RETAIL MANAGEMENT

OVERVIEW OF RETAILING
ENVIRONMENT &
MANAGEMENT

UNIT-I
RETAILING
 It is defined as a conclusive set of
activities or steps used to sell a
product or service to a consumer
for their personal or family use
 The word ‘retail’ is derived from
the French word retaillier, meaning
to ‘to cut a piece off’ or ‘to break
bulk’
RETAILING- CONCEPTS
 A retailer is a person, agent, agency,
company or organization which is
instrumental in reaching the goods,
merchandise or services to the ultimate
consumers
 Retailers perform specific activities as:
anticipating customers wants, developing
assortments of products, acquiring
market information and financing
 The selling need not necessarily take
place through a store. Retailing
encompasses selling through the mail,
the Internet, door to door visits- any
channel that could approach consumer
 Example- Dell
 Why has retailing become such a
popular method of conducting business?
 Retailers act as Gatekeepers who decide
on which new products should find their
way to the shelves of their stores
Retailers have to make optimum selection
of goods to be sold given the following
major concerns:

 Selling space available is relatively

fixed, and must return maximum
profits
 There is always a risk of non-
performance in terms of quality,
which can harm the image of retail
outlet
FUNCTIONS OF RETAILING
 SORTING
Manufacturers usually make one or a
variety of products and like to sell to
few buyers to reduce cost. Final
consumer, in turn, prefer a large variety
to choose from. Retailers have to
balance the demands of both sides, by
collecting an assortment of goods from
different sources.
 BREAKING BULK
To reduce transportation costs,
manufacturers and wholesalers typically
ship large cartons of the product, which
are then tailored by retailers into smaller
quantities to meet individual needs
 HOLDING STOCK
Retailers maintain an inventory that
allows for instant availability of the
product to the consumers. It helps to keep
prices stable and enables the
manufacturers to regulate production
 ADDITIONAL SERVICES
Providing product guarantees, after
sales service, and dealing with
consumer complaints are some of the
services that add value to the product at
retailer’s end
 CHANNEL OF COMMUNICATION
Retailers also act as the channel of
communication and information
between the wholesalers and the
consumers
 TRANSPORT AND ADVERTISING
FUNCTIONS
Small manufacturers can use
retailers to provide assistance with
transport, storage, advertising and
pre-payment of merchandise
DRIVING FORCES FOR
RETAILING
 Customers are the driving force in
change
With two-income families, busier schedules and
less time to shop, retailers must also offer more
convenience than ever before
Customers are more demanding and less
forgiving. They are less interested in lower price
or bigger selection, but in finding solutions to
their problems
Key to success is – Knowing what the customer
wants, and providing what the customers wants
just as required in most cost efficient manner
 Re-evaluating the Marketing
Plan
Along with growth in competition, both
on & off the web, advertising prices too
will continue to rise
Mass Advertising has become less
effective
Generic Advertising is also becoming
less & less effective, so a strong public
relation campaign has become a more
effective way to get customer attention
 Advanced education for
retailers is critical for growth
Innovative retailers have discovered that to
improve and adjust to changes , they must
continue to learn
Attending seminars, meeting other retailers &
learning from both will add to competitive edge
 Strong Visual Recognition
Visual Marketing has become increasingly
important to drive the sales. About 70-80% of
the buying decisions today are made at the
point of purchase
 The workplace challenge
Its difficult to attract & retain employees in
retail as information technology and other high
paying professions lure applicants
Retailers may foresee this challenge by offering
more continued education, greater
appreciation & motivation for their employees
 Planning for success
Strategic planning, which is a combination of
strategic thinking & long range planning, is the
key to planning for success
CHANGING STRUCTURE OF
RETAILING
 Changing customer demand, new
technologies, intense competition, and social
changes create new opportunities even as
they shake up existing business
 Technological advances, changing
demographics and shift in consumer
preferences and shopping expectations bring
changes in the structure of the industry
 The Internet & Web technologies have
created a myriad of opportunities for the
Web- based business model of Retailing
 A key impact of technology has been
provision of greater information to the
customer- opportunities for price
differentiation have nearly vanished
 Technology is also prompting efforts
towards product & service
differentiation
 Electronic Inventory system s have
spawned discount stores that offer
same merchandise as traditional
departmental stores do but at much
lower prices
THEORIES OF
STRUCTURAL CHANGES IN
RETAILING
 To understand the changes in
retailing business in a better way,
it is necessary to examine the
theories of change in retailing
 The Wheel of Retailing
 The Dialectic Process
 Natural selection
 Theories have been developed to explain the process
of retail development

Theories developed : Revolve around importance of

 Competitive pressures

 Investments in organizational capabilities

 Creation of sustainable competitive advantage

Growth in retail is a result of

 Understanding market signals

 Responding to the opportunities that arise

1. Environmental Theory
 Where a change in retail is attributed to the change in
the environment in which the retailers operate

2. Cyclical Theory
 Where change follows a pattern and phases can be
can have definite identifiable attributes associated
with them

3. Conflictual Theory
 The competition or conflict between two opposite
types of retailers, result in a new format being
developed
Environmental Theory
 Retail institutions are economic entities

 Retailers confront an environment (customers, competitors,

changing technology etc.)

 Environment can alter profitability of a single retail store as

well as of clusters and centres

 Environment in which retailer competes is robust to squash

any retail form that is unable to adjust

 The birth, success or decline of different retail enterprises is

attributed to business environment

 The ability to adapt to these environmental changes,

successfully, is the core of this theory
 Eg. Department stores I Western markets
Cyclical Theory
 Also known as the “Wheel of Retailing” theory. One of
the most well known theories
 Described by McNair, helps us in understanding retail
changes
 Theory suggests that retail innovators often appear as
1. low price operators,
2. with low cost structure
3. and low profit margin requirements offering some real
advantages that enable them to take away customers
 While prospecting they develop their business
 Offer wide range and acquire expensive facilities
 Such trading up occurs as the retailer becomes
established in his own right
 This in turn leaves room for others to enter and repeat
he process
Cyclical Theory
Theory of the wheel of retailing can be better understood
by taking the
example of a department store

 Starts as a low cost competitor to small retailers

 They develop and prosper
 Then they are severely undercut by supermarkets and
discount warehouses

This theory does not explain the development of retail in all

markets

In less developed markets, introduction may not

necessarily occur at a low
Price

There introduction may occur at a high price

Conflict Theory
 Conflicts will always exist between operators
of similar formats or within broad retail
categories

