Competitive Retail Strategy for Fashion Merchandise New

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Competitive Retail Strategy For Fashion Merchandise New - Document Transcript 1. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008 COMPETITIVE RETAIL STRATEGY FOR FASHION MERCHANDISE ArunKumar Arunachalaiah - Retail Consultant Em ail – aarun9677@hot mail.com, Mobile: 9740067765 ArunKumar Arunachalaiah – Retail Consultant, email – [email protected], Mobile - 9740067765 1 2. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008 Contents Introduction Emerging Trends in Retail Sector – India Story Page - 01 Industry Overview – Indian Retail Sector Page 02 - 07 Oppurtunities,Threats and Risks in Indian Retail Sector Page 08 - 10 An intuitive assumption Page - 11 Need for Topic – Retail Strategy for Fashion Merchandise Page 13 - 15 Project Objectives and Scope Page 16 - 19 Retail Marketing Strategy Market Penetration Page 23 - 24 Pricing Page 25 - 27 Store Location Approach Page 28 - 29 Establishing a Retail Brand Image Page 30 - 34 Planning and Forecasting Forecasting Demand Page 35 - 36 Merchandise Planning and Category Management Page 37 - 39 Merchandise Budget Plan for Fashion Merchandise Page 40 - 41 Procurement and Inventory Management Supplier Scoring and Assessment Page 42 - 43 Supplier Contract Administration Page 44 Vendor Management Page 45 Inventory Management Page 46 - 49 ArunKumar Arunachalaiah Retail Consultant, email [email protected], Mobile - 9740067765 2 3. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008 Retail Operations Management Store Layout Designing and Visual Merchandising Page 51 - 61 Customer Service Management Page 62 - 63 Store Facility Management and Maintenance Page 64 Loss Prevention Page 65 - 66 Store Operations Parameters Page 67 - 68 Supply

Transcript of Competitive Retail Strategy for Fashion Merchandise New

Page 1: Competitive Retail Strategy for Fashion Merchandise New

Competitive Retail Strategy For Fashion Merchandise New

- Document Transcript

1. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

COMPETITIVE RETAIL STRATEGY FOR FASHION MERCHANDISE

ArunKumar Arunachalaiah - Retail Consultant Em ail –

aarun9677@hot mail.com, Mobile: 9740067765 ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 1

2. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Contents Introduction Emerging Trends in Retail Sector – India

Story Page - 01 Industry Overview – Indian Retail Sector Page 02

- 07 Oppurtunities,Threats and Risks in Indian Retail Sector Page

08 - 10 An intuitive assumption Page - 11 Need for Topic – Retail

Strategy for Fashion Merchandise Page 13 - 15 Project Objectives

and Scope Page 16 - 19 Retail Marketing Strategy Market

Penetration Page 23 - 24 Pricing Page 25 - 27 Store Location

Approach Page 28 - 29 Establishing a Retail Brand Image Page

30 - 34 Planning and Forecasting Forecasting Demand Page 35 -

36 Merchandise Planning and Category Management Page 37 -

39 Merchandise Budget Plan for Fashion Merchandise Page 40 -

41 Procurement and Inventory Management Supplier Scoring and

Assessment Page 42 - 43 Supplier Contract Administration Page

44 Vendor Management Page 45 Inventory Management Page 46

- 49 ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 2

3. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Retail Operations Management Store Layout Designing and

Visual Merchandising Page 51 - 61 Customer Service

Management Page 62 - 63 Store Facility Management and

Maintenance Page 64 Loss Prevention Page 65 - 66 Store

Operations Parameters Page 67 - 68 Supply Chain Management

Framework Page 69 - 76 Summary Report and Conclusion Page

77 Annexures Proposal Page 78 - 80 References Page 81

ArunKumar Arunachalaiah – Retail Consultant, email –

Page 2: Competitive Retail Strategy for Fashion Merchandise New

[email protected], Mobile - 9740067765 3

4. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Emerging Trends in Retail Sector – India Story It is beyond doubt

that Retailing in India is the most attractive sector of this decade.

While the retailing industry itself has been present through the

history in our country, it is only in the recent past that has

witnessed so much dynamism and growth. It’s the latest

bandwagon that has witnessed hordes of players leaping onto it.

