, without missing any section and without any confusion. 2.Uplifting the display and attracting the customers towards specific merchandise. 3.Enhancing the overall impression about the store, its contents, variety of goods and all relevant information. 4.Making the entire experience pleasant and satisfying for the customers. RETAILING
STORE DESIGN Target Customers Merchandise Mix Location Parking Access Building Architecture Health & Safety Frontage & Entrance Area Available Store Theme STORE DESIGN MIX Visibility Neighbor- hood RETAILING
Principals of Store Design •Totality The entire store has to be conceived as one unit, thereby incorporating the retailers image, positioning, target customers, merchandise and services together. •Focus The primary focus for the retailer is the goods or merchandise. This aspect should not be lost while designing the décor and ambience. •Ease of Shopping The layout and interiors should facilitate ease of navigation, access, information and service to the customers. •Change & Flexibility Store designs have to be adaptable to the environment. There should be adequate provision for changes, modifications, expansions and up-gradations, from time to time. RETAILING
Store Display Product placement plays a key role in enhancing the effect of display and the selling opportunities. It attracts, creates desire and also encourages the buyers to pick complimentary or related items to the one already chosen. Display decisions are determined by 3 key elements : •Display Theme •Location for the display •Display Components Display Concepts are based on a combination of one or more of the following themes : •Seasons •Festivals •Moods and Colours •Special Days •Zodiac Signs RETAILING
RETAILING Store Layout : The layout of the store is the manner in which merchandise or products are arranged in a retail store. It describes the interior arrangement of departments, sections or groupings of merchandise. While designing a customer-friendly layout, the following factors are considered most important : 1.The number and flow of customers at peak hours 2.The shopping space allotted to the customers 3.Sufficient space for merchandise display 4.Safety and security A customer-friendly store layout is likely to motivate the shoppers to move around the store and shop more than what they planned.
RETAILING Store Layout : The layout of the store may vary across retailers, depending upon the types of merchandise, customer habits and the space available. The objective of the layout should be to facilitate ease of movement, ease of understanding the locations of different merchandise and also take the customer through all the sections. Typical store layout patterns are catagorized as below : a)Grid Layout b)Race-Track Layout c)Freeform Layout d)Storeyed Layout
RETAILING Grid Layout : This is the most commonly followed system which facilitates movement within the area and uses space effectively. The grid comprises of long gondolas with merchandise displayed along the passages in a repetitive form. The grid form is mostly employed by retail stores primarily selling grocery items, FMCG goods or drugs (Medicines). The system also facilitates display of large variety and quantity of goods because of large shelf spaces. Grid layout is not very appealing aesthetically but it facilitates smooth shopping movement and ensures optimum space utilisation, and is therefore cost efficient.
RETAILING Grid Layout : Bakery Fruits F&B
Race-Track Layout : This is also known as the ‘Loop’ layout. Here, the display is in the form of a loop or a race-track, wherein a major aisle runs through the store. The aisle provides access to various smaller shops or departments within the store. This design encourages impulse purchasing, as shoppers are taken through various departments. The departments place fresh or new merchandise on the aisles to attract customers into the department. Different surfaces or colours are used to differentiate between various departments. This arrangement is not very common but offers an interesting and entertaining shopping experience. RETAILING
RETAILING RACE-TRACK LAYOUT
RETAILING Free-Form Layout : This format is used in large departmental stores, having several sections. Under the free-form format, the various sections or departments are scattered across the retail floor, in different directions. There is no particular route or pattern of movement of the customers. This format provides an informal setting to the shoppers, allowing them to roam around and browse at their will. Sales staff on the retail floor have a challenging task to perform in this layout since the customers are not drawn automatically. Free-form layout may not provide for maximum utilisation of the retail space available. There is also litlle or no possibility of storage facility on the retail floor.
RETAILING Free-Form Layout
RETAILING Storeyed Layout : Under this layout a multi-storeyed retail store can devote every floor to a different category of goods and services. This is a common form of store-layout design among leading retail chains in India. This layout offers not only the best utilisation of avaiilable floor space but also provides comfort and ease to shoppers. It also helps the retailers to manage the goods display more effectively. Storeyed layout is more popular among leading fashion department stores and supermarkets in India. Such establishments can also provide restaurants, coffee shops and/ or entertainment and other services within the premises.
RETAILING Factors affecting store layout : 1.Available floor space (Retail & Storage) 2.Variety of departments and sections 3.Other services offered 4.Types and variety of merchandise 5.Expected customer traffic 6.Display and demo requirements 7.Safety and security requirements 8.Horizontal and vertical transportation requirements
RETAILING Floor Space Management : FSM is about best possible allocation of space to various departments, product categories and customer movements. FSM not only attracts business by offering convenience to customers, but also places the merchandise strategically so as to help the sales efforts. Space Planning affects the following factors : •The location of various departments •Placement of various products within the departments •Specific locations for impulse buying, seasonal products and complimentary products •Revenue and profits per unit of space
RETAILING Floor Space Management : The retailer has to work out the best possible utilisation of the limited space available. Space allocation is the process of allocating the right amount of space, to the right merchandise, at the right time according to the customer demand. Effective store space management requires a thorough understanding of the following factors : •The nature of merchandise, suppliers and departments within the store. •The quantity of the merchandise the store wants to carry and display •The location and proportion of space allotted to different types of merchandise
RETAILING MERCHANDISING ‘Merchandising’ is the process of acquiring, promotion and sale of goods in a retail outlet. Merchandising involves the promotion of merchandise sales by coordinating production and marketing, and developing advertising, display and sales strategies to increase retail sales. Merchandising is also understood as the marketing practice in which the brand or image of one product or service is used to sell another. While retailers have traditionally engaged in the task of retail merchandising in a physical location, the Internet has now made it possible to apply these same basic principles in a virtual setting.
RETAILING MERCHANDISING The merchandise mix management involves decisions on important factors such as – •The variety of merchandise to be offered •Assortment •Support Merchandise variety refers to the number of different product lines to be stocked in the store. Merchandise assortment refers to the number of different product items within a particular product line. Merchandise support deals with the planning and control of the number of units the retailer needs to have on hand to meet the expected sales for a particular product.
RETAILING Strategic issues in merchandising decisions : 1.Who are our target customers ? 2.Which of their needs can we satisfy ? 3.What are our competitors doing ? 4.How can we do it differently ?