 Belief : Retail innovation does not necessarily

reduce the number of formats available to
customers

 But it leads to the development of more

formats

Retailing thus evolves through a dialectic

process ie. the
blending of two opposites to create a new format
Conflict Theory
This can be applied to developments in retailing as follows

a. “Thesis” : Individual retailers exist as corner shops all

across the country

b. “Antithesis” : A position opposed to the thesis develops

over a period of time. These are the department stores.
Antithesis is a challenge to the thesis
c. “Synthesis” : There is a blending of thesis and
antithesis

The result is a position between the thesis and the

antithesis

Supermarkets and hypermarkets thrive

This synthesis becomes the thesis for the next round of

evolution
RETAIL STRATEGY- RETAIL
PLANNING, DEVELOPMENT
& CONTROL
 Retail strategy indicates how the
firm plans to focus its resources to
accomplish its resources
 It influences the firm’s business
activities & its responses to market
forces, such as competition &
economy
There are 6 steps involved in the development
of a retail strategy:
[Link] the business of the firm in terms of
orientation towards a particular sector
[Link] short term & long term objectives with
regard to image & profitability
3. Identifying the target market towards which
to direct efforts on the basis of customer’s
characteristics & needs
[Link] the broad direction the company
must take in the future
[Link] an integrated plan that
encompasses all the aspects of retailing like
pricing, location & channel decisions
[Link] & revising the plan depending on
the nature of the internal & external
environment
THE CUSTOMER & RETAIL
BUSINESS
 The psychology of how consumers think, feel, reason, and select
between different alternatives (e.g., brands, products, and retailers);
 The psychology of how the consumer is influenced by his or her
environment (e.g., culture, family, signs, media);
 The behavior of consumers while shopping or making other
marketing decisions;
 Limitations in consumer knowledge or information processing
abilities influence decisions and marketing outcome;
 How consumer motivation and decision strategies differ between
products that differ in their level of importance or interest that they
entail for the consumer; and
 How marketers can adapt and improve their marketing campaigns
and marketing strategies to more effectively reach the consumer.
KNOWING YOUR
CUSTOMERS
 Physiological measures are used to examine consumer
response. For example, advertisers may want to measure a
consumer’s level of arousal during various parts of an
advertisement. This can be used to assess possible
discomfort on the negative side and level of attention on the
positive side.
 By attaching a tiny camera to plain eye glasses worn by the
subject while watching an advertisement, it is possible to
determine where on screen or other ad display the subject
focuses at any one time. If the focus remains fixed
throughout an ad sequence where the interesting and active
part area changes, we can track whether the respondent is
following the sequence intended. If he or she is not, he or she
is likely either not to be paying as much attention as desired
or to be confused by an overly complex sequence.
•Mind-reading would clearly not be ethical and is,
at the present time, not possible in any event.
However, it is possible to measure brain waves by
attaching electrodes. These readings will not
reveal what the subject actually thinks, but it is
possible to distinguish between beta waves—
indicating active thought and analysis—and alpha
waves, indicating lower levels of attention.
•An important feature of physiological measures is
that we can often track performance over time. A
subject may, for example, be demonstrating good
characteristics—such as appropriate level of
arousal and eye movement—during some of the
ad sequence and not during other parts. This,
then, gives some guidance as to which parts of
the ad are effective and which ones need to be
reworked.
MOTIVATION
 The motivation is the drive that leads the consumer towards buying a
product or service. If the motivation is high, meaning the need or
perception of need is high, the individual will actively seek to satisfy
that need. This results in the consumer deciding to buy the product or
service. This factor is directly related to "Maslow's Hierarchy of Needs"
which states that every individual will actively seek to satisfy
physiological needs first, followed by safety, social, esteem and finally,
self-actualization needs. Businesses that successfully leverage these
needs will motivate consumers to buy their products.
.
 Why do people wear branded clothes ?
Individuals prefer to spend on premium brands and unique
merchandise for others to look up to them. Certain products become
their status symbol and people know them by their choice of picking
up products that are exclusive. An individual who wears a Tag Heuer
watch would never purchase a local watch as this would be against his
image.
PERCEPTION
 MBA Notes World defines perception as, "The process
by which people select, organize, and interpret
information to form a meaningful picture of the world."
Consumers make all manner of associations from their
prior knowledge and experiences. It is difficult for a
company that positions itself as a low cost retail store,
Walmart, for example, to sell expensive clothing once
it has established its market positioning. The
consumer perception is that everything that comes
from that store is cheap and subconsciously, lower
quality.
What an individual thinks about a particular
product or service is his/her perception towards
the same. For someone a Dell Laptop might be the
best laptop while for others it could be just one of
the best brands available.
Individuals with the same needs might not
purchase similar products due to difference in
perception.
Individuals perceive similar situation differently
due to difference in the way they interpret
information.
There are three different processes which lead
to difference in perception:
Selective Attention - Selective attention refers to
the process where individuals pay attention to
information that is of use to them or their immediate
family members. An individual in a single day is
exposed to numerous advertisements, billboards,
hoardings etc but he is interested in only those which
would benefit him in any way. He would not be
interested in information which is not relevant at the
moment.
Selective Distortion - Consumers tend to perceive
information in a way which would be in line to their
existing thoughts and beliefs.
Selective Retention - Consumers remember
information which would be useful to them, rest all
they forget in due course of time. Michael wanted to
purchase a watch for his wife and thus he
remembered the RADO advertisement which he had
seen several days ago.
LEARNING
 Consumers are products of their experiences. They
catalog each experience as good or bad for later
use when a similar situation arises. These
experiences influence the consumer buying
behavior by changing the way they react to
products similar to those they already have
experience with. For example, many consumers
choose to buy Toyota cars because they have had
good experiences with their previous Toyota
models. Companies that focus on the consumer
experience often gain repeat business because the
consumer does not feel the need to look anywhere
else to fulfill that particular need.
•Learning comes only through experience. An
individual comes to know about a product and
service only after he/she uses the same. An
individual who is satisfied with a particular
product/service will show a strong inclination
towards buying the same product again.
•There are three main theories of Learning:
 Classical Conditioning
 Operant conditioning
 Vicarious learning
ATTITUDE & BELIEFS
 Beliefs and attitude play an essential role in
influencing the buying decision of consumers.
Individuals create a certain image of every
product or service available in the market.
Every brand has an image attached to it, also
called its brand image.
 Consumers purchase products/services based
on their opinions which they form towards a
particular product or service. A product might
be really good but if the consumer feels it is
useless, he would never buy it.
 An attitude is the individual's consistently
favorable or unfavorable evaluation, tendency or
feeling about a particular subject.
These beliefs and attitudes shape the consumer's
perception of the product.
These factors may be difficult to change because
they stem from the individual's personality and
lifestyle. Consumers often block information that
conflicts with their beliefs and attitudes. They
tend to selectively retain information or even
distort the information to make it consistent with
their previous perception of the product
SITUATIONAL ANALYSIS

