Retail

Management
Mkt 531
• Pride: Pride is the most powerful marketing tool that induces the
customer to buy something so that he gets a sense of
accomplishment, power, or respect.
• Love: Sometimes, merchandise is marketed stating that it is the best
gift for the loved ones.
• Greed: Marketing strategies focusing on the greedy emotion is very
effective. Getting a list of bonus items with the purchase of an item,
for e.g. fashion accessories with a fashionable outfit, is a package
price charged on a group of products.
• Value: Some advertisements focus on the emotional trigger of getting
a good deal. Messages challenging the customer that if they get a
better deal for the same product they will match their price, or if the
customer is not satisfied with the product in a limited time and the
brand promises cash back are related to feelings of value.

Some emotional factors that appeal to customers

• Identification with social groups: Most of the customers would like to
associate themselves with a group. Customers purchase a product just
to feel a part of the group associated with the brand or the product.
• Instant gratification: Impulse buying refers to the unplanned decision
taken by a consumer to buy a service or a product. Customer's basic
instinct related to instant gratification is manipulated by retailers. The
way merchandise is displayed in the window, and in-store may trigger
the buyer to buy what, may otherwise not be considered.
• Customers are generally not interested in product attributes, but are
likely to be interested in knowing how the merchandise would match
with their personality. Customers are attracted towards a product due to
the effect of their feelings.
• Emotional marketing is all about getting the target audience to connect
with the product or service of the brand at an emotional level.
Retail is a complex industry to manage. Between the unpredictable seasons,
finicky customers, and a volatile economy it presents a worthy challenge. Two
foundational business capabilities in Merchandising, and Supply Chain determine
a Retailer’s ability to compete. Merchandising gets the Customers, and Supply
Chain gets the Products…

At the highest level, it is a simple concept. Buy, Distribute, and Sell. And as long
as you can do that profitably, you are in business. That is where the rub is –
profitably – an average departmental retail store can have tens of thousands of
items to start with. Add to that the number of stores, formats, customer
demographics, seasons, fashions, competitor across the road, weather, economy
and you have a pretty hairy problem. The sheer number of independent variables
that a retailer must contend with, in planning and executing is mind boggling.

However, understanding the two key processes in merchandising and supply

chain can make or break a retailer. Building functional capabilities in these areas
to flexibly address business needs can give a retailer competitive edge.
• Retail Merchandising is the planning and control of the
buying and selling of goods and services to help the
retailer achieve its business objectives both qualitative
and quantitative.

What is Retail
Merchandising?
• Retail merchandising helps to encourage customers to
shop in a specific store rather than a competitor’s.
• It’s an effective way of helping to convert more browsers
or window shoppers into customers, by removing their
confusion and helping them choose between multiple
products more quickly.
• The better the merchandising and messaging, the less
overwhelmed shoppers will feel, and the less likely it is
that they will leave without purchasing.

Why is Retail Merchandising Important?

• Merchandise budget is a plan of projected scale for an
upcoming season, when and how much merchandise is to
be purchased and what markups and reductions /
markdowns will likely occur

Merchandise Budget
• Plan in advance for the season
• Simple to understand
• For a short period of time
• Flexible to accommodate.

4 rules of a merchandise
budget
• Merchandise Function: both buying and selling goods and
services (including selection, pricing, display, and customer
transaction)
• Micro Merchandising: a retailer adjusts shelf space
allocations to respond to customer and other differences of
local market
• Cross Merchandising: A retailer carries complimentary goods
and services to encourage shoppers to buy more. Remember
how we discussed logical groupings for Habitt. Well this is
why Sana and Safinaz carries Fashion accessories or Honda
Motors offers automobile accessories

Merchandise Function
• Merchandise Management is the process by which a
retailer attempts to offer the right quantity of the right
merchandise in the right place at the right time while
meeting the company’s financial goal.

Merchandise Management
• The Marketplace
• Wholesale Markets
• Trade shows

Where to go to
merchandise?
• Merchandise can be of following types:
o Basic or staple merchandise: which are regular products
found most of the time at a store
o Assortment merchandise: which includes a variety so as
to give customers on adequate range.
o Fashion merchandise: it has critical sales due to changing
tastes, trends.
o Festival / Seasonal: merchandise for the particular
festival season.