RETAILING Merchandise Management is the process of analysis, planning, acquisition, handling and control of the merchandise investments of a retail business with the objective of maximising the sales and profits of a category. It is the process by which a retailer attempts to offer the right quantity of the right product at the right place and time, while meeting the retail firm’s financial objectives. Planning and control of the merchandise inventory of the retail firm, in a manner which balances the expectations of the target customers and the strategy of the firm. Merchandise management drives a retailer’s business strategy and has immense cost and profit implications.
RETAILING Visual Merchandising Visual merchandising is the activity and profession of developing the floor plans and three-dimensional displays in order to maximise sales. This can be called the ‘silent salesmanship’ for retail formats. VM involves presentation of the store’s merchandise to highlight its function and aesthetic appeal to a consumer considering a purchase. It creates an engaging and enjoyable atmosphere, which invites consumers to spend more time in the store, and thus increase the turnover potential. These displays must attract attention to the merchandise, help create interest, fuel desire, and enhance perceived value.
RETAILING Objectives of Visual Merchandising 1.Reflect the brand image 2.Strengthen brand awareness and brand recognition at the point-of-sale 3.Increase sales and multiple sales 4.Present concept and colour, co-ordinate merchandise 5.Create a comfortable, enjoyable and exciting shopping environment for consumers 6.Support sales staff, as a ‘silent’ selling tool 7.Reduce ‘mark-downs’
RETAILING Principles of Visual Merchandising 1.Make it easier for the customers to locate the desired category and the merchandise 2.Make self-selection simple and easy 3.Make coordination and accessorisation possible 4.Educate about the product in an effective and creative manner 5.Make arrangements in a manner which will push the sales of unsought goods.
RETAILING Role of 5 Senses in VM In order to give the customers a pleasant store and purchase experience , the VM has to bear in mind certain factors which enhance the store display and customer perception. For this purpose, all 5 Senses have to be kept in mind so as to create an overall favourable store atmosphere. Sight : The retail space needs to be pleasing to the eye and uncluttered. It should be made easy for the customer to spot interesting merchandise. a)Consistent colour scheme b)Fresh flowers decoration around the place c)Placing the merchandise at eye level
RETAILING Role of 5 Senses in VM Sound : 1.Play music that is appropriate with the store theme 2.Play music that enhances the mood of the store 3.Play music according to the tastes and preferences of your target customers 4.Make the environment alive, keep things humming Taste : A fast-food outlet or an ice-cream or candy store helps uplift the mood of the customers. Smell : The atmosphere and scent of the room must match the store theme. Touch : Usually, cozy or unique items are placed within reach of the customers to experience. Comfortable chairs, soft leather furniture, samples of hand lotions etc.
RETAILING MERCHANDISE PLANNING Merchandise planning is the financial tool for planning and controlling the retailer’s investment in merchandise inventory. Retailers use the merchandise plan to determine and control sales volumes, inventory levels, procurement and profit margins. The four important components of the merchandise budget plan are as follows : 1.Sales Projection 2.Inventory Plan 3.Estimated Reductions 4.Estimated Purchase
RETAILING CATEGORY MANAGEMENT The phrase "category management" was coined by Brian F. Harris. A Category is an assortment of items that the customer views as products reasonably substituting each other. Category Management refers to the practice of managing a retail business with the objective of maximising the sales and profits of a category rather than the performance of individual models or brands. Category management involves managing product categories as business units and customizing them It is a systematic, disciplined approach to managing a product category as a strategic business unit.
RETAILING CATEGORY MANAGEMENT Category management enables the retailers to devise merchandising strategy and to maximise the total return on the resources assigned. In recent times, emergence of multiple brands in every product category and availability of a variety of substitute products has led to the emergence of category management as a retail business practice. ADVANTAGES OF CATEGORY MANAGEMENT : 1.Increased Sales 2.Reduced inventory investment 3.Improved warehouse efficiency
RETAILING CATEGORY MANAGEMENT The category management 8-step process : Define the category Define the role of the category (Within the retailer) Assess the current performance Set objectives and targets for the category Devise an overall strategy Devise specific tactics Implementation Review
RETAILING ‘Product Range’ is the total product offering, expressed in terms of ‘Width’ and ‘Depth’. Product Width is the variety and number of types of product category (Packaged Foods, Personal Care, Grocery, Dairy, Fruits & vegetables, Electronics, Consumer durables, Garments etc.) Product Depth refers to choice of product and choice variations offered within every product category (Deep or shallow). (The deeper the assortment, the greater is the number of price levels offered) SKU (Stock Keeping Units) A number assigned to a product by a retail store to identify the price, product options and manufacturer of the merchandise. Assortment Planning
RETAILING SKUs are used by suppliers within their data management systems, to help track amounts of product in inventory, and/or units of billable entities sold. SKUs help suppliers be able to track efficiently, the numbers of individual variants of products/services sold or remaining in stock. Assortment Planning Assortment refers to the number of SKUs 9Stock Keeping Units) within a merchandise category, group or department. It is the process to determine what and how much should be carried in a merchandise category. Assortment plan is a trade-off between the bredth and depth of products that a retailer wishes to carry.
RETAILING Questions to be considered during Assortment Planning : 1.Which SKUs drive sales & profits ? 2.Criteris to be applied for adding and deleting items 3.Opportunities likely to be missed by not carrying certain items 4.Items representing true variety, without duplication 5.Merchandise critical to customer loyalty or category image 6.Items not relevant or not contributing to category
RETAILING PRIVATE LABEL BRANDS : Private Labels are also known as ‘Store Brands’. These are typically products which are manufactured by a company under exclusive contract with another, which sells and markets these brands through its own retail network. Private Label brands are made available to consumers through certain exclusive retail outlets, carrying the name and brand owned by the retailer, and are not widely available through conventional retailers. Store brands/ Private labels have become a way for retailers to differentiate themselves from their competitors and to create loyalty to their stores in a tightly concentrated marketplace.
RETAILING PRIVATE LABEL BRANDS : Retailers have extended the concept of private label to identify a brand with a store, a concept known as the store brand. This can be a far more profitable business than selling nationally advertised brands. Use of private labels is most visible in food products and certain FMCG categories such as soaps and detergents. However it has also seen increasing application in clothing, apparels and cosmetics. Private Label may be an extremely profitable business for companies or corporations already commanding an important share of the market, with certain products that enjoy a high customer recognition. In the US, Private labels represent 20 percent of grocery store and 18 percent of supercenter sales.