UNIT II
 CLASSIFICATION OF
RETAIL OUTLETS

STORE BASED RETAILING NON-STORE SERVICE

RETAILING MARKETING

FORM OF MERCHANDISE Direct selling Banks

OWNERSHIP OFFERED Mail order Car rentals
Tele- marketing Service
Independent retailer Convenience stores Automated contracts
Chain retailer Supermarkets vending Providers of
Franchise Hypermarkets various services
Leased department Speciality stores
Consumer co- Departmental stores
operatives Off- price retailers
Factory outlets
Catalogue showrooms
Classification of Retail Stores : On the basis of ownership
Independent Retailer

 One who owns and operates only one retail outlet

 Such an outlet features the owner & proprietor and
few local hands or family members
 Many independent stores are passed from
generation to generation
 In India large number of retailers are independent
retailers
 Example : local baniyas, kirana stores, paanwalla etc.
 Ease of entry into the retail market is one of the
biggest advantages available to an independent
retailer
 Depending on the location and the product mix
independent retailers determine their own
strategies
Chain Retailer
 Also known as a “Corporate Retailer”
 When two or more outlets are under a
common ownership
 Characteristics: Similarity in merchandise,
ambience, advertising and promotion
 Examples : Park Avenue, Parx (Raymond),Wills
Sport (ITC), Louis Phillipe, Van Heusen
(Madura Coats), Arrow (Arvind Mills)
 Department stores like West Side, Pantaloons,
Globus, Shopper’s Stop, Music World, Planet M
, etc.
 The biggest advantage for the chain stores is
the bargaining power over their suppliers
 Cost effectiveness is also possible in
advertising and promotion
Franchising

 Franchise is a contractual agreement

between franchiser and franchisee
 Allows the franchisee to conduct

business under an established name

 The business format is specified

 The franchisee in return pays a fee or

compensation
Franchising can be for the following
 A product or a trade mark franchise, eg.

Archie’s
 A business format franchise – Mc

Donald’s
Leased Departments
 These are also termed as shop-in-shops
 When a section of a department in a retail store is
leased / rented to an outside party
 A good method available to a retailer for
expanding his product offering to the customers
 In India many large department stores operate
their perfumes and cosmetics counters in this
manner
 This is a new trend emerging in Indian retail
 Large retail chains are setting up smaller retail
outlets
 Outlets or counters in high traffic areas like malls,
department stores, multiplexes
 Outlets in public places like airports, railway
stations
 Main aim is to be available to the customer near
his place of work or home
Consumer Cooperatives

 Consumer cooperative is a retail institution

owned by its member customers
 Consumer cooperative may arise due to
dissatisfied consumers, whose needs are
not met by existing retailers
 The members of the cooperative largely
run these cooperatives
 Thus there is limited growth opportunities
 Examples of cooperatives: Sahakari
Bhandars & Apna Bazaar in Mumbai and
the Super Bazaar in Delhi
 Kendriya Bhandars are probably the oldest
examples operated by the government
Classification on the basis of merchandise offered
1. As food oriented
2. General merchandise retailers

Within this classification they may further be

classified on
the basis of target markets they cater to
 Speciality stores, department stores and
convenience stores cater to a very specific
target market
 They are many a times referred to as products/
service retailers
 Supermarkets, hypermarkets and department
stores cater to mass market and are often
called traditional product retailers.
Convenience Stores
 Small stores located near residential areas
 Open for long hours, seven days a week and
offer limited line of convenience products
 Eggs, milk, bread, toiletries etc.
 Store size ranges from 3,000 to 8,000 [Link].
 Targeted at customers who wish to make
purchases quickly
 However retail stores have come up at
petrol pumps like HP, IOC, BPC, Speed Mart
etc.
 These can be termed as convenience stores
Supermarkets
 These are large, low cost, low margin, high
volume, self service operations
 Designed to meet the needs for food,
groceries & other non-food items,
dedicated to selling at least 70% foodstuffs
& everyday commodities
 Internationally the size of these stores
varies from 8,000 to 20,000 [Link].
 Reliance fresh,Subhiksha, Kroger and Tesco
are some of the large international players
 The concept of everyday low pricing (EDLP)
is followed by some retailers
 Under this the price charged by retailers
are lower than those charged by other
grocery retailers in the area
Hypermarkets
 These are huge retail stores occupying an area
which ranges anywhere between 80,000 to
2,20,000 [Link].
 Combination of supermarket & department
store
 Offer both food and non food items like clothes,
jewellery, hardware, sports equipment, cycles,
motor accessories, books, CD’s DVD’s, videos,
TV’s, electrical equipment and computers
 They combine the supermarket, discount &
warehousing retailing principles
 Hypermarket concept was pioneered by
Carrefour in France
 Other facilities include banks with cash
machines, photo processing shops and
pharmacies.
 Ex- Carrefour, Wal-mart, Target, Big bazar
Department Stores
 These as retail format, originated in the mid
nineteenth century
 They are large-scale retail outlets, often multi
leveled, whose merchandise offer spans a
number of different product categories
 The merchandise of various departments is
displayed separately in the store
 Apparel and furnishing are two of the most
common product categories
 Some of the well known international players
in this format are Marks & Spencer, Sears, J C
Penny, Harrods, Selfridges etc
 This format of retailing has seen a lot of action
over the last few years
 Some of the national players are Shopper’s
Stop, Westside etc
Speciality Stores

 These are characterized by narrow product

line, with a deep assortments in that product
line
 Speciality stores usually concentrate on
apparel, jewellery, fabrics, sporting goods,
furniture etc.
 They have a very clear defined target market
and their success lies in serving their needs.
 Personal attention, store ambience and
customer service are of prime importance to
these retailers
 Internationally most speciality retailers
operate in an area that is under 8,000 [Link].
 Examples of speciality stores are The Gap,
Ikea, Lilliput
Off Price Retailers