Types of Merchandise
• Merchandise can also be classified as:
o Impulse goods: Unplanned purchases by customers
o Convenience goods: Everyday purchase by customers
o Sloppy goods: Periodical purchase by customers.

Types of Merchandise..contd
• Brands can be international, national, regional / local
brands or private labels.
• Private labels are brands developed by a retailer for sales
only at that retailer’s stores.

Brands of Merchandise
 Organize the buying process by categories

Set Merchandising Financial Objectives

Develop Assortment Plan

Planning Merchandise
Assortment
Staple Merchandising
System or Fashion
Merchandising Buying
systems

Openness to
buy

Buying Systems
Allocation
• In recent years, the merchandising process is often
integrated into a more holistic management approach to
retailing, called category management
• Category Management is the process of managing a retail
business with the objective of maximizing the sales and
profits of a category.

Category Management
1. To determine the products that make up the category and its
segmentation from the consumer‘s perspective.
2. To assign a role for the category, based on consumer,
competitor, and retailer information.
3. To conduct an analysis of the category, sub-categories,
segments, etc. by reviewing detailed information.
4. To establish the category‘s performance measures and
targets.
5. To develop the marketing and product supply strategies that
realize the category role and performance objectives.
6. To determine the optimal assortment pricing, shelf
presentation and promotion tactics from the strategy.
7. To implement the category business plan through a specific
schedule and list of responsibilities

Category Management
After a more thorough analysis of the category and subcategories
(category assessment), the category targets are set and relevant
performance indicators selected(category performance
measures),because different roles lead to different target indicators.

This is the market share of a retailer in the category, compared to

his/her overall market share. It is an indicator of retailer
performance in this category relative to overall performance. The
next step is to decide on a marketing strategy for the category.
 Many different strategies are possible, including:
• Traffic building, attracting many consumers into the store, for
example, by offering price promotions for frequently purchased
products.
• Transaction building, enhancing the average size of the shopping
basket, for example, by exploiting demand in the space allocation in
stores or encouraging impulse purchases
• Profit generating, enhancing the profitability of the customers
shopping baskets by offering products with high margins and or
higher inventory
• Image creating , improving the retailers image for example by
offering products that are sold uniquely at the retailer. Lets take
Necos and Safe Milk. The only retailer to sell Safe Milk, Cow
hormone free milk is Necos. It is not widely available and the other
alternative is to join their distribution listing. It is an alternative
many people utilized during the Supreme Court case of Day Fresh.
Category Management is widely recognized as an essential
component of retailing. The original concepts introduced in the
1980’s moved retailers from selling products to marketing
categories and understanding shopper needs. Since then however,
the retailing landscape has changed significantly.

Consumer behavior is now far more dynamic and increasingly

fragmented yet the majority of retailers still follow the largely
unchanged traditional 8-step category management process¹ which
focuses on categories, not people. An industry study found that the
majority of retailers and manufacturers agree that the current
approach to category management has too many limitations due to
a “narrow focus on single categories and a deficiency in factoring
in shopper perspective”.
Category Leadership is a unique framework that takes a
pan-category approach, addressing the strategic role
categories play within the business and applying this
consistently through to category execution. Category
Leadership enables the holistic management of categories
through each of the marketing levers, and brings together
all the analysis, insight and tools required to drive category
growth by placing evolving consumer behavior at the
center of the planning process.

The framework developed for category leadership is

designed with the following key principles in mind:
The approach starts with strategic questions and progresses
through to tactical (but aligned) execution plans.
• 1. Simple to understand and logical to follow.
• 2. Modular. While best value will be attained by working
through each stage within the framework, the approach is
designed so that specific steps can be addressed in
isolation if required.
• 3. Recommendations are supported by existing
technologies, enabling ease of execution.

THE CATEGORY LEADERSHIP

FRAMEWORK
• Forecasts : Projections of expected Retail sales over a given period
• In the forecast one must account for Staple Merchandise: Regular products
carried by a retailer .
• Assortment Merchandise: as the name assortment. You have stores like Chen
One, Chase Up, Hyperstar that provide this service, they have an assortment of
things from furniture, to clothing, etc.. This is harder to forecast
• Fashion Merchandise which I hope you are familiar with is affected by changing
tastes and life cycles. Seasonal Merchandise consists of products that sell well
over certain time periods. Take shawls and sweaters in Karachi during the
winter.
• Fad merchandise: High sales are generated for a short time. This is very time
sensitive and in order to take full advantage one has to navigate how to not tie
up stocks (take into account the shortest cycle without losing on any crucial
element) so that when the fade changes or eases out, a loss is not incurred.