RETAILING ADVANTAGES OF PRIVATE LABEL BRANDS : 1.Control over quality 2.Control over pricing 3.Own ideas on positioning and marketing 4.Create unique identity, thereby leading to customer loyalty 5.Flexibility in pricing and selling strategies 6.Differentiation for retailer
RETAILING Retailing Pricing Pricing is one of the most important variables in retail decision making. Price factor is the one that most easily elicits a response from the consumers. In retail marketing, price is frequently a major reason for shopping at a particular store. Price can also influence the quantities of various products or services that consumers will buy, which in turn determines the total revenue an profits earned by the retailer. Retail Pricing Objectives : Primary objectives : 1.Maximise short & long-term profits 2.Build volumes 3.Increase market value 4. Establish a distinct image 5. Optimize price-value relationship
RETAILING Retail Pricing Objectives : Secondary Objectives : 1.Maintain a proper store image 2.Discourage customers from becoming overly price conscious 3.Be perceived as fair by all parties 4.Be consistent in setting prices 5.Increase customer traffic during slow periods 6.Clear out seasonal merchandise 7.Match competitors prices without starting a price war 8.Create and maintain customer interest 9.Encourage repeat business
RETAILING Retail Price Determinants : 1.Market factors – Market type, city type etc. 2.Competitor factors 3.Category/ Merchandise 4.Store and chain factors 5.Customer factors – Income and loyalty 6.Brand factors 7.Business Environment 8.Location
RETAILING Approaches to Retail Pricing EDLP High-Low Pricing Loss Leader Pricing Skimming Pricing Bundled Pricing Penetration Pricing Extinction Pricing Price Lining
Retail Communication : Location, merchandise and price are crucial elements in attracting customers to a retail outlet and in generating business. However, the retailer also has to undertake promotional activities in order to publicise the business. The retailer has to design an effective communication programme to provide information to the customers and to persuade them to visit and shop at the store. Retail promotion is a philosophy that revolves around customer expectations and satisfaction. Its function is to invite, persuade and stimulate interest in the retailer. RETAILING
Retail Promotional Objectives : Retailers develop a promotional mix in order to accomplish several objectives, such as: 1.Positioning of the retailer 2.Immediate customer visibility 3.Increasing the customer traffic 4.Increasing sales 5.Announcing special events 6.New Products RETAILING Contd..
Retail Promotional Objectives : 7.Information about the store location 8.Information about the merchandise offered 9.Develop repeat purchases 10.Develop Brand loyalty RETAILING Contd..
Planning retail communication : A promotion plan put together skillfully, plays an important role in the retailer’s effectiveness in communicating with the customers. The planning process involves the following steps : 1.Setting the communication objectives 2.Determining the promotional budget 3.Assigning the budget to various activities 4.Implementation and evaluation RETAILING
Deciding the Promotional Budget : Promotional budgets can be decided using any of the following methods : •Marginal Analysis •Objective and task method •Thumb rule method Affordability Percentage of sales Competitive parity RETAILING
RETAILING International Retailing International retailing includes all activities involved in selling products and services to final international customers for their personal consumption. According to the Wharton School of Business at the University of Pennsylvania, the international retail market includes all buyers and sellers, regardless of their location throughout the world. The economic boom in several countries, coupled with globalization have given way to major retailers looking at expanding businesses across borders. The advent of internet and multimedia has further changed the dimensions as far as International Retailing is concerned.
RETAILING International Retailing is broadly categorised as a.Global Grocery Retailers b.International Fashion Brands Wal-Mart, Carrefour, Metro, Tesco etc. are a few of the leading international grocery retailers having multi-national presence. Gucci, Ralph Lauren, Mango, Zara, Benetton etc. are some of the major global fashion retailers. There is yet another group of International retailers like IKEA, Lego, Toys ‘R’Us etc who focus and specialise in particular segments.
The key success factors in international retailing are : •The Internet - an e-commerce web presence •Data Gathering - accumulation of demographic data on Web users •Global Sourcing - maximization of global sourcing opportunities The Internet : Merely having a presence on the web is not considered enough. It must effectively deliver the product or service, make transactions procedures clear and easy with as few steps as possible, be able to load all content quickly and also ensure privacy of the customer’s personal and financial information. Data Gathering : A organisation’s ability to source and use demographic information and data is the key to success of any international retail activity. It helps the retailer to break the global marketplace down into smaller segments, which are easier to target strategically. RETAILING
RETAILING Global Sourcing : Global sourcing is defined as the process of identifying, developing and utilising the best sources of supply for the enterprise, regardless of location. Global sourcing Involves proactively integrating and coordinating common items and materials, processes, designs, technologies and suppliers across worldwide purchasing, engineering, and operating locations. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. Global sourcing brings down the costs associated with all of the previously mentioned processes and allows for the passage of monetary savings along to the consumer.
RETAILING Factors to be considered for global sourcing : 1.Total landed cost 2.Quality 3.Logistics Capability 4.Location 5.Trade regulations (Taxes, Tarriffs and Duties) 6.Finances 7.Time to Market/ Responsiveness of the supplier 8.Value-added services 9.Communication/ IT Capabilities 10.Supply and operational risks
RETAILING Advantages of Global Sourcing : 1.Reduction in costs 2.Access to fresh research, design and specialised intellectual capital 3.Availability of new technology and capacity 4.Superior Quality 5.Companies can focus on core processes and have more capital to invest in them. 6.The supplier base is not restricted to the domestic market, giving companies the opportunity to transact with more competitive suppliers. 7.Time difference between countries can be used as a huge advantage where processing times are of high importance
RETAILING Disadvantages of Global Sourcing : 1.Hidden costs that may arise due to time-zone or cultural differences 2. increased ‘monitoring’ costs when work is near-shored or off shored when compared to domestic suppliers. 3.Increased risk of loss of data 4.Risk of shut-down of operations due to conditions arising in the supplier country 5.Job loss in the sourcing countries

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Retail management

  • 1. Distribution & Retail Management - Prof. Shashank Divekar
  • 2. DISTRIBUTION Distribution can be defined as an operation, or a series of operations, which physically bring goods manufactured or produced by any particular manufacturer into the hands of the final consumer or user. Distribution is an integral part of marketing. Its function is to distribute or sub-divide the total product of a manufacturer on a geographical basis to various specific markets. Distribution is estimated to account for one-quarter of the price of the consumer goods people buy. Distribution creates time utility and space utility.