 Here the merchandise sold is less than the retail

price
 They buy manufacturer’s seconds, overruns and off
seasons at deep discount
 The merchandise may be in odd sizes, unpopular
colours or with minor defects
 Off price retailer may be manufacturer owned or
may be owned by a speciality or departmental store
 These outlets are usually seen by the parent
company as a means of increasing the business
 Factory outlets, if owned by the manufacturer, may
only stock company’s merchandise
 Examples Pantaloon, Levi’s, Raymond's factory
outlets
 These formats depend on the volume of sales to
make money
Catalogue Showrooms

 Catalogue retailers usually specialize in hard

goods
 House ware, jewellery, consumer electronics
etc
 Customers walk into these showrooms and go
through the catalogue of products they would
like to purchase
 Sometimes customers are asked to write the
code number and hand it over to the clerk, who
then arranges for the product to be brought out
from the warehouse for inspection and
purchase
 Examples : Electronics & Electrical Equipment,
Building Accessories, Sanitary Fittings, Paints
etc
Non Store Retailing
 Ultimate form of retailing directly to the
consumers
 Direct relationship with the consumer
 Can be classified into direct selling and direct
response marketing

Direct Selling
 Involves making of personal contact with end
consumers at his home or his place of work
 Cosmetics, jewellery, food and nutritional
products, home appliances and educational
materials are some of he products sold in this
manner
 Direct selling industry started in India in mid-
1990s, went through a bad phase and today has
attained a significant worth of Rs.1,500 crores
 Party plan & multi level network
Direct Response marketing
 Involves various non personal methods of
communication with the consumers and these
include
- Catalogue retailing
- Television retailing
- E- retailing

Mail Order Retailing/Catalogue Retailing

 It eliminates personal selling and store
operations
 Appropriate for speciality products
 Key is using customer database to develop
targeted catalogues that appeal to narrow target
markets
 The basic characteristic of this form of retailing is
convenience
Television Shopping
 Asian Sky Shop was among the first

retailers who introduced television

shopping in India
 The product is advertised on the

television, details about the product

features, price and other things like
guarantee and warranty are explained
 Phone numbers are provided for each

city, where the buyer can call in and

place the order for the product
 The products are then delivered
Electronic Shopping

 This format allows customers to

evaluate and purchase products from
the comfort of their homes
 Success depends on the products that
are offered and the ability of the retail
organization to deliver the product on
time
 Strong supply chains and delivery
mechanisms need to be in place for it to
be a success
 Many retailers are opting to sell the
products on the internet
PROMOTIONAL
STRATEGIES USED IN
RETAILING
 Any communication by a retailer that
informs, persuades, and/or reminds the
target market about any aspect of that
firm
 Elements of the Promotional
Mix
Impersonal Personal
Advertising
Sales promotion Personal selling
Paid

Store atmosphere E-mail marketing

Web site
Unpaid

Publicity Word of mouth

Management of Promotional
Efforts Must Fit Into a Retailer’s Overall
Strategy
 A retailer’s location will help determine the target area for
promotions

 Retailers need high levels of traffic to keep merchandise moving

– promotion helps build traffic

 Retailer’s credit customers more store loyal and purchase on

larger quantities making them an excellent target for
promotions

 Promotions can increase short-run cash flow

 Promotional creativity and style should coincide with building

and fixture creativity

 Promotion can be viewed as a major component of customer

service because it provides information
Planning a Retail
Promotional Strategy
 Promotional Objectives
Improve Long-Run Improve Short-Run
Performance Performance

Store Image and Public Attract New Increase Existing

Positioning Service Customers Customer Patronage

From Existing Expand

Trade Area Trade Area
Newspaper Advertising
Yellow Pages
 The average consumer
looks at: 4.32 ads.

 70% of consumers look

at the bigger ads when
they are not sure where
to make a purchase.

 65% of consumers feel

that a large ad signifies a
business with an
established reputation.

 83% of consumers start

looking at ads in the
beginning of a heading.
Direct Mail
Billboards/Outdoor Ads
• On average, a billboard is only viewed for 7 seconds!
• A good rule is to use about 8 to 10 words in your entire ad!
• Your message must be very short so it can be easily read by the people driving
60 to 75 miles per hour by your sign.
•Measured and priced in gross rating points
(GRP) .The GRP is calculated by dividing the
traffic count by the population .

•Billboards are typically purchased as 25, 50,

75, or 100 GRP (showings). For example, if
you want a 50 GRP (showing), than 50% of
the population should see your billboards
every single day.
Radio Advertising
 Retailers spent $72.2 million on
metropolitan commercial radio
advertising in the first six months
of 2005
Magazine Advertisements

Parisian Ad
 Flyers/Circulars

[Link]
Media Selection
 Coverage – maximum number of
consumers in the retailer’s target
market

 Reach – actual total number of target

customers who come into contact with
the ad message

 Frequency – average number of times

each person who is reached is exposed
to the ad during a given time period
Scheduling Retail Ads
 Ads should appear on (or slightly precede) the days when
customers most likely to purchase

 Ads should be concentrated around the times when

people receive their payroll checks

 If funds are limited, concentrate ads during periods of

highest demand

 Ads should be timed to appear during time or day of

week when the best cost-per thousand for the target
market ((cost of ad/number of people in the target
market viewing the ad) x 1000)

 The higher the degree of habitual purchasing of a product

class, the more the advertising should precede the
purchase time.
CHOOSING A STORE
LOCATION
 Objectives of the Store
Environment
 Get customers into the store (store image)


Serves a critical role in the store selection process

Important criteria include cleanliness, labeled prices, accurate and
pleasant checkout clerks, and well-stocked shelves

The store itself makes the most significant and last impression

 Once they are inside the store, convert them into customers
buying merchandise (space productivity)

The more merchandise customers are exposed to that is presented in
an orderly manner, the more they tend to buy

Retailers focusing more attention on in-store marketing – marketing
dollars spent in the store, in the form of store design, merchandise
presentation, visual displays, and in-store promotions, should lead to
greater sales and profits (bottom line: it is easier to get a consumer in
your store to buy more merchandise than planned than to get a new
consumer to come into your store)
 Objectives of Good Store Design
 Design should:

 be consistent with image and strategy

 positively influence consumer behavior
 consider costs versus value
 be flexible
 recognize the needs of the disabled –
The Americans with Disabilities Act
 Types of Floor Space in