While international retail store chains have caught the fancy of

many travellers abroad, the action was missing from the Indian

business scene, atleast till the last 5 to 7 years. The emergence

of retailing in India now has more to do with the increasing

purchasing power of buyers, especially post liberalization,

increase in product variety and the increase in economies of

scale with the aid of modern supply and distribution

management solutions. Indian Retail Scenario at a glance Ø The

contribution of retail industry to India’s GDP is more than 13%. Ø

Indian retail industry spreads over more than 6 million outlets

including organised and unorganised sectors. Ø Even with 6

million retail outlets the country sorely lacks anything that can

resemble a retailing industry in the modern sense of the

term.This presents organised retail a great oppurtunity. Ø Less

than 6% of India retail is in an organised format in year 2006. Ø

There is complete absence of Supply Chain Management

perspective in the Indian retail industry. Ø 96% of outlets in India

are less than 500sqft. India per capita retail space is the lowest

in the world with just 2sqft compared to 16sqft in USA. Ø Only

8%of India’s one billion population is engaged in retailing. Ø 60%

of sales in Retail still comes from food items in India. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 4

5. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Industry Overview – Indian Retail Sector With only about 3%

share in an estimated $320-bn Indian retail industry, we see

significant growth potential in the organized retail segment in

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India. The expected growth in income levels, easy availability of

credit, increasing urbanization and favorable demographic

conditions are expected to put the Indian organized retail

industry on a rapid growth path. A CAGR of 26% is expected for

this industry over the next four years and have a positive view

on the sector. Key Growth Drivers of Retail Industry v Low

penetration The current penetration levels of organized retail are

the lowest in the world. With a massive population, the potential

of the industry in India, going forward, is tremendous. Companies

have announced plans entry into various segments in the

industry. The penetration levels are as low as 3-4% overall and

as low as 1% in segments such as food and grocery retail.

Clearly, the potential of the sector going forward is enormous.

Global retail development index Rank Country Country Risk

Market attraction 0=high 0=high 100=low 100=low 1 India 67

42 2 Russia 62 52 3 China 75 46 4 Vietnam 57 34 5 Ukraine 41

43 (Illustration 1)Source: Economic Times Intelligence group

2004 ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 5

6. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

v Favorable demographics provide enough potential for

organized retail Out of India's population of about 1 bn, the

overall target market for modern retail is Estimated at about 50

million people. With more than 50% of the population being

under the age of 25, the market looks extremely attractive for

organized retail players as this population has demanding

lifestyles. This segment forms a major portion of any retailer's

plan. Growth in urbanization is a key driver for the organized

retail industry. This is because, currently 85% of organized retail

market is concentrated in India's 8 largest cities. In India, the top

six cities currently account for about 6% of population but

contribute to 14% of GDP The population of urban areas is

expected to touch 550 million by 2021 as against 376(E)

currently. INDIA HAS THE YOUNGEST POPULATION IN THE

WORLD. IN 2020, THE AVERAGE INDIAN WILL BE ONLY 29 YEARS

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OLD COMPARED WITH 37 IN CHINA AND THE US, 45 IN WEST

EUROPE AND 48 IN JAPAN. Source: (Business Line) v Easy

availability of credit The number of credit cards issued in India

has been witnessing a strong growth over the past few years.

Currently, there are 22.6 mn cards in circulation as compared to

7.1 mn in 2003. This number is expected to grow by over 30%

over the next few years. Easy avail- -ability of credit and also

easy EMI schemes being offered by the bank as well as

companies Do provide a boost to retail companies as this directly

has an impact in consumption patterns Of people. In India, less

than 1% of personal consumption happens through credit cards

as Compared to the global average of 5%. With a significant

increase in the expected usage of credit cards, the spending

patterns of consumers are expected to change further in turn

Benefiting organized retailers. THERE ARE 23MILLION CREDIT

CARDS IN CIRCULATION IN 2007 IN INDIA AGAINST 7.5MILLION

CARDS IN2003 ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 6

7. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

v Rising incomes & consumption patterns to spur growth Out of

an estimated 209 million households in India, nearly 6 million are

classified as 'rich' as Compared to 3 million in 1999-00. (Source:

E&Y). Also, about 91 