  • 3. DISTRIBUTION Market Logistics Objectives “Getting the right goods at the right place at the right time.. .. At the least cost”.
  • 4. DISTRIBUTION Market Logistics Primary Activities Secondary Activities 1. Transportation 2. Warehousing 3. Order Processing 4. Inventory Maintenance 5. Product Packaging 6. Product Handling 7. Acquisition 8. Product Scheduling 9. Information Maintenance
  • 5. CHANNELS OF DISTRIBUTION A Distribution channel is a chain of people and/ or entities involved in the transfer of title or ownership, as the product moves from the producer to the end-consumer. A path through which goods and services flow in one direction (from vendor to the consumer), and the payments generated by them that flow in the opposite direction (from consumer to the vendor). The structure of intra-company organisation units and extra- company agents, dealers, wholesalers and retailers through which a commodity, product or service is marketed. - The American Marketing Association
  • 6. Retailer : The retail outlet distributes the product to the consumer / end-user, for personal, non-business use. Maintains limited stock of goods for sale. Wholesaler : Performs all activities involved in selling goods and services to those who buy for re-sale or business use. Maintains large stocks of goods for distribution. Agent : Is usually a direct representative of the company in the market. He approaches customers, negotiates and closes deals with customers on behalf of the company. Agents rarely stock goods with themselves. CHANNELS OF DISTRIBUTION C&FAs/ CSAs : This category is also known as ‘Facilitators’. C&FAs (Carrying & Forwarding Agents) carry the goods physically but do not pay for it, while CSAs (Consignment Selling Agents) act as C&FA but also perform the selling function and remit the collections to the company.
  • 7. PHYSICAL DISTRIBUTION FUNCTIONS : 1. Breaking Bulk : Buying in large quantities and selling in small quantities - Reduces costs for both manufacturers as well as buyers. 2. Creating Bulk : Intermediary works as an ‘assembler’. Buys in small quantities and accumulates bulk for the buyer. 3. Creating Assortments : Creation of assortments of merchandise that would otherwise not be available. Offers a variety of products to the buyer. 4. Reducing transactions : The no. of necessary transactions to accomplish the exchanges necessary for economic activity is brought down substantially. 5. Transportation and storage : Intermediaries carry goods and also provide regional and local storage. CHANNELS OF DISTRIBUTION
  • 8. Manufacturer/ Producer 1 Wholesaler Manufacturer’s Chain Stores Retailer Manufacturer’s Branch Offices Consumer CHANNELS OF DISTRIBUTION
  • 9. TYPICAL CHANNELS OF DISTRIBUTION For Consumer Goods & Services : Manufacturer Consumer Manufacturer Retailer Consumer Manufacturer Wholesaler Retailer Consumer Manufacturer Agent Consumer CHANNELS OF DISTRIBUTION
  • 10. Functions of Marketing Channels 1.Provide Distribution Efficiency Thereby leaving the manufacturer free to concentrate on other activities. 2. Salesmanship 3. Assist implementation of a Price Mix 4. Physical distribution & Financing 5. Merchandising 6. Market Intelligence 7. Demand Generation 8. Managing Various Flows in Distribution Physical, title, risk, negotiation, payments and information flow CHANNELS OF DISTRIBUTION
  • 11. Designing a Physical Distribution System • Articulating distribution objectives • Understand customer expectations in product delivery • Optimising costs • Keeping the system flexible. • Understand competitors distribution policies CHANNELS OF DISTRIBUTION •Specifying the minimum service level desired in product delivery •Evaluating channel alternatives
  • 12. CHANNELS OF DISTRIBUTION WHOLESALING Wholesaling involves sale and distribution of goods to users other than end consumers. Wholesaling involves selling merchandise to retailers, other wholesalers and merchants, or to industrial, commercial and institutional users. Wholesaling often occurs when large quantities of goods are re-assembled, sorted, then repackaged, and distributed in smaller lots, at a cost significantly lower than the average retail price. Buying of goods in large quantities from producers and selling the same in small quantities to retailers is termed as wholesale trade and the person who carries on wholesale trade is called the "Wholesaler".
  • 13. CHANNELS OF DISTRIBUTION IMPORTANCE OF WHOLESALING 1.Providing retailers access to various products 2.Providing suppliers/ manufacturers access to markets 3.Providing stocking and warehousing services 4.Value-addition to the distribution process by participating in promotion, financing, payment collection and market intelligence. 5.Sometimes wholesalers also share part of the business risks.
  • 14. CHANNELS OF DISTRIBUTION FUNCTIONS OF WHOLESALING The primary functions performed by the wholesalers are : 1.He collects varieties of goods from different producers. 2.He performs the warehousing function. This fills up the time gap between the production and consumption. 3.He distributes the assembled goods to the retailer or to the consumer directly. He thus helps in the dispersion process of marketing. 4.He helps in the transportation of goods from the place of production to his godown and further to the retailer. 5.Bulk-breaking
  • 15. CHANNELS OF DISTRIBUTION FUNCTIONS OF WHOLESALING 6.He provides financial assistance to the retailers by supplying products on credit. 7.He helps in proper grading of goods as per quality, size and colour. 8.He involves all the risks associated with the ownership as he makes bulk purchases and makes arrangement for assembling and warehousing. 9.Financing & Risk bearing 10.Services & training to industrial buyers
  • 16. CHANNELS OF DISTRIBUTION RETAILER Any business entity selling products and services to end- consumers is ‘retailing’. Retailing includes all activities involved in selling and/ or renting consumer products and services directly to ultimate consumers for their personal or home consumption. A retailer purchases goods or products in large quantities directly from manufacturers or through a wholesaler, and sells in smaller quantities to the consumer for a profit. Retailing can be done in either fixed locations, mobile outlets or online.