Store
Back Room – receiving area, stockroom

Department stores (50%)

Small specialty and convenience stores (10%)

General merchandise stores (15-20%)

 Offices and Other Functional Space – employee break

room, store offices, cash office, restrooms

 Aisles, Service Areas and Other Non-Selling Areas


Moving shoppers through the store, dressing rooms,
layaway areas, service desks, customer service facilities

 Merchandise Space

Floor

Wall
 Store Layout (and Traffic
Flow) objectives:
 Conflicting

 Ease of finding merchandise versus

varied and interesting layout

 Giving customers adequate space to

shop versus use expensive space
productively
Grid (Straight) Design
• Best used in retail
environments in which
majority of customers shop the
entire store

• Can be confusing and

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

• Should be employed
carefully; forcing customers to
back of large store may
frustrate and cause them to
look elsewhere

• Most familiar examples for

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

• Exposes shoppers to the

greatest possible amount of
merchandise by encouraging
browsing and cross-shopping
 • Fixtures and
merchandise
grouped into free-

Free-Flow Layout flowing patterns on

the sales floor – no
defined traffic
pattern
Stockings

Storage, Receiving, Marketing

• Works best in
small stores (under

Hats and
Dressing Rooms 5,000 square feet)
Underwear
in which customers
Pants Accesso

Top
wish to browse
Casual Wear

s
ries

Checkout counter

Skirts and Dresses

• Works best when
merchandise is of

Top
Clearance the same type,

s
Items such as fashion

Handbags
apparel
Jeans

Feature Feature
• If there is a great
Open Display Open Display variety of
Window Window merchandise, fails
to provide cues as
to where one
department stops
 • Variation of grid, loop and free-form

Spine Layout
layouts

• Based on single main aisle running

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

• On either side of spine, merchandise

departments branch off toward the
back or side walls

• Heavily used by medium-sized

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

• In fashion stores the spine is often

subtly offset by a change in floor
coloring or surface and is not
perceived as an aisle
 Location of Departments

 Relative location advantages

 Impulse products

 Demand/destination areas

 Seasonal needs

 Physical characteristics of merchandise

 Adjacent departments

Fixture Types
Straight Rack – long pipe
suspended with supports to the
floor or attached to a wall

 Gondola – large base with a vertical

spine or wall fitted with sockets or
notches into which a variety of
shelves, peghooks, bins, baskets
and other hardware can be
inserted.

 Four-way Fixture – two crossbars

that sit perpendicular to each other
on a pedestal

 Round Rack – round fixture that sits

on pedestal

 Other common fixtures: tables,

large bins, flat-based decks
 Fixture Types
 Wall Fixtures
 To make store’s wall
merchandisable, wall usually
covered with a skin that is
fitted with vertical columns of
notches similar to those on a
gondola, into which a variety
of hardware can be inserted
 Can be merchandised much
higher than floor fixtures
(max of 42” on floor for round
racks on wall can be as high
as 72”
Merchandise Display
Planning
 Shelving – flexible, easy to maintain

 Hanging

 Pegging – small rods inserted into gondolas or wall systems – can be

labor intensive to display/maintain but gives neat/orderly appearance

 Folding – for softlines can be folded and stacked on shelves or tables

- creates high fashion image

 Stacking – for large hardlines can be stacked on shelves, base decks

of gondolas or flats – easy to maintain and gives image of high
volume and low price

 Dumping – large quantities of small merchandise can be dumped into

baskets or bins – highly effective for softlines (socks, wash cloths) or
hardlines (batteries, candy, grocery products) – creates high volume,
low cost image
Three Psychological
Factors to Consider in
Merchandising Stores
 Value/fashion image

Trendy, exclusive, pricy vs value-oriented

 Angles and Sightlines


Customers view store at 45 degree angles from the path
they travel as they move through the store

Most stores set up at right angles because it’s easier
and consumes less space

 Vertical color blocking


Merchandise should be displayed in vertical bands of
color wherever possible – will be viewed as rainbow of
colors if each item displayed vertically by color

Creates strong visual effect that shoppers are exposed
to more merchandise (which increases sales)
POS Displays
 Assortment display – open
and closed assortment

 Theme-setting display

 Ensemble display

 Rack display

 Case display

 Cut case

 Dump bin
Visual Merchandising
 The artistic display of merchandise and theatrical props
used as scene-setting decoration in the store

 Several key characteristics


Not associated with shop-able fixture but located as a focal
point or other area remote from the on-shelf
merchandising (and perhaps out of the reach of
customers)

Use of props and elements in addition to merchandise –
visuals don’t always include merchandise; may just be
interesting display of items related to merchandise or to
mood retailer wishes to create

Visuals should incorporate relevant merchandise to be
most effective

Retailers should make sure displays don’t create walls that
make it difficult for shoppers to reach other areas of the
store
StoreFront Design
 Storefronts must:
 Clearly identify the name and general nature
of the store
 Give some hint as to the merchandise inside
 Includes all exterior signage
 In many cases includes store windows – an
advertising medium for the store – window
displays should be changed often, be
fun/exciting, and reflect merchandise offered
inside
Atmospherics
 The design of an environment via:

 visual communications
 lighting
 color
 sound
 scent

to stimulate customers’ perceptual and emotional

responses and ultimately influence their purchase
behavior
 Visual Communications
 Name, logo and retail identity

 Institutional signage

 Directional, departmental and category

signage

 Point-of-Sale (POS) Signage

 Lifestyle Graphics
 Visual Communications
Coordinate signs and graphics with
store’s image
 Inform the customer
 Use signs and graphics as props
 Keep signs and graphics fresh
 Limit sign copy
 Use appropriate typefaces on signs
 Create theatrical effects
 Lighting
Important but often overlooked element in
successful store design

 Highlight merchandise

 Capture a mood

 Level of light can make a difference


Blockbuster

Fashion Departments
Color
 Can influence behavior

 Warm colors increase blood pressure,

respiratory rate and other physiological
responses – attract customers and gain
attention but can also be distracting

 Cool colors are relaxing, peaceful, calm and

pleasant – effective for retailers selling
anxiety-causing products
Sound & Scent
 Sound

Music viewed as valuable marketing tool

Often customized to customer demographics - AIE

Can use volume and tempo for crowd control

 Scent

Smell has a large impact on our emotions

Victoria Secret, The Magic Kingdom, The Knot Shop

Can be administered through time release
atomizers or via fragrance-soaked pellets placed on
light fixtures
MANAGING RETAIL
BUSINESS

