What is Retail Management?

Retail
Management Retailing encompasses the business activities involved in selling goods & services
to consumers for their personal, family, or household use.
It includes every sale to the final consumer – ranging from cars to apparel to
meals at restaurants to movie tickets.

Key issues that retailer must resolve:

How can we best serve our customer while earning a fair profit?
How can we stand out in a highly competitive environment where customers
have so many choices?
How can we grow our business while retailing a core of loyal customers?

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Retail Functions in Distribution

Retail Functions in Distribution
contd..
Retailers often act as the contact between manufacturers, wholesalers, & customers.
Final Retailers collect an assortment (variety) from various sources, buy in large quantity, &
Manufacturer Wholesaler consumer sell in small amount. This is sorting process.
Retailer
Retailers communicate with customers & wholesalers & manufacturers.
Shoppers learn about the availability & characteristics of goods & services, store hours,
A Typical Channel of Distribution sales etc., from retailers advt., sales people & displays.
Manufacturers & wholesalers are informed by their retailers with regard to sales forecast,
Manufacturer delivery delays, customer complaints, defective items, inventory turnover and so on..
Brand A Brand A
Many goods & services have been modified due to retailer feedback.
Wholesaler customers
Manufacturer For small suppliers, retailers provide assistance by transporting, sorting, marketing,
Brand B advertising, & pre-paying for the products.
Brand B
Retailer customers
Retailers also complete transactions with customers i.e., having convenient locations,
Manufacturer Brand C filling order promptly & accurately, & processing credit purchase.
Brand C customers
Wholesaler Some retailers also provide customer services such as gifts wrapping, delivery, &
Brand D installation.
Manufacturer
customers To be more appealing, many firms engage in multi-channel retailing i.e., multiple point
Brand D
Retailers role in sorting process of contact like physical stores, websites, mail-order catalogs etc.

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Retail Functions in Distribution

Retailer-Supplier Relationship
contd..
Retailers are part of distribution channel, so manufacturers (wholesalers) are concerned
Benefits about:
Reach more customers Caliber of displays

Reduce costs Customer service

Improve cash flow Store hours

Retailer’s reliability as business partners
Increase sales more rapidly
Retailers are also major customers of goods & services for resale, store fixtures,
Focus on area of expertise computers, management consulting ,& insurance.
Retailers and supplier have different priorities on:
Manufacturers also do operate retail Control over distribution channel
facilities (besides selling at Profit allocation
conventional retailers). In running their
stores, these firms compete the full No. of competing retailers handling supplier’s products
range of retailing functions & compete Product display
with conventional retailers. Promotion support
Payment terms
Operating flexibility
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Retailer-Supplier Relationship The Special Characteristics of
contd.. Retailing
Channel Relations The average amount of a sales transaction for retailers is much less than
Exclusive Distribution manufacturers.

Suppliers make agreements with one or a few retailers that designates them the only one This low amount creates the need to tightly control the cost associated with each
to carry certain brands/products in a specific geographic region. transaction like sales personnel, credit verification, & bagging.

Both parties work together to maintain an image, assign self space, allot profits & costs, To maximize the no. of customer the retailer has to emphasize more on ads & special
& advertise. promotions.

This is the smoothest channel relationship. Increase impulse sales by more aggressive selling.

Intensive Distribution Final consumers make many unplanned or impulse purchases.

Suppliers sell through as many retailers as possible. Large %age of consumers do not look at ads before shopping.

This maximizes suppliers’ sales & lets retailers offer many brands & product versions. They do not prepare shopping list.

Retailers may assign little self space to specific brands, set high price on them, & not Make fully unplanned purchases.
advertise them. This indicates the value of in-store displays, attractive store layouts, & well organized
This is most volatile channel relationship. stores, catalogs, & website.

Selective Distribution Retailer’s ability to forecast, budget, order merchandise, & sufficient personnel on the
selling floor becomes difficult.
Suppliers sell through a moderate no. of retailers carrying some competing brands.
This combines aspects of Exclusive & Intensive Distribution

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The Special Characteristics of