  • 17. CHANNELS OF DISTRIBUTION RETAILER 1.Retailing creates time, place and possession utility. 2.Makes a wide variety of goods available to consumers. 3.Plays a valuable role in creating a product and brand image. 4.Retailer is a vital communication link between the manufacturer and the end-user. 5.Personalised service and customising as and when required. Importance of Retailing :
  • 18. CHANNELS OF DISTRIBUTION RETAILER Functions of Retailing : 1.Breaking Bulk 2.Sorting and categorising of goods 3.Offer advise and guidance to help customers make the right choices. 4.Holding stock 5.Credit services 6.Training and after-sales service to end-users
  • 19. CHANNELS OF DISTRIBUTION Types of Retailers : Retailers are classified based on the following factors : • Ownership • Merchandise Offered • Format of Stores / Selling Method
  • 20. Types of Retailers : CHANNELS OF DISTRIBUTION Classification based on Merchandise Offered : •General Stores •Departmental Stores •Variety Stores •Speciality Stores •Category Stores
  • 21. Types of Retailers : CHANNELS OF DISTRIBUTION Classification based on Format/ Method of selling : •Warehouse Stores •Vending Machines •Street Vendors •Corporate Chains •Discount Stores •Hypermarkets/ Supermarkets •Malls •E-Tailers •Consumer Co-operatives
  • 22. Types of Retailers : CHANNELS OF DISTRIBUTION Classification Based on Ownership : 1.Independent Retailer/ Entrepreneur 2.Existing Retail Business 3.Franchise 4.Dealership 5.Network Marketing
  • 23. RETAILING FRANCHISING Franchising is a business model in which A parent company allows entrepreneurs to use a successful company's strategies, techniques and trademarks; in exchange, the franchisee pays an initial fee and royalties based on revenues. The parent company also provides the franchisee with support, including advertising and training, as part of the franchising agreement. Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade- name as well as certain business systems and processes, to produce and market a good or service according to certain specifications.
  • 24. Advantages of franchising To the franchisee : 1.Immediate name recognition 2.Tried, tested and successful products/ offerings 3.Standard building design/ décor 4.Detailed techniques in running and promoting the business 5.Training of employees 6.Ongoing help in promoting and upgrading the products 7.Lower financial risk and smaller gestation period due to an established brand and goodwill. RETAILING
  • 25. Disadvantages of franchising To the franchisee : 1.Considerable capital allocation : In order to build infrastructure and décor as per the franchisor’s specifications. 2.Lesser operational freedom and autonomy : Since all operations are directed and monitored by the franchisor. 3.Benefits could be superficial/ illusory : Unless the franchisor is a well-established brand and product, the benefits of franchising arrangements could be limited or non-existent to the franchisee. 4.Reduced margins : On-going royalty payments as well as share in revenues/ profits can lead to reduced margins for the franchisee. RETAILING
  • 26. Advantages of franchising To the franchisor : 1.Capitalised expansion : Rather than investing own or borrowed funds and human efforts for expansion, franchising facilitates faster expansion with the franchisee’s funds. 2.Brand development : The faster multi-unit expansion serves to supplement and expand the brand geographically. 3.Economies of scale : Larger volumes generated by multi- unit expansion results in higher volumes of purchases and leverage with suppliers and vendors. 4.Continuing revenue streams : Continuing royalty serves as a steady cash inflow. RETAILING
  • 27. Disadvantages of franchising To the franchisor : 1.Greater risk of losing brand value and goodwill due to mistakes or poor customer service on part of the franchisee. 2.Risks associated with sharing of confidential information, techniques, trade secrets etc. with the franchisee. 3.Legal hassles : Franchising agreement involves lot of legal formalities as well as government regulation, paperwork etc. 4.Limited control : Since a franchisee is an outsider to the parent organisation, the franchisor has limited control over the way business is carried out. RETAILING
  • 28. Why is location so important for a retail outlet ? •Location determines a large part of the capital investment •Location affects transportation costs •Location affects labour and HR costs •Location determines customer traffic •Location affects volume of business RETAILING
  • 29. Retail Location Decision Location is typically the prime consideration in a customer’s store choice decision. Locations are also used to develop a sustainable competitive advantage. An ideal location for a retail outlet is determined by •Target market •Competition •Costs Location of the retail store affects all aspects of business, such as : •Attracting customers •Convenience for labour/ employees •Transportation and logistics •Safety and security RETAILING
  • 30. Secondary Factors determining locations : •Demographics/ Target customers •Competition •Merchant Associations •City rules/ by-laws •Future Growth Primary Factors determining locations : •Business Requirements (Type of merchandise) •Accessibility •Traffic/ Footfalls •Availability •Costs (Acquisition, maintenance & security) •Unique business requirements Lighting & display Fire safety Sanitation service Children Disabled persons RETAILING
  • 31. LEVELS OF RETAIL LOCATION DECISION CITY CHOICE •Trading area •Population & Growth trends •Economic Conditions •Purchasing power •Trade potential •Competition LOCALITY CHOICE •Shopping District •Competition •Accessibility •Civic body rules & Restrictions •Expanding localities •Law & Order SITE CHOICE •Cost & Capacity •Passing Customer Traffic •Interception Potential •Complementary Outlets •Parking & Convenience •Visibility RETAILING
  • 32. STORE DESIGN Store design, architecture and layout are critical factors for the success of any form of retail business. The physical environment determines the shopping behaviour, mood and hours spent by the customers. Space, atmosphere, placement and illumination are important since these affect the perception and interest generated in the merchandise. Carefully designed physical atmosphere : •Attracts customers •Enhances display effects •Generates interest in the merchandise •Improves quality of shopping experiences •Helps customer retention efforts •Helps brand positioning for the store RETAILING
  • 33. STORE DESIGN Key Components of Retail Atmosphere : 1.Exterior Atmosphere 2.Interior Atmosphere 3.Store Layout 4.Visual Merchandising External Atmosphere : This includes all elements of physical environment found outside the store, including the exterior, entrance, approach road, traffic, windows, lighting, signages etc. Storefront is considered very important in competitive markets as strong differentiating factors. It is equally important for attracting new shoppers in unknown markets. RETAILING
  • 34. STORE DESIGN Elements of Exterior Atmosphere : •Storefront •Building Size and Height •Visibility •Surrounding Stores and marketplace •Approach •Marquee •Parking Facilities •Entrance •Display Windows •Illumination •Uniqueness RETAILING
  • 35. STORE DESIGN Interior Atmosphere includes all elements of physical environment found inside the store. Its importance lies in the fact that it determines to a great extent the time spent, behaviour of the visitors and the sales. The internal retail environment contains various stimuli that play upon the customer’s senses and influence the shopping behaviour. The important aspects of internal environment are : •Cleanliness, fragrance and freshness of air •Floorings •Wall colours and Textures •Lighting •Fixtures •Width of aisles •Personnel & Service quality •Merchandise and display •Vertical Transportation RETAILING
  • 36. STORE DESIGN Store Layout is the internal retail store arrangement of departments and groupings of merchandise. A carefully planned, customer-friendly layout encourages the customers to move around the store and shop for more than what they have planned for. The main objective of the layout should be : 1.Facilitating smooth and easy movement through the store, without missing any section and without any confusion. 2.Uplifting the display and attracting the customers towards specific merchandise. 3.Enhancing the overall impression about the store, its contents, variety of goods and all relevant information. 4.Making the entire experience pleasant and satisfying for the customers. RETAILING
  • 37. STORE DESIGN Target Customers Merchandise Mix Location Parking Access Building Architecture Health & Safety Frontage & Entrance Area Available Store Theme STORE DESIGN MIX Visibility Neighbor- hood RETAILING
  • 38. Principals of Store Design •Totality The entire store has to be conceived as one unit, thereby incorporating the retailers image, positioning, target customers, merchandise and services together. •Focus The primary focus for the retailer is the goods or merchandise. This aspect should not be lost while designing the décor and ambience. •Ease of Shopping The layout and interiors should facilitate ease of navigation, access, information and service to the customers. •Change & Flexibility Store designs have to be adaptable to the environment. There should be adequate provision for changes, modifications, expansions and up-gradations, from time to time. RETAILING
  • 39. Store Display Product placement plays a key role in enhancing the effect of display and the selling opportunities. It attracts, creates desire and also encourages the buyers to pick complimentary or related items to the one already chosen. Display decisions are determined by 3 key elements : •Display Theme •Location for the display •Display Components Display Concepts are based on a combination of one or more of the following themes : •Seasons •Festivals •Moods and Colours •Special Days •Zodiac Signs RETAILING
  • 40. RETAILING Store Layout : The layout of the store is the manner in which merchandise or products are arranged in a retail store. It describes the interior arrangement of departments, sections or groupings of merchandise. While designing a customer-friendly layout, the following factors are considered most important : 1.The number and flow of customers at peak hours 2.The shopping space allotted to the customers 3.Sufficient space for merchandise display 4.Safety and security A customer-friendly store layout is likely to motivate the shoppers to move around the store and shop more than what they planned.