UNIT-III
RETAIL ORGANIZATION
AND HRM
Figure 11-2: The Process of
Organizing a Retail Firm

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-100 publishing as Prentice Hall 100
Figure 11-3: Division of Tasks in a
Distribution Channel

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-101 publishing as Prentice Hall 101
 Table 11-1: Principles for
Organizing a Retail Firm
 Show interest in employees
 Monitor employee turnover, lateness, and
absenteeism
 Trace line of authority from top to bottom
 Limit span of control
 Empower employees
 Delegate authority while maintaining
responsibility
 Acknowledge need for coordination and
communication
 Recognize the power of informal
relationships
Retail Mgt. 11e (c) 2010
Pearson Education, Inc.
11-102 publishing as Prentice Hall 102
Figure 11-6: Organization
Structures Used by Small
Independents

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-103 publishing as Prentice Hall
 Figure 11-8:
Equal-Store
Organizational
Format Used
by Chain
Stores

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-104 publishing as Prentice Hall
Figure 11-
9: The
Organizati
onal
Structure
of Kroger

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-105 publishing as Prentice Hall
Human Resource
Management in Retailing

 Recruiting
 Selecting
 Training
 Compensating
 Supervising

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-106 publishing as Prentice Hall
Table 11-2: True Cost of Employee
Turnover
 Costs of using fill-in employees
 Severance pay for exiting employees
 Costs of hiring new employees
 Training costs
 Costs of mistakes and lower productivity
while new employees gain experience
 Customer dissatisfaction due to the loss of
prior employees and the use of
inexperienced workers.
 Lower continuity among co-workers.
 Poor employee morale when turnover is high.

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-107 publishing as Prentice Hall
Women in Retailing

 Issues to address with regard to female

workers

Meaningful training programs

Advancement opportunities

Flex time: the ability of employees to adapt
their hours

Job sharing among two or more employees
who each work less than full time

Child care
 Retailing empires

Mary Kay

Avon
Retail Mgt. 11e (c) 2010
Pearson Education, Inc.
11-108 publishing as Prentice Hall
 Diversity

 Two premises:
1. That employees be hired and promoted in a
fair and open way, without regard to
gender, ethnic background, and other
related factors
2. That in a diverse society, the workplace
should be representative of such diversity

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-109 publishing as Prentice Hall
 Labor Law Considerations
 Retailers must not

Hire underage workers

Pay workers “off the books”

Require workers to engage in illegal acts

Discriminate in hiring or promoting
workers

Violate worker safety regulations

Disobey the Americans with Disabilities
Act

Deal with suppliers that disobey labor
laws

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-110 publishing as Prentice Hall
 Figure 11-10:
A Goal-Oriented
Job Description
for a
Management
Trainee

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-111 publishing as Prentice Hall
Figure 11-11: A Checklist of Selected
Training Decisions

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-112 publishing as Prentice Hall
 Components of
Compensation

$ Total compensation
$ Salary plus commission
$ Profit-sharing

Retail Mgt. 11e (c) 2010

Pearson Education, Inc.
11-113 publishing as Prentice Hall
Employee Behavior and
Motivation

 Several attitudes may affect employee behavior

 Sense of accomplishment
 Enjoyment of work
 Attitude toward physical work
conditions
 Attitude toward supervisors
 Confidence in company
 Knowledge of business strategy
 Recognition of employee role in
achieving corporate objectives
Retail Mgt. 11e (c) 2010
Pearson Education, Inc.
11-114 publishing as Prentice Hall
Style of Supervising Retail
Employees
1. Management assumes
employees must be closely
supervised and controlled; only
economic inducements motivate
2. Management assumes

employees can be assigned

authority and be self-managers;
motivation is intrinsic
3. Management applies self-
Retail Mgt. 11e (c) 2010

management
11-115 approach
Pearson Education, Inc.
publishing as Prentice Hall
RETAIL ORGANIZATION
AND OPERATIONS
MANAGEMENT
Four Steps for Strategy
Formulation
 Defining a primary task

What is the firm in the business of doing?
 Assessing core competencies

What does the firm do better than anyone else?
 Determining order winners and order qualifiers

What wins the order?

What qualifies an item to be considered for
purchase?
 Positioning the firm

How will the firm compete?

Copyright 2006
John Wiley & Sons,
Inc. 2-117
 Operations’ Role in
Corporate Strategy

 Operations provides support for a

differentiated strategy
 Operations serves as a firm’s distinctive
competence in executing similar
strategies better than competitors

Copyright 2006
John Wiley & Sons,
Inc. 2-118
 Operations
Strategy at Wal-
Mart

Copyright 2006
John Wiley & Sons,
Inc. 2-119
 Strategy and the
Internet
 Internet can be used to create a
distinctive business strategy

eBay
 unlimited capacity and a huge market
 all work is done by buyers and sellers
and there is no marginal cost

Cisco
 integrated value chain is its
competitive advantage
Copyright 2006
John Wiley & Sons,
Inc. 2-120
 Strategy and the
Internet (cont.)
 Internet can be used to strengthen existing
competitive advantages by integrating new and
traditional activities
 GE’s Trading Process Network: an automated Web-based
purchasing system

cut average purchasing cost in half

enabled a much larger group of suppliers to bid on jobs

customers were able to track their orders through shop in
real time
 Intel

sells $2 billion a month over the Internet

purchases 80% of its direct materials online

replaced 19,000 sales-order faxes received daily
Copyright 2006
John Wiley & Sons,
Inc. 2-121
 Strategy and the
Internet (cont.)
 Lessons from the dot com shakedown
 Internet is the great equalizer

allows innovations to be copied with little investment

companies may reach larger market

customers have more information and can compare
prices and features of their products.