Importance of Retail Strategy
Retailing
Retail customers usually visit a store, even though mail, phone, & web sales has Retail strategy is the overall plan guiding a retail firm. It influences the firm’s business
increased. activities & its response to market forces, such as competition & economy.
Most retail transactions happen in stores & will continue in future. Six steps in strategic planning
Many people like to shop in person, want to touch, smell, and/or try on products. Define the type of business in terms of the goods or services & company’s specific
orientation.
Many people to browse for unplanned purchases.
Set long-run & short-run objectives for sales & profit, market share, image etc.
They feel more comfortable talking a purchase home with them than waiting for a
delivery. Determine the customer market to target on the basis of its characteristics (like gender
& income level) & needs (like product & brand preferences).
Desire privacy while at home.
Devise an overall, long-run plan that gives general direction to the firms & its employees.
Retailers must work to attract shoppers to stores & consider such factors such as store
location, transportation, store hours, proximity (nearness) of competitors, product Implement an integrated strategy that combines factors like store location,
selection, parking & ads. transportation, product variety, pricing, and advertising & display to achieve objectives.
Regularly evaluate performance & correct weaknesses or problems when observed.

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Key to success The Retailing Concept

Customer
Growth-oriented objectives orientation
Appeal to prime market
Distinctive company image Coordinated effort
Retailing
Focus concept Retail Strategy

Strong customer service for its retail category Value- driven

Multiple points of contact
Employee relations
Goal orientation
Innovation
Commitment to technology Customer orientation - The retailer determines the attributes & needs of its customers
& endeavors (take action) to satisfy these needs.
Community involvement
Coordinated effort - The retailers integrates all plans & activities to maximize
Constantly monitoring performance
efficiency.
Value-driven - The retailer offers good value to the customers, whether it be upscale
(expensive) or discount i.e., “appropriate pricing” for goods & customer service.
Goal oriented - The retailer sets goal & uses its strategy to attain them.

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Classification of Retail Institutions Retail Institution by Ownership
Ownership format serves a marketplace niche.
Nonstore-based
Independent retailers capitalize on a very small targeted customer base & please
Store-based retail retail strategy mix
Ownership & nontraditional shoppers in a friendly, folksy (simple) way. Word-of mouth communication is important.
strategy mix These retailers should not try to serve too many customer & enter into price wars.
retailing
Chain retailers benefit from widely known image, economies of scales (i.e. cost
advantages that a business obtains due to expansion), & mass promotion possibilities.
• Convenience store They should maintain their image chain wide & not be inflexible in adapting changes in
• Independent • Direct marketing
• Conventional supermarket the marketplace.
• Chain • Direct selling
• Franchise • Food-based supermarket • Vending machine Franchisors have strong geographic coverage & motivation of the franchisees as owner-
• Leased department • Combination store • World wide web (WWW) operators. They should not get bogged down in policy disputes with franchisees or charge
• Vertical marketing system • Box (limited line) store excessive royalty fees.
• Consumer cooperative • Warehouse store
• Specialty store Leased departments enable store operators & outside parties to join forces & enhance
• Variety store the shopping experience, while sharing expertise & expenses. They should not hurt the
• Traditional department store image of the store or place too much pressure on the lessee to bring in store traffic.
• Full-line department store A vertically integrated channel gives a firm greater control over sources of supply, but it
• Off-price chain should not provide consumers with too little choice of products or too few outlets.
• Factory outlet
• Membership club Cooperatives provide members with price savings. They should not expect too much
• Flea (louse) market involvement by members or add facilities that raise costs too much.

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Independent Retailer Independent Retailer

An independent retailer owns one retail unit. Disadvantages
Advantages Less bargaining power with the suppliers as they buy less quantity.
There is flexibility in choosing retail formats, location, assortment (variety), prices, hours etc., Cannot gain economies of scale (i.e. cost advantages that a business obtains due to expansion) in
& devising strategy based on the target customers. buying & maintaining inventory. Transportation, ordering, & handling costs are high.
Investment costs for leases, fixtures, workers, & merchandise can be brought down. There is no Operations are labor intensive.
duplication of stock or personnel function. Responsibilities are clearly delineated (defined)
within the store. They are limited to certain media for advt. because of financial constraints.

Independents frequently act as specialist in a niche of the particular goods/services category. Family-run independents is overdependence on the owner. It is difficult to keep it up &
They are then more efficient & can lure (attract) shoppers interested in specialized retailers. running.

Independents exert strong control over their strategies, & the owner-operator is typically on Limited time allotted to long-run planning, since owner is intimately involved in day-to day
the premises. Decision making is centralized & layers of management personnel are minimized. operations.

There are certain image attached to independents, particularly small ones, that chains cannot
readily capture.
Independents can easily sustain consistency in their efforts because only one store is operated.
Independents have “Independence”. No meetings, union, stockholders & labor unrest etc.
Entrepreneurial drive.

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Chain Retailer Chain Retailer

Chain retailer operates multiple outlets (store units) under common ownership. It
Disadvantages
usually involves in some level of centralized purchasing & decision making.
Flexibility may be limited. Consistent strategies on pricing, promotions, & product variety must
Advantages be followed throughout all units which may be difficult to adapt to local diverse market.
Many chains have bargaining power due to their purchase volume. They receive new items
Investment is high due to infrastructure & store as multiple store has to be stocked.
when introduced, have orders promptly filled, get sales support, & obtain volume discounts.
Managerial control is complex due to geographically dispersed branches.
Chains achieve cost efficiencies when they buy directly from the manufacturers & in large
volumes, ship and store goods, & attend trade shows sponsored by the suppliers to learn about Limited independence to the personnel.
new offerings. They can sometimes bypass wholesalers.
Efficiency is gained by sharing warehouse facilities; purchasing standardized store fixtures;
centralized buying & decision making etc. Headquarters have broad authority for personnel
policies & for buying, pricing, & advt. decisions.
Computerized ordering merchandise, inventory, forecasting, sales, & bookkeeping. This reduces
overall costs.
Take advantage of variety of media from print to electronic.
Detailed & clear responsibility for employees with available substitute incase any employee is
retiring or quitting.
Spend considerable time in strategic planning. Opportunity & threat are closely monitored.

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Franchising Franchising contd..
Franchising involves a contractual arrangement between a franchisor (a Advantages of Franchisees
manufacturer, wholesaler, or service sponsor) & a retail franchisee, which allows
the franchisee to conduct business under a established name & according to a given They own a retail enterprise with a relatively small capital.
pattern of business. They acquire well-known names & goods/services lines.
The franchisee pays an initial fees & a monthly %age of the gross sales in exchange Standard operating procedures & management skills may be taught to them.
for the rights to sell goods & services in an area. Cooperative marketing efforts (like national advt.) are facilitated.
A franchisee operates autonomously in setting store hours, chooses a location, & They obtain exclusive selling rights for specified geographical territories.
determines facilities & displays.
Their purchases may be less costly per unit due to the volume of the overall franchise.
Three structural arrangements dominate retail franchising
Manufacturer-retailer – A manufacturer gives independent franchisees the right to sell goods & Disadvantages of Franchisees
related services through licensing agreement. (Eg., Auto/truck dealers like GM, Petroleum Oversaturation could occur if too many franchisees are there in one geographical area.
products dealers like IOC).
Due to overzealous selling by some franchisors, franchisees’ income potential, required
Wholesaler-retailer managerial ability, & investment may be incorrectly stated.
Voluntary - A wholesaler sets up a franchise system & grants franchises to individual They may be locked into contracts requiring purchases from franchisors or certain vendors.
retailer. (Eg., Auto accessories stores, Consumer electronics stores).
Cancellation clauses may give franchisors the right to void agreement if provisions are not
Cooperative – A group of retailers sets up a franchise system & shares the ownership & satisfied.
operations of a wholesaling organization. (Eg., Food stores).
In some industries, franchise agreements are of short duration.
Service sponsor-retailer – A service firm licenses individual retailers so they can offer specific
service packages to customers. (Eg., McDoland’s). Royalties are often a %age of gross sales, regardless of franchisee profits.

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Franchising contd.. Leased Department

Advantages of Franchisors A leased department is a department in a retail store – usually a department,
discount, or specialty store – that is rented to outside party.
A national & global presence is developed more quickly & with less franchisor investment.
The leased department proprietor is responsible for all aspects of its business &
Franchisee qualification for ownership are set & enforced. normally pays a %age of sales as rent.
Agreement require franchisees to abide by stringent operating rules set by franchisors.
The store sets operating restrictions for the leased department to ensure overall
Money is obtained when goods are delivered rather than when goods are sold. consistency & coordination.
Because franchisees are owners & not employees, they have greater initiative to work hard.
Advantages (from the stores’ prespective)
Even after franchisees have paid for their outlets, franchisors receive royalties & may sell
products to the individual proprietors. The market is enlarged by providing one-stop customer shopping.
Personnel management, merchandise displays, & reordering items are undertaken by lessees.
Disadvantages of Franchisors
Regular store personnel do not have to be involved.
Franchisees harm the overall reputation if they do not adhere to company standards.
Leased department operators pay for some expenses, thus reducing store costs.
Lack of uniformity among outlets adversely affects customer loyalty.
A %age of revenue is received regularly.
Intra-franchise competition is not desirable.
The resale value of individual units is injured if franchisees perform poorly. Disadvantages (from the stores’ prespective)
Ineffective franchised units directly injure franchisors’ profitability. Leased department operating procedures may conflict with store procedures.
Franchisees, in greater number, are seeking to limit franchisors’ rules & regulations. Lessees may adversely affect the stores’ image.
Customers may blame problems on the store rather than on the lessees.

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Leased Department Vertical Marketing System

Advantages for Leased department operators A vertical marketing system consists of all the levels of independently owned businesses along a
channel of distribution.
Stores are known, have steady customers, & generate immediate sales for leased departments.
Type of channel Channel Functions Ownership
Some costs are reduced through shared facilities like security equipment & display windows.
Independent system Manufacturing Independent manufacturer
Their image is enhanced by the relationships with popular stores. • Manufacturers or retailers are small
• Intensive distribution is sought
• Customers are widely dispersed Wholesaling Independent wholesaler
Disadvantages for Leased department operators
• Unit sales are high
There may be inflexibility as to the store hours they must be open & the operating style. • Company resources are low Retailing Independent retailer
• Channel members share costs & risk
The goods / services lines are usually restricted. • Task specialization is desirable

If they are successful, the store may raise rent or not renew leases when they expire. Partially integrated system Manufacturing Two channel members own all
• Manufacturers & retailers are large facilities & perform all functions.
In-store locations may not generate the sales expected. • Selective or exclusive distribution
• Unit sales are moderate
Wholesaling
• Company resources are high
• Greater channel control is desired Retailing
• Existing wholesalers are too expensive or
unavailable

Fully integrated system Manufacturing All production & distribution

• Firm has total control over its strategy functions are performed by one
• Direct customer contact
• Exclusive offerings Wholesaling channel member.
• System is costly & requires lot of
expertise Retailing

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Consumer Cooperative
A consumer cooperative is a retail firm owned by its customer members.
A group of customers invests, elects officers, manages operations & share profits.
They account for tiny piece of retail sales.
Cooperatives are formed because they think they can do retailing function,
traditional retailers are inadequate & prices are high.
They have not grown because consumer initiative is required, expertise may be
lacking, expectations have frequently not been met, & boredom occurs.
Retail Location Strategies &
Decisions

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Why Location is Important? Types of Retail Location

The choice of the location of the store depends on the target audience & kind
There are three most important aspects in Retailing – location, location of merchandise to be sold.
& location.
Types:
Locating the retail store in the right place was considered to be
Freestanding/Isolated store
adequate for success.
Store located along major traffic artery
It is a important part of the retail strategy as it conveys a fair amount No competitive retailers around
of image.
Rents are usually low
It influences the merchandise mix & interior layout of the store. Advertising cost are high
It is difficult to change the location once the store comes into Customers may not prefer to travel long distance to visit only one store
existence. Part of a business district

Change of location may result in loss of customer & employees. A business district (primary, secondary or neighborhood) is a place of commerce in
the city
Rent is high; parking is cumbersome
It has good accessibility in terms of transport
Customers are more

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Steps involved in choosing a retail

Types of Retail Location contd..
location
Types: 1. Identify the market in which to locate the store
Part of a shopping centre 2. Evaluate the demand & supply within that market i.e., determine the market potential
Shopping centre - A group of retail & other commercial establishments that is 1. Demographic features of the population
planned, developed, owned & managed as single property
2. The characteristics of the households in the area
Parking is available
3. Competition & compatibility
Basic configuration – mall or strip centre with walkway
4. Laws & regulations
Ideally enclosed & climate control
5. Trade area analysis
3. Identify the most attractive sites
1. Traffic
2. Accessibility of the market
3. The no. & types of stores in the area
4. Amenities available
5. To buy or to lease
6. The product mix offered
4. Select the best site available

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The Spread of Organized Retail in
India

Jaipur
Pune
Bhopal
Mumbai Chandigarh
Bhubaneshwar
Hyderabad
Bangalore
Chennai
Delhi Retail Merchandising
Indore Nagpur
Kolkata
Gurgaon Udaipur
Noida

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What is Merchandising? Merchandise Planning

Merchandising is planning, buying & selling of merchandise (product). Merchandise planning can be defined as the planning & control of the merchandise
inventory of the retail firm, in a manner which balances between the expectations of the
The American Marketing Association defined merchandising as “the planning involved in
target customers & the strategy of the firm.
marketing the right merchandise at the right place at the right time in the right quantity
at the right price”. Implication of Merchandise Planning
Merchandising can be termed as the analysis, planning, acquisition, handling & control of
the merchandise investments of a retail operation.
Finance
Factors affecting the merchandising function Payments to suppliers
Profitability measurements

Developing advertisements
Details of Purchase Order

New product introductions

Warehouse & Logistics
Size of

Details of allocations
organization

Marketing
Merchandise
Merchandising
Organization

to be carried
structure

Merchandising Planning
function

Store Operations
Space planning
Types of stores Communication about new
products & their features

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Merchandise Planning Process Merchandise Planning Process

Stage I: Developing the Sales Forecast Stage II: Determining the Merchandise Requirements
1. Reviewing past sales Planning in merchandising is at two levels:
2. Analyzing the changes in the economic conditions 1. The creation of the Merchandise Budget (5 parts)
3. Analyzing the changes in the sales potential 2. The Assortment Plan
4. Analyzing the changes in the marketing strategies & the competition
5. Create the sales forecast The Merchandise Hierarchy

Stage II: Determining the Merchandise Requirements

Planning in merchandising is at two levels:
1. The creation of the Merchandise Budget (5 parts) Merchandise Merchandise Merchandise Style Price SKU (Stock
Company Department
Classification Category Sub Category point Keeping Unit)
2. The Assortment Plan

Merchandise
Budget

Stock Planned Planned Gross

Sales Plan
support plan reduction Purchase Margins

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 Key Components of Merchandise
Merchandise Planning Process
Planning
Some key merchandising terms Planned sales – Planned sales are projected sales for a period that is planned.
Staple/basic merchandising – products always in demand (basic necessities)
Fashion merchandising – products has high demand for a relatively short period of time Example:
Last year’s sale for the same period = 35,000
Seasonal merchandising – seasonal products
Month %age increase Planned sales (Rs)
Fad merchandising – enjoy popularity for a limited period of time; generated high sales for
a short time Feb 12% 35,000 X 12% + 35,000 = 39,200
Style – unique shape or form of any product (taste in music) April 25% 43,750
Assortment – variety of merchandise mix June 21% 42,350

The width/breadth of assortment – refers to the number of brands

The depth of assortment – variety in one goods/services category Planned purchase – Planned purchases represent the merchandise that is to be purchased
during any given period.
Points to be kept in mind while creating a plan - Planned Purchase = Planned Sales + Planned Reductions + Planned EOM – Planned BOM
The merchandise budget should be prepared in advance of selling season.
The language of the budget should be easy to understand.
Merchandise budget must be planned for a short period – 6 months is the normal norm.
Budget should be flexible.

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Key Components of Merchandise Key Components of Merchandise

Planning Planning
Planned reduction – Markdowns (deductions in prices), employee discounts & inventory The Basic Stock Method – In this method, the buyer believes that he needs to carry a
shrinkage due to theft or pilferage come under planned reduction. certain amount of inventory in the store at all times.
Planned markup – After calculating the level of inventory that needs to be purchased, the Basic Stock = Average stock for the season – Average monthly sales for the season
retailer needs to determine the initial markup for the products. Average monthly sales for the season = Total planned sales for the season
Markup in Rs. = Selling Price – Cost Price No. of months in the season
Markup % = Markup in Rs. Average stock for the season = Total planned sales for the season
Retail Price Estimated inventory turnover rate for the season
Gross Margin – Gross margin is the difference between the selling price & the cost of the Beginning of the month (BOM) stock = Planned monthly sales + Basic Stock
product, less reductions from markdowns, shrinkage & employee discounts.
Profit = Gross margin – operating expenses The Percentage Variation Method – This method of inventory calculation is used in case
the stock turnover typically exceeds six times a year.
B.O.M (Beginning-of-month) & E.O.M (End-of-month) planned inventory levels –
BOM Stock = Avg. stock for season * 1/2 * [1 + (Planned sales for the month / Avg.
Four Methods of Inventory Planning: monthly sales)]
a. Stock-to-Sales Method The Week’s Supply Method – Retailers who need to maintain a control over the
inventories on a weekly basis, may use this method.
S/S Ratio = Stock in hand E.O.M (at retail value) = Value of inventory
BOM Stock = Average weekly sales x No. of weeks to be stocked
Sales for the same month Actual sales
Planned BOM Inventory = Stock-sales ratio x Planned sales
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Merchandise Planning Process Merchandise Planning Process

Stage III: Merchandise Control – The Open to Buy Stage IV: Assortment Planning
The concept of Open to buy has two folds: Assortment Planning involves determining the quantities of each product that will
be purchased to fit into the overall merchandise plan.
1. depending on sales of the month & the reduction, the merchandise buying can
be adjusted. Details of color, size, brand, materials etc. have to be specified.
2. the planned relation between the stock & sales can be maintained. To create a balanced assortment merchandise for the customer.
Open to buy ensures that the buyer –
Limits overbuying & under buying
Prevents loss of sales due to unavailability of the required stock Department Menswear

Maintain purchases within the budgeted limits

Reduce markdowns i.e., reduction in price which may arise due to excess Product Line Shirts Trousers Accessories
buying

Open-to-Buy = Planned EOM Stock – Projected EOM Stock Louis

Breadth Zodiac Van Heusen
Philippe
Arrow
Projected EOM Stock = Actual BOM Stock + Actual Additions to stock + Actual on
order – Planned monthly sale – Planned reductions for the
month Depth Styles Color ……

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Merchandise Planning Process Merchandise Planning Process
Stage IV: Assortment Planning Stage IV: Assortment Planning
The Range Plan: The Model Stock Plan:
The aim of the range plan is to create a balanced range for each category of products that After determining the money available for buying, a decision needs to be taken on what to
the retailer choose to offer. buy? & in what quantity?
Range planning should take care of - Steps -
The no. of items/options available to the customer should be sufficient at all times & 1. Identify the attributes that the customer would consider while buying the product.
should be such that it helps the customer make a choice.
2. Identify the number of levels under each attribute.
The overbuying & under buying is limited.
3. Allocate the total units to the respective item category.
Sufficient quantities of the product are available, so that all the stores can be serviced
& the product is available at all the stores across various locations.

The process of merchandise planning may be top down or bottom up.

The lower limit of the range width is often called aesthetic minimum Top down planning occurs when the corporate objectives dictate the company’s financial objectives
in terms of sales, profit & working capital.
In Bottom up planning, individual department managers work on the estimated sales projections

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The Model Stock Plan

Men’s shirt
100% (1000)

Casual Dress Formal Sport

40% (400) 10% (100) 20% (200) 30% (300)

Small Medium Large Extra large

25% (100) 40% (160) 25% (100) 10% (100)

Full Sleeve Half Sleeve Branding & Private Labels

30% (48) 70% (112)

Button
Other
Down
60% (67)
40% (45)

White Blue Cream Grey

40% (18) 30% (14) 20% (9) 10% (4)

Cotton
Cotton
Blend
25% (4)
75% (14)

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Branding Building a Retail Brand

Brand Key questions for retail brands –

The American Marketing Association defined a brand as “a name, term, design, Can the brand be identified with the lifestyles of its target customers?
symbol or a combination of them, intended to identify the goods or services of Is there a perceptible difference between the brand & the products offering by the
one seller or group of sellers & to differentiate them from those of the retailer & other retailers?
competitors”.
Can a story be woven around the brand?
Branding existed from the time man felt the need to differentiate his products from that
being offered by others. A retail brand is a combination of the company’s heritage, the merchandise mix, the
Branding gradually became a guarantee of the source of the product & ultimately its use store environment, the service strategy, the advertising & promotion.
as a form of legal protection against copying grew. Successful retail branding starts with a clear definition of what retailers stand for – an
With the development of shops, shopkeepers hung pictures above their shops indicating identification of what the customers associate it with, leading customers to think: “This
the types of goods they sold. brand is a reflection of me.. This brand is meaningful to me..”

With industrial revolution mass production came into existence but the distance between The retailer needs to determine the specific value proposition for the end customers.
the manufacturers & customers increased. Playing on emotional benefits can also be a branding exercise of the retailer.
This eventually led to the evolution of the role of the brands as tools by which consumers Retail branding does not sell a specific product. It is about customer service.
identified the products.

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The Retail Value Chain Private Label
When the retailer decides to sell products or a line of merchandise which is owned,
controlled, merchandised & sold by the retailer in his own store/chain of stores, he is said
to be Selling Own Label / Brand or Private Label merchandise.

The Private Label Marketing Association defines store products as “all merchandise sold
Support Functions under a retail store’s private label. That label can be stores name or a name created
exclusively by that store. In some cases, a store may belong to a wholesale buying group
that owns labels, which are available to the members of the group. These whole-sale
owned labels are referred to as controlled labels”

Third Party Retail Customer Customers

Suppliers A private label can be classified as:
Logistics Operations Mgmt.
Store Brand – which carries the retailer’s name, such as Westside, Food World, Big Bazaar
etc.
An Umbrella Brand – where a common brand name is used across multiple categories –
Systems example Splash (Lifestyle), Bare (Pantaloon) etc.
Individual Brands – where specific brand names are created for specific market segments
and/or categories.

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Private Label - Evolution Why Private Label?

Private labels were traditionally defined as generic product offerings that competed with Retailer can fill in the need gaps that may exist in the market place.
national brands on the basis of value proposition.
Private label gives the retailer an advantage of offering the customer another
They were often seen as the lower priced alternative to the “real” thing. option.
Private label carried the stigma of inferior quality & therefore inspired less confidence.
A private label allows the retailer to offer a unique product in the marketplace.
Generics, which were products distinguishable by their plain & basic packaging were the
first type of private labels. Private label allows a retailer to earn a higher margin than other brands he
chooses to retail because designing, merchandising, sourcing & distribution is
With the increase in retail stores, the need to earn higher profit & the desire to service
the gaps in consumer requirements gave rise to private labels, both in apparel & the food
done by the retailer. Also, advertisement is in-store.
& grocery sector.
Today, most of the large department stores have their own private labels which cater to a
specific audience. Private Label Creation Process
Private labels rely on in-store advertisements.
In order to compete with national brands, private labels need to focus on quality. Placing
the order
The average quality of one product compared to other Identification of Make or Performance
& Marketing
the need Buy Measurement
Consistency in quality over a period of time Allocating
the goods
Private label goods become more successful where the no. of competing products is
lower.

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Merchandise Procurement / Sourcing Merchandise Procurement / Sourcing

The term sourcing means finding or seeking out products from different places, 2. Contacting & Evaluating the sources of supply
manufacturers or suppliers. Contacting can be vendor initiated contact or retailer initiated contact
Method of Procuring Merchandise Points to be kept in mind
1. Identifying the sources of supply The target market for whom the merchandise is being purchased.
Costs associated with global sourcing: The image of the retail organization & the fit between the product & the
image of the retail organization.
Country of origin effects – Many a times, where the merchandise has been
manufactured makes a difference in the final sale of the product. The merchandise & the prices offered.
Foreign currency fluctuations – Effects the buying price of the products. Terms & service offered by the vendor.
Tariffs – Taxes placed by the govt. on imports. The vendor’s reputation & reliability.
Foreign trade zones – These are special areas within the country that can be 3. Negotiating with the sources of supply
used for warehousing, packaging, inspection, labeling, exhibition, assembly,
The types of discounts that could be made available to the buyer
fabrication etc., of imports, without becoming subject to the country’s
tariffs. Trade discounts
Chain discounts
Cost of carrying inventory
Quantity discounts
Transportation cost
Seasonal discounts
Cash discounts

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Merchandise Procurement / Sourcing

4. Establishing Vendor Relations

To build & maintain strategic partnership with vendors, the buyer needs to build on:
Mutual trust
Open communication
Common goals
Credible commitments
5. Analyzing Vendor Performance Category Management
The total orders placed on the vendor in a year - A Method of Merchandise Management
The total returns to the vendor, the quality of the merchandise
The initial markup on the products
The markdowns (if any)
Vendor’s participation in various schemes & promotions
Transportation expenses if borne by the retailer
Cash discounts offered by the vendor
The sales performance of the merchandise
ISB&M Retail Management ISB&M Retail Management

Category Management Category Management contd..

Category Management can be defined as “the distributor/supplier process of managing Category Management is now considered as the “new science of retailing”
categories as SBUs, producing enhanced business results by focusing on delivering customer because -
value”.
1. It involves a systematic process.
A category is an assortment of items that a customer sees as reasonable substitutes
of each other. 2. It emphasizes decision-making based on complex analysis of consumer
A category management concept is a focus on a better understanding of consumer data & market level syndicate data.
needs as the basis for retailers’ & suppliers’ strategies, goal, & work processes. 3. It replaces the brand bias that stems from suppliers’ interest & encourages
The need to reduce costs, control inventory levels & replenish (refill) stock objective view based on consumers’ desires.
efficiently led to the concept of Efficient Consumer Response (ECR).
Category management provides renewed opportunities for meeting consumer needs Why Category Management?
& at the same time, for achieving competitive advantage as well as lower costs
through greater work process efficiencies. Consumer changes
Competitive pressures
Economic & efficiency considerations
Advances in IT

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Components Category Management The Category Management Business

Process

Performance
Measurement

Strategy
Trading
Organizational
Partner
Capabilities
Relationships
Business Process

Information
Technology

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The Category Management Business The Category Management Business
Process Process
Step 1: Category Definition Step 3: Category Assessment – Brain Harris’s Quadrant Analysis
A distinct, manageable group of products/services that consumers perceive to be
interrelated/substitutable in meeting a consumer need. Sleepers Winners
- Identify key products within category - Continue current policies
The category definition should be based on how the customer buys, & not on how - Delist slow movers & marginal products - Be alert to adaptation of new products
the retailer buy.
- Give quick movers more self space - Minimise operational problems like “out of
This step decides the products that represent a category, sub-category & major - Optimize margin mix stock”
segmentation. - Optimise margin mix

Market Share
At this step, the retailer assigns products to the various categories based on factors
such as consumer usage & packaging.
Questionable Opportunities
Step 2: Category Role - Limit product mix to core assortment & delist - Harmonise product mix with market trends
It determines the priority & importance of each category in the overall business. marginal products - Improve price image via low prices for key
- Look for price raises products
It serves the basis of resource allocation. - Minimise self space at category level - Maximise shelf space at category level
Consumer-based category roles: - Transfer logistical & operational work to third - Give promotional support to key items
parties
Destination categories – Why you as a retailer?
Preferred/routine category
Occasional/seasonal category
Market Growth
Convenience category – one-stop shop
ISB&M Retail Management ISB&M Retail Management

The Category Management Business The Category Management Business

Process Process
Step 4: Category Performance Measures Step 6: Category Tactics
Sales Category tactics work towards the determination of optimal category pricing,
Profits promotion, assortment & self management/presentation of the merchandise.
Market Share Step 7: Category Plan Implementation
Inventory Turnover What specific tasks needs to be done?
Changes in the Assortment When each task needs to be completed?
Consumer Transaction Who will accomplish each task?

Step 5: Category Strategies Step 8: Category Review

Typical category marketing strategies are:
Traffic building
Transaction building
Turf defending
Profit generating
Cash generating
Excitement creating
Image enhancing (Areas: Price, Service, Quality & Varity)

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Retail Marketing Mix The Retail Image Factors

Product Price People

Pricing
Associations

People Place Presentation The Adidas Retail Store

CA, USA
Brand

The Retail Retail

Customer

Promotion
Service

Marketing Store
Mix Image

Product / Place /
Merchandise Location
features
Customer
Promotion
Service

Shopping
Presentation Experience

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The Retail Communication Mix Retail Selling Process

Acquiring Product/Merchandise Knowledge

Sales
Promotion
Studying the Customer

Approaching the Customer

Public
Advertising
Relations
Retail Presenting the Merchandise
Communication
Mix

Overcoming Resistance

Personal Direct Suggestive Selling

Selling Marketing

Closing the Sale

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Effect of a Single Customer Transaction

Marketing &
Promotions

Recording Inventory
Merchandise Management

Retail Management Information System Customer

Warehouse
Transaction Sales Analysis

Customer Credit Card

Database Payments

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Why IT in Retail? Application of IT

Electronic Data Interchange (EDI)

Scale &
scope of Database Management, Data Warehousing, Data Mining
operations

Radio Frequency Identification (RFID)

Transaction Processing System (TPS)

Factors The
HR affecting financial Decision Support System (DSS)
availability the use of resources
IT available
Enterprise Resource Planning (ERP)

Intranet & Internet

The nature E-Commerce or E-Trailing

Efficient Stocking of Merchandise
of
Collection of Data business ……
Efficiency in Operations
Helps Communication

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 The Basic Supply Chain

Raw material packaging Manufacturer warehouse

Supplier warehouse Manufacturer

Physical Flow
SCM in Retail Finance Flow

Retailer warehouse
Retailer
ISB&M Retail Management ISB&M Retail Management

Framework for Analyzing Issues in SCM

Customer
Service

STRATEGIC

Channel Network
Design Strategy

STRUCTURAL
Warehouse
Transportation Materials
Design &
Management Management
Operations

FUNCTIONAL
Organization &
Information Policies & Facilities &
Change
Systems Procedures Equipment
Management

IMPLEMENTATION

ISB&M Retail Management