  • 41. RETAILING Store Layout : The layout of the store may vary across retailers, depending upon the types of merchandise, customer habits and the space available. The objective of the layout should be to facilitate ease of movement, ease of understanding the locations of different merchandise and also take the customer through all the sections. Typical store layout patterns are catagorized as below : a)Grid Layout b)Race-Track Layout c)Freeform Layout d)Storeyed Layout
  • 42. RETAILING Grid Layout : This is the most commonly followed system which facilitates movement within the area and uses space effectively. The grid comprises of long gondolas with merchandise displayed along the passages in a repetitive form. The grid form is mostly employed by retail stores primarily selling grocery items, FMCG goods or drugs (Medicines). The system also facilitates display of large variety and quantity of goods because of large shelf spaces. Grid layout is not very appealing aesthetically but it facilitates smooth shopping movement and ensures optimum space utilisation, and is therefore cost efficient.
  • 43. RETAILING Grid Layout : Bakery Fruits F&B
  • 44. Race-Track Layout : This is also known as the ‘Loop’ layout. Here, the display is in the form of a loop or a race-track, wherein a major aisle runs through the store. The aisle provides access to various smaller shops or departments within the store. This design encourages impulse purchasing, as shoppers are taken through various departments. The departments place fresh or new merchandise on the aisles to attract customers into the department. Different surfaces or colours are used to differentiate between various departments. This arrangement is not very common but offers an interesting and entertaining shopping experience. RETAILING
  • 46. RETAILING Free-Form Layout : This format is used in large departmental stores, having several sections. Under the free-form format, the various sections or departments are scattered across the retail floor, in different directions. There is no particular route or pattern of movement of the customers. This format provides an informal setting to the shoppers, allowing them to roam around and browse at their will. Sales staff on the retail floor have a challenging task to perform in this layout since the customers are not drawn automatically. Free-form layout may not provide for maximum utilisation of the retail space available. There is also litlle or no possibility of storage facility on the retail floor.
  • 48. RETAILING Storeyed Layout : Under this layout a multi-storeyed retail store can devote every floor to a different category of goods and services. This is a common form of store-layout design among leading retail chains in India. This layout offers not only the best utilisation of avaiilable floor space but also provides comfort and ease to shoppers. It also helps the retailers to manage the goods display more effectively. Storeyed layout is more popular among leading fashion department stores and supermarkets in India. Such establishments can also provide restaurants, coffee shops and/ or entertainment and other services within the premises.
  • 49. RETAILING Factors affecting store layout : 1.Available floor space (Retail & Storage) 2.Variety of departments and sections 3.Other services offered 4.Types and variety of merchandise 5.Expected customer traffic 6.Display and demo requirements 7.Safety and security requirements 8.Horizontal and vertical transportation requirements
  • 50. RETAILING Floor Space Management : FSM is about best possible allocation of space to various departments, product categories and customer movements. FSM not only attracts business by offering convenience to customers, but also places the merchandise strategically so as to help the sales efforts. Space Planning affects the following factors : •The location of various departments •Placement of various products within the departments •Specific locations for impulse buying, seasonal products and complimentary products •Revenue and profits per unit of space
  • 51. RETAILING Floor Space Management : The retailer has to work out the best possible utilisation of the limited space available. Space allocation is the process of allocating the right amount of space, to the right merchandise, at the right time according to the customer demand. Effective store space management requires a thorough understanding of the following factors : •The nature of merchandise, suppliers and departments within the store. •The quantity of the merchandise the store wants to carry and display •The location and proportion of space allotted to different types of merchandise
  • 52. RETAILING MERCHANDISING ‘Merchandising’ is the process of acquiring, promotion and sale of goods in a retail outlet. Merchandising involves the promotion of merchandise sales by coordinating production and marketing, and developing advertising, display and sales strategies to increase retail sales. Merchandising is also understood as the marketing practice in which the brand or image of one product or service is used to sell another. While retailers have traditionally engaged in the task of retail merchandising in a physical location, the Internet has now made it possible to apply these same basic principles in a virtual setting.
  • 53. RETAILING MERCHANDISING The merchandise mix management involves decisions on important factors such as – •The variety of merchandise to be offered •Assortment •Support Merchandise variety refers to the number of different product lines to be stocked in the store. Merchandise assortment refers to the number of different product items within a particular product line. Merchandise support deals with the planning and control of the number of units the retailer needs to have on hand to meet the expected sales for a particular product.
  • 54. RETAILING Strategic issues in merchandising decisions : 1.Who are our target customers ? 2.Which of their needs can we satisfy ? 3.What are our competitors doing ? 4.How can we do it differently ?