These benefits are temporary unless…
 Companies provide unique value to customer

Copyright 2006
John Wiley & Sons,
Inc. 2-122
 Strategic Decisions
in Operations

Services Process
and
Products
Technology

Human
Resources Quality
Capacity

Facilities Sourcing Operating

Systems

Copyright 2006
John Wiley & Sons,
Inc. 2-123
 Strategy:
Products and
Services
 Make-to-Order
 products and services are made to customer
specifications after an order has been received
 Make-to-Stock
 products and services are made in anticipation
of demand
 Assemble-to-Order
 products and services add options according to
customer specifications

Copyright 2006
John Wiley & Sons,
Inc. 2-124
 Production Strategy:
Processes and
technology
 Project
 one-at-a-time production of a product to customer
order
 Batch Production
 systems process many different jobs at the same
time in groups (or batches)
 Mass Production
 large volumes of a standard product for a mass
market
 Continuous Production
 used for very high volume commodity products
Copyright 2006
John Wiley & Sons,
Inc. 2-125
 Product-Process
Matrix

Source: Adapted from Robert

Hayes and Steven Wheelwright,
Restoring the Competitive
Edge: Competing Through
Manufacturing (New York: John
Wiley & Sons, 1984), p. 209

Copyright 2006
John Wiley & Sons,
Inc. 2-126
 Continuous Production
A paper manufacturer produces a

e
continuous sheet paper from wood

lum
pulp slurry, which is mixed, pressed,
Vo dried, and wound onto reels.
er
gh
Hi

Mass Production
–
d

Here in a clean room a worker performs

ize

quality checks on a computer assembly line.

rd
da
an

Batch Production
St
e

At Martin Guitars bindings on the guitar frame are

or
M

installed by hand and are wrapped with a cloth

webbing until glue is dried.

Project
Construction of the aircraft carrier USS Nimitz was a huge
project that took almost 10 years to complete.

Copyright 2006 John Wiley & Sons, Inc. 2-127

 Operations Strategy:
Capacity and Facility
 Capacity strategic decisions include:

When, how much, and in what form to alter
capacity
 Facility strategic decisions include:

Whether demand should be met with a few
large facilities or with several smaller ones

Whether facilities should focus on serving
certain geographic regions, product lines,
or customers

Facility location can also be a strategic
decision
Copyright 2006
John Wiley & Sons,
Inc. 2-128
 Operations
Strategy: Human
Resources
 What are the skill levels and degree of
autonomy required to operate production
system?
 What are the training requirements and
selection criteria?
 What are the policies on performance
evaluations, compensation, and incentives?
 Will workers be salaried, paid an hourly
rate, or paid a piece rate?
 Will profit sharing be allowed, and if so, on
what criteria?
Copyright 2006
John Wiley & Sons,
Inc. 2-129
 Operations
Strategy: Human
Resources (cont.)
 Will workers perform individual tasks
or work in teams?
 Will they have supervisors or work in
self-managed work groups?
 How many levels of management will
be required?
 Will extensive worker training be
necessary?
 Should workforce be cross-trained?
 What efforts will be made in terms of
retention?
Copyright 2006
John Wiley & Sons,
Inc. 2-130
 Operations
Strategy: Quality
 What is the target level of quality
for our products and services?
 How will it be measured?
 How will employees be involved
with quality?
 What will the responsibilities of the
quality department be?

Copyright 2006
John Wiley & Sons,
Inc. 2-131
 Operations
Strategy: Quality
(cont.)
 What types of systems will be set up to
ensure quality?
 How will quality awareness be
maintained?
 How will quality efforts be evaluated?
 How will customer perceptions of
quality be determined?
 How will decisions in other functional
areas affect quality?
Copyright 2006
John Wiley & Sons,
Inc. 2-132
 Operations
Strategy: Sourcing
 Vertical Integration

degree to which a firm produces parts
that go into its products
 Strategic Decisions

How much work should be done outside
the firm?

On what basis should particular items be
made in-house?

When should items be outsourced?

How should suppliers be selected?
Copyright 2006
John Wiley & Sons,
Inc. 2-133
 Operations
Strategy: Sourcing
(cont.)
 What type of relationship should be
maintained with suppliers?
 What is expected from suppliers?
 How many suppliers should be
used?
 How can quality and dependability
of suppliers be ensured?
 How can suppliers be encouraged to
collaborate?
Copyright 2006
John Wiley & Sons,
Inc. 2-134
 Operations
Strategy: Operating
Systems
 How will operating systems execute
strategic decisions?
 How does one align information
technology and operations strategic goals?
 How does information technology support
both customer and worker demands for
rapid access, storage, and retrieval of
information?
 How does information technology support
decisions making process related to
inventory levels, scheduling priorities, and
reward systems?
Copyright 2006
John Wiley & Sons,
Inc. 2-135
 Strategic Planning
Mission
Mission
and
and Vision
Vision

VVooiiccee oof t o f tthhee

f thhee Vo
Vo ic
icee o f
B
Buussiinneesss
s Corporate
Corporate C meerr
Cuussttoom
Strategy
Strategy

Marketing
Marketing Operations
Operations Financial
Financial
Strategy
Strategy
Copyright 2006 Strategy
Strategy Strategy
Strategy
John Wiley & Sons,
Inc. 2-136
 Issues and Trends
in Operations
 Global Markets, Global Sourcing,
and Global Operations
 Virtual Companies

 Greater Choice, More

Individualism
 Emphasis on Service

 Speed and Flexibility

Copyright 2006
John Wiley & Sons,
Inc. 2-137
 Issues and Trends
in Operations
(cont.)
 Supply Chains
 Collaborative Commerce
 Technological Advances
 Knowledge and Ability to Learn
 Environmental and Social
Responsibilities

Copyright 2006
John Wiley & Sons,
Inc. 2-138
FINANCIAL DIMENSIONS IN
RETAIL ORGANIZATION
 Statement of Goals and
Objectives LO 1
 Financial Performance Objectives
Represent the profit and economic
performance a retailer desires.
• Net Profit Margin Is the ratio of net profit
(after taxes) to total sales and shows how
much profit a retailer makes on each dollar
of sales after all expenses and taxes have
been met.
• Asset Turnover Is the total assets and shows
how many dollars of sales a retailer can
generate on an annual basis with each dollar
140
invested in assets.
 Financial Performance Objectives: LO
Profitability
1

• Return on Assets (ROA) Is net profit

(after taxes) divided by total assets.
• Financial Leverage Is total assets
divided by net worth or owners’ equity
and shows how aggressive the retailer
is in its use of debt.
• Return on Net Worth (RONW)
Is net profit (after taxes) divided by
owners’ equity.
141
 Financial Performance Objectives: Productivity

• Productivity Objectives: State the LO 1

sales
objective that the retailer desires for each unit of
resource input: floor space, labor, and inventory
investment.
• Space Productivity Annual net sales divided by
the total square feet of retail floor space.
• Labor Productivity Annual net sales divided by
the number of full-time-equivalent employees.
• Merchandise Productivity Annual net sales
divided by the average dollar investment in
inventory.