Devising Merchandise Plans

 An assortment is a selection
of merchandise a retailer
Allocati carries
on Forecas If you can score
innovation you
t can become
distinct however
Timing if you misread the
situation you can
Merchand be stuck with
inventory
ising Plan
The use of private
Brands brands or
manufacture
Assortm brands.
Innovat ent
ion There is such a thing as the right
time and there is such a thing as
the wrong time
 • Definition: A space you lease for the selling of goods to
consumers .
• When it comes to business, retailers have one overall goal: to sell
merchandise.
• That's why they focus on sales floor space, adequate parking for
customers, and an overall image that draws in customers. Of
secondary interest to many retail operations are office space and
storage requirements, since most inventory is on the sales floor.
• The opposite is true for shoe stores and more importantly
jewelers
• The real inventory is locked in back and only shown to customers
they deem interested or with the appropriate spending capacity
• However Location decisions for them is based in secure locations
and some times around competition

Retail Location
• Taking Jewelers as an example their location would be ideally close
to their target market
• Security is a high concern which is why jewelers hire their own
security and now prefer to be located in malls as malls feature their
own security and although have high rents can be balanced by the
lower need of security over heads
• This also provides Parking facility which is a crucial concern for
some buyers
• Competition is also welcome as jewelers like to be placed amidst
either their completion or their logical grouping of retailers, i. e
Watch stores, lets take Zaibunisa Street and Sadder as our local
market example

Jewelers
• Besides learning that Parking in fact does matter, lets talk
competition
• Notice how similar restaurants open in a area ( Do Daria),
(E street)
• Car Show rooms ( Khalid Bin Waleed Road) Auto Parts
Market and Accessories (Plaza)
• Furniture and Interiors ( Nursery, 26th Street after the
Mazaar)

Takeaway
• Most spaces for Rent ask you for a few months deposit, some are flexible ( like
kiosk) that allow for a month to month basis, but over all it’s a long term
commitment so if you are commitment shy , perhaps Brick and Mortar is not the
way for you
• Decision where to locate is complex, the costs are high, and once a site is
chosen, flexibility is limited.
• Depending on your location, even a mediocre offering can fly successfully. Lets
take hospital gift shops as an example
• Due to their proximity , they can charge a premium and still have limited variety
• South City Flower Shop
• Zerrita (PC)
• Airport Duty Free
• Bateel (PC)

The importance of
Location
• Lucky for all of us there are software's to make those
calculations
• Unfortunately basing your data on population is not a
winning combination (Lucky Mall)
• Lets revisit one of our earlier discussions, If sporting
stores like Reebok had taken not just income and
population but how much disposable income is spent on
fitness into the equation, perhaps their decision to open a
branch in Lucky Mall may have been different

Let’s keep it Real

• A trading area is a geographic area containing customers of a
particular firm or group for specific goods or services ( seen the
groupings of Courier services on Shahrefaisal?)
• Consumer demographics and socio economic characteristics are
uncovered
• The focus on promotional activities is ascertained
• A retailer learns whether new customers in the new locations will be
attracted or will it take away from current customers (Dolmen Mall
Clifton and Ocean Mall)
• Chains can determine whether competitors want to open nearby stores
• The best number for a chain to operate is determined ( Khaadi at The
Place, Ocean Mall , Dolmen Mall and a stand alone on Zamzamma)

Advantages of Trading Area

Analysis
• Geographic weaknesses are highlighted ( unless you have
already taken the leap, extensive research is required to
validate a hypothesis and many consumers lie in surveys
because of image
• Impact of the internet is taken into account
• Factors like accessibility of transport, labor, finance and
the proximity to financial institutions or atms,
competition, suppler location, legal restrictions ,bataa, etc
are also taken into account and preparation

Advantages of Trading
Area Analysis continued
• Central Business District (CBDs) is a traditional business
area in a city or a town. Due to its business activities it
draws many people into the area. The CBD is also a hub
of Public transport and there's a high level of Pedestrian
Traffic. Saddar is a key example, also ShahreFaisal and
Hassan square. The process of tearing down old stores or
restoration with new offices, housing development or
retailers is called Gentrification.