  • 55. RETAILING Merchandise Management is the process of analysis, planning, acquisition, handling and control of the merchandise investments of a retail business with the objective of maximising the sales and profits of a category. It is the process by which a retailer attempts to offer the right quantity of the right product at the right place and time, while meeting the retail firm’s financial objectives. Planning and control of the merchandise inventory of the retail firm, in a manner which balances the expectations of the target customers and the strategy of the firm. Merchandise management drives a retailer’s business strategy and has immense cost and profit implications.
  • 56. RETAILING Visual Merchandising Visual merchandising is the activity and profession of developing the floor plans and three-dimensional displays in order to maximise sales. This can be called the ‘silent salesmanship’ for retail formats. VM involves presentation of the store’s merchandise to highlight its function and aesthetic appeal to a consumer considering a purchase. It creates an engaging and enjoyable atmosphere, which invites consumers to spend more time in the store, and thus increase the turnover potential. These displays must attract attention to the merchandise, help create interest, fuel desire, and enhance perceived value.
  • 57. RETAILING Objectives of Visual Merchandising 1.Reflect the brand image 2.Strengthen brand awareness and brand recognition at the point-of-sale 3.Increase sales and multiple sales 4.Present concept and colour, co-ordinate merchandise 5.Create a comfortable, enjoyable and exciting shopping environment for consumers 6.Support sales staff, as a ‘silent’ selling tool 7.Reduce ‘mark-downs’
  • 58. RETAILING Principles of Visual Merchandising 1.Make it easier for the customers to locate the desired category and the merchandise 2.Make self-selection simple and easy 3.Make coordination and accessorisation possible 4.Educate about the product in an effective and creative manner 5.Make arrangements in a manner which will push the sales of unsought goods.
  • 59. RETAILING Role of 5 Senses in VM In order to give the customers a pleasant store and purchase experience , the VM has to bear in mind certain factors which enhance the store display and customer perception. For this purpose, all 5 Senses have to be kept in mind so as to create an overall favourable store atmosphere. Sight : The retail space needs to be pleasing to the eye and uncluttered. It should be made easy for the customer to spot interesting merchandise. a)Consistent colour scheme b)Fresh flowers decoration around the place c)Placing the merchandise at eye level
  • 60. RETAILING Role of 5 Senses in VM Sound : 1.Play music that is appropriate with the store theme 2.Play music that enhances the mood of the store 3.Play music according to the tastes and preferences of your target customers 4.Make the environment alive, keep things humming Taste : A fast-food outlet or an ice-cream or candy store helps uplift the mood of the customers. Smell : The atmosphere and scent of the room must match the store theme. Touch : Usually, cozy or unique items are placed within reach of the customers to experience. Comfortable chairs, soft leather furniture, samples of hand lotions etc.
  • 61. RETAILING MERCHANDISE PLANNING Merchandise planning is the financial tool for planning and controlling the retailer’s investment in merchandise inventory. Retailers use the merchandise plan to determine and control sales volumes, inventory levels, procurement and profit margins. The four important components of the merchandise budget plan are as follows : 1.Sales Projection 2.Inventory Plan 3.Estimated Reductions 4.Estimated Purchase
  • 62. RETAILING CATEGORY MANAGEMENT The phrase "category management" was coined by Brian F. Harris. A Category is an assortment of items that the customer views as products reasonably substituting each other. Category Management refers to the practice of managing a retail business with the objective of maximising the sales and profits of a category rather than the performance of individual models or brands. Category management involves managing product categories as business units and customizing them It is a systematic, disciplined approach to managing a product category as a strategic business unit.
  • 63. RETAILING CATEGORY MANAGEMENT Category management enables the retailers to devise merchandising strategy and to maximise the total return on the resources assigned. In recent times, emergence of multiple brands in every product category and availability of a variety of substitute products has led to the emergence of category management as a retail business practice. ADVANTAGES OF CATEGORY MANAGEMENT : 1.Increased Sales 2.Reduced inventory investment 3.Improved warehouse efficiency
  • 64. RETAILING CATEGORY MANAGEMENT The category management 8-step process : Define the category Define the role of the category (Within the retailer) Assess the current performance Set objectives and targets for the category Devise an overall strategy Devise specific tactics Implementation Review
  • 65. RETAILING ‘Product Range’ is the total product offering, expressed in terms of ‘Width’ and ‘Depth’. Product Width is the variety and number of types of product category (Packaged Foods, Personal Care, Grocery, Dairy, Fruits & vegetables, Electronics, Consumer durables, Garments etc.) Product Depth refers to choice of product and choice variations offered within every product category (Deep or shallow). (The deeper the assortment, the greater is the number of price levels offered) SKU (Stock Keeping Units) A number assigned to a product by a retail store to identify the price, product options and manufacturer of the merchandise. Assortment Planning
  • 66. RETAILING SKUs are used by suppliers within their data management systems, to help track amounts of product in inventory, and/or units of billable entities sold. SKUs help suppliers be able to track efficiently, the numbers of individual variants of products/services sold or remaining in stock. Assortment Planning Assortment refers to the number of SKUs 9Stock Keeping Units) within a merchandise category, group or department. It is the process to determine what and how much should be carried in a merchandise category. Assortment plan is a trade-off between the bredth and depth of products that a retailer wishes to carry.
  • 67. RETAILING Questions to be considered during Assortment Planning : 1.Which SKUs drive sales & profits ? 2.Criteris to be applied for adding and deleting items 3.Opportunities likely to be missed by not carrying certain items 4.Items representing true variety, without duplication 5.Merchandise critical to customer loyalty or category image 6.Items not relevant or not contributing to category
  • 68. RETAILING PRIVATE LABEL BRANDS : Private Labels are also known as ‘Store Brands’. These are typically products which are manufactured by a company under exclusive contract with another, which sells and markets these brands through its own retail network. Private Label brands are made available to consumers through certain exclusive retail outlets, carrying the name and brand owned by the retailer, and are not widely available through conventional retailers. Store brands/ Private labels have become a way for retailers to differentiate themselves from their competitors and to create loyalty to their stores in a tightly concentrated marketplace.
  • 69. RETAILING PRIVATE LABEL BRANDS : Retailers have extended the concept of private label to identify a brand with a store, a concept known as the store brand. This can be a far more profitable business than selling nationally advertised brands. Use of private labels is most visible in food products and certain FMCG categories such as soaps and detergents. However it has also seen increasing application in clothing, apparels and cosmetics. Private Label may be an extremely profitable business for companies or corporations already commanding an important share of the market, with certain products that enjoy a high customer recognition. In the US, Private labels represent 20 percent of grocery store and 18 percent of supercenter sales.
  • 70. RETAILING ADVANTAGES OF PRIVATE LABEL BRANDS : 1.Control over quality 2.Control over pricing 3.Own ideas on positioning and marketing 4.Create unique identity, thereby leading to customer loyalty 5.Flexibility in pricing and selling strategies 6.Differentiation for retailer
  • 71. RETAILING Retailing Pricing Pricing is one of the most important variables in retail decision making. Price factor is the one that most easily elicits a response from the consumers. In retail marketing, price is frequently a major reason for shopping at a particular store. Price can also influence the quantities of various products or services that consumers will buy, which in turn determines the total revenue an profits earned by the retailer. Retail Pricing Objectives : Primary objectives : 1.Maximise short & long-term profits 2.Build volumes 3.Increase market value 4. Establish a distinct image 5. Optimize price-value relationship
  • 72. RETAILING Retail Pricing Objectives : Secondary Objectives : 1.Maintain a proper store image 2.Discourage customers from becoming overly price conscious 3.Be perceived as fair by all parties 4.Be consistent in setting prices 5.Increase customer traffic during slow periods 6.Clear out seasonal merchandise 7.Match competitors prices without starting a price war 8.Create and maintain customer interest 9.Encourage repeat business
  • 73. RETAILING Retail Price Determinants : 1.Market factors – Market type, city type etc. 2.Competitor factors 3.Category/ Merchandise 4.Store and chain factors 5.Customer factors – Income and loyalty 6.Brand factors 7.Business Environment 8.Location
  • 74. RETAILING Approaches to Retail Pricing EDLP High-Low Pricing Loss Leader Pricing Skimming Pricing Bundled Pricing Penetration Pricing Extinction Pricing Price Lining
  • 75. Retail Communication : Location, merchandise and price are crucial elements in attracting customers to a retail outlet and in generating business. However, the retailer also has to undertake promotional activities in order to publicise the business. The retailer has to design an effective communication programme to provide information to the customers and to persuade them to visit and shop at the store. Retail promotion is a philosophy that revolves around customer expectations and satisfaction. Its function is to invite, persuade and stimulate interest in the retailer. RETAILING
  • 76. Retail Promotional Objectives : Retailers develop a promotional mix in order to accomplish several objectives, such as: 1.Positioning of the retailer 2.Immediate customer visibility 3.Increasing the customer traffic 4.Increasing sales 5.Announcing special events 6.New Products RETAILING Contd..
  • 77. Retail Promotional Objectives : 7.Information about the store location 8.Information about the merchandise offered 9.Develop repeat purchases 10.Develop Brand loyalty RETAILING Contd..
  • 78. Planning retail communication : A promotion plan put together skillfully, plays an important role in the retailer’s effectiveness in communicating with the customers. The planning process involves the following steps : 1.Setting the communication objectives 2.Determining the promotional budget 3.Assigning the budget to various activities 4.Implementation and evaluation RETAILING
  • 79. Deciding the Promotional Budget : Promotional budgets can be decided using any of the following methods : •Marginal Analysis •Objective and task method •Thumb rule method Affordability Percentage of sales Competitive parity RETAILING
  • 80. RETAILING International Retailing International retailing includes all activities involved in selling products and services to final international customers for their personal consumption. According to the Wharton School of Business at the University of Pennsylvania, the international retail market includes all buyers and sellers, regardless of their location throughout the world. The economic boom in several countries, coupled with globalization have given way to major retailers looking at expanding businesses across borders. The advent of internet and multimedia has further changed the dimensions as far as International Retailing is concerned.
  • 81. RETAILING International Retailing is broadly categorised as a.Global Grocery Retailers b.International Fashion Brands Wal-Mart, Carrefour, Metro, Tesco etc. are a few of the leading international grocery retailers having multi-national presence. Gucci, Ralph Lauren, Mango, Zara, Benetton etc. are some of the major global fashion retailers. There is yet another group of International retailers like IKEA, Lego, Toys ‘R’Us etc who focus and specialise in particular segments.
  • 82. The key success factors in international retailing are : •The Internet - an e-commerce web presence •Data Gathering - accumulation of demographic data on Web users •Global Sourcing - maximization of global sourcing opportunities The Internet : Merely having a presence on the web is not considered enough. It must effectively deliver the product or service, make transactions procedures clear and easy with as few steps as possible, be able to load all content quickly and also ensure privacy of the customer’s personal and financial information. Data Gathering : A organisation’s ability to source and use demographic information and data is the key to success of any international retail activity. It helps the retailer to break the global marketplace down into smaller segments, which are easier to target strategically. RETAILING
  • 83. RETAILING Global Sourcing : Global sourcing is defined as the process of identifying, developing and utilising the best sources of supply for the enterprise, regardless of location. Global sourcing Involves proactively integrating and coordinating common items and materials, processes, designs, technologies and suppliers across worldwide purchasing, engineering, and operating locations. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. Global sourcing brings down the costs associated with all of the previously mentioned processes and allows for the passage of monetary savings along to the consumer.
  • 84. RETAILING Factors to be considered for global sourcing : 1.Total landed cost 2.Quality 3.Logistics Capability 4.Location 5.Trade regulations (Taxes, Tarriffs and Duties) 6.Finances 7.Time to Market/ Responsiveness of the supplier 8.Value-added services 9.Communication/ IT Capabilities 10.Supply and operational risks
  • 85. RETAILING Advantages of Global Sourcing : 1.Reduction in costs 2.Access to fresh research, design and specialised intellectual capital 3.Availability of new technology and capacity 4.Superior Quality 5.Companies can focus on core processes and have more capital to invest in them. 6.The supplier base is not restricted to the domestic market, giving companies the opportunity to transact with more competitive suppliers. 7.Time difference between countries can be used as a huge advantage where processing times are of high importance
  • 86. RETAILING Disadvantages of Global Sourcing : 1.Hidden costs that may arise due to time-zone or cultural differences 2. increased ‘monitoring’ costs when work is near-shored or off shored when compared to domestic suppliers. 3.Increased risk of loss of data 4.Risk of shut-down of operations due to conditions arising in the supplier country 5.Job loss in the sourcing countries