142
MANAGING SERVICE
QUALITY
 Service Strategy:
Processes and
Technology
 Professional Service
 highly customized and very labor intensive
 Service Shop
 customized and labor intensive
 Mass Service
 less customized and less labor intensive
 Service Factory
 least customized and least labor intensive

Copyright 2006
John Wiley & Sons,
Inc. 2-144
 Service-Process Matrix

Source: Adapted from Roger

Schmenner, “How Can Service
Businesses Survive and
Prosper?” Sloan Management
Review 27(3):29

Copyright 2006
John Wiley & Sons,
Inc. 2-145
 Brand management
The world’s 10 strongest brands
• Key issues in retail
branding:
- brand management of the
retail outlet
- deciding whether or not to
opt for the strategy of self
own branding
- mutli-pronged strategy
• a strong retail brand and
private label strategy is an
effective tool to differentiate
stores and the shopping
experience
Own branding
• Own branding: retailer sells products under
the retail organization’s house brand name
• 2 types of own branding:
- integrated own branding: retailer also
manufactures the branded retail products
(Raymond, Sony)
- independent contracting: retailer procures the
products from other suppliers although sold under
the label of the retail house
 Own branding contd

• Four significant factors of own

branding/private labels:
- private label sales have showed an increase in terms of
both value and volume across countries
- labels enhance store profitability by increasing pressure
on branded manufacturers
- lables can be used to increase margins or offer products
at lower prices
- better control over price, delivery, and quality, ensures a
strong brand identity for a retailer
- effective private label programme to include all elements
of the value proposition—price, quality, and product
differentiation
 e
siv
en
Service Factory
I nt
r
Electricity is a commodity available
bo

continuously to customers.
La
ss
Le

Mass Service
d-
i ze

A retail store provides a standard array of

m

products from which customers may choose.

sto
Cu
ss

Service Shop
Le

Although a lecture may be prepared in advance, its

delivery is affected by students in each class.

Professional Service
A doctor provides personal service to each patient based
on extensive training in medicine.

Copyright 2006 John Wiley & Sons, Inc. 2-149

DELIVERING THE
PRODUCT

UNIT-IV
 RETAIL INFORMATION
SYSTEM
 Purpose
 The Retail Information System (RIS) is
a flexible tool that enables you to
collect, aggregate and analyze data
from retailing activities.
 Integration
The Retail Information System is a component of the
Logistics Information System. The Logistics
Information System is divided into the following
information systems:
 Sales Information System (SIS)

 Purchasing Information System (PURCHIS)

 Inventory Controlling (INVCO)

 Quality Management Information System (QMIS)

 Retail Information System (RIS)

 These information systems are available in the SAP

Retail menu for controlling your business processes.

 Various Retail Information Systems
 1. Merchandising system
 2. Sales and marketing system
 3. Point of sale system
 4. Financial accounting system
 5. Attendance and payroll
 6. Administrative systems
Information Technology in Retail
 RIS makes it easier for to:
 Predict what customers will buy
 Manage inventory to match demand
 Expedite checkouts and target customer preferences
 Manage inventory across warehouses, locations and
your E-Commerce business
 Automate purchase order management
 Improve your customers' shopping experience with
mobile POS
 Streamline transaction processing
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MERCHANDISE
MANAGEMENT
• Merchandise management relates to the
selection of the right quantity of the product
and ensures its availability at the right place
and time ( Pantaloon offers fashion and
leather accessories, cosmetics, perfumes,
jewellery for women and formals, smart
casuals, denims, men's accessories for men)
• Merchandise
management: 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
goals
• Merchandise management is the sum of :
- planning
- procurement,
- handling and
- control of
merchandise
investments of a retail
operation
Dimensions of
merchandise mix
Merchandise budget
A financial plan that indicates how much to invest in
product inventories
Product selection process
• Review of product performance related to :
- type of products
- life cycle of the products,
- trends in the product category
- its strategic fit with the retailer’s business
• Product range review assists retailers to make decisions
on :
- deletion of a product
- increase in variety and range
- identification of new suppliers
- additions to product features
- review and revision of promotional campaigns
• Effective product management is also known as brand
management
 Merchandise unit plan
• Target market analysis
• Need to incorporate demographic, shopping behaviour
and psychographic data (DLF City Centre Shopping
Mall in Gurgaon has evolved its merchandise mix around
female ethnic and formal wear in garments, footwear,
etc.,
•
Influential consumer characteristics
• Competition Analysis
- evaluation of the competitive retail stores in
the trade area
- used to arrive at a market

positioning that identifies the retail store

position vis-à-vis competition and defines its
target customers
- determined by competitive factors (number,
types, and positioning of the anchor store
and non-anchor stores, size and nature of
the market area of retailer)
 RETAIL PRICING
CONCEPT OF RETAIL PRICING
 Integral part of retail marketing mix

 Source of revenue for the retailer

 Communicate the image of the retail store

FACTORS THAT NEED TO BE TAKEN INTO

CONSIDERATION
 Demand for the product and the target market

 Store policies and the image to be created

 Competition for the product and the

competitor’s price
 Economic conditions prevailing at that time
PRICING OBJECTIVE
 In agreement with the mission
statement
 In agreement with the

merchandising policies
RETAIL PRICING ELEMENTS OF RETAIL
PRICE
 Cost of goods : Cost of Merchandise
 Expenses incurred towards transportation Taxes,
duties levies etc.
 Expenses Incurred : Fixed expenses Variable
expenses
 Fixed Expenses : Expenses that do not vary with
quantum of business eg. Shop rent, Head Office
costs etc
 Variable expenses : Level of sales directly effects
variable expenses. eg. Merchandise margins,
product mix costs
 Their Management either enhances or destroy
profitability
RETAIL PRICING FIXING THE RETAIL PRICE
 Consideration : Profit to be earned

 Profit from Merchandise planed before

price fixation
 Profit to be arrived at is expressed as a

mark up percentage
 Retail Price = Cost + Mark Up Or Cost =

Retail Price - Mark Up Or

 Mark Up = Retail Price - Cost

Components of the formula can be

expressed in Rupee Term or as a
percentage
 Break-even Analysis :
 Break-even Analysis Break-even analysis:
method of calculating the minimum volume
of sales needed at a given price to cover all
costs
 Variable costs: business costs that increase
with the number of units produced
 Fixed Costs: business costs that remain
constant regardless of the number of units
 Break-even point: sales volume at a given
price that will cover all of a company costs