Types of Retail Location

The Union League Club is a private social
club in New York City.
• Many Cities use entertainment to attract people to
gentrified areas. New Yorks Horse Drawn Carriage Rides,
San Francisco’s cable car, side walk cafes, etc..
• Like the mall, this type of store location may be another
premium choice.
• However, there may be more freedom and fewer rules for
the business owner. Many communities are hard at work
to revitalize their downtown areas and retailers can
greatly benefit from this effort. However, the lack of
parking is generally a big issue for downtown retailers.
You'll find many older, well-established specialty stores
in a downtown area.

Downtown Area
In Karachi • A shopping Center is a group of retail and
• Lucky Mall other establishments that is planned,
• Dolmen Group developed and owned as a single property.
(DMC, DMTR, • Strip Centers have a Canopy linking store
DMH, DC) fronts with direct parking in front ( Tipu
• Ocean Mall Sultan eg Xanders, Chop Chop Wok, LSM,
ETC..) *failed shopping center is next to
• The Place Paramount where the first Charles and Keith
• Saimas was located parallel to Sea View Mcdonalds.
• Millennium Mall This failed due to … parking issues
• Park Towers • Malls on the other hand are more pedestrian
• The Forum focused with walkways attaching retail
stores, enclosed areas,, outward parking and
• Atrium
controlled environment
• Zamzamma Mall

Shopping Centers
• Because of many different retail stores, merchandise
available within, opportunity to combine shopping with
entertainment, shopping malls are the main street for
todays shoppers
• Customers can have a one stop shopping experience
based on the tenant mix. Need to loose weight and join a
gym, Clothing and accessories can be found in Dolman
Mall Clifton from sneakers to gym wear, gym bags ,
water bottles and even yoga mats from different brands
ranging from lifestyle and durability

Advantages of a
shopping mall location
• The third advantage is that retailers do not need to worry
about their external environment. The malls management
takes care of maintenance, uniform hours of operation,
security, and even signage regulations.
• In the event of shop lifting, security personnel can be called
to take care of the perpetrator, also easing the responsibility
of the retail staff of an outlet. *real example of a brand
• Also when fights between customers break out (has been
known to involve yelling and even physical violence)
security can be called to ease tensions

Advantages continued
• One disadvantage is that with all the facilities mentioned above
there comes a price. Mall rent is relatively higher than one
would pay say on Zamzamma. Furniture stores that require a
lot of space would hesitate before making the shift. Habbit in
fact joined Dolmen Mall Clifton years after its launch when
traffic to their Gizri brand had in fact declined. JB Saeed
showcases their wares at their stand alone in Bukharai.
• Some tenants may not like the mall administrations rules and
regulations * This includes store hours and window displays
• Competition in a mall can be intense. Small specialty stores go
head to head with bigger brands and departmental stores

Disadvantages of a Mall
• Regional Center: This type of center provides general
merchandise and services in full (CSD)
• Superregional Centers: similar to a regional center, but draws
from a larger population base and is enclosed with levels
(Rabi Center, Ghul Plaza)
• Fashion Specialty Centers : Although Tariq road still has a
close collection of medium to low range bridals on the strip
across Rabi Center, Mohsins, and Jabeens stretch, Mehboob
Buksh in Saddar, high end designers prefer E street and
Bukharai for their show rooms ( see String)
• Outlet Centers : Found in Saddar, North Nazmabad (although
prices say otherwise), manufacturers mostly sell their wares of
the brand at discounted rates. From the shift in of the mix,
these are now referred to as value centers
• The business park or office
building may be another
option for a retailer,
especially when they cater
to other businesses.
Tenants share maintenance
costs and the image of the
building is usually upscale
and professional.
• Example: Gyms, Salons,
located in office buildings

Office Building
• More and more retail
businesses are getting a start at
home. Some may eventually
move to a commercial store
location: The cakery or
Caramel for example, while
many remain in the business
owner's spare room. This type
of location is an inexpensive
option, but growth may be
limited. It is harder to separate
business and personal life in
this setup and the retailer may
run into problems if there isn't
a different address and/or
phone number for the business.

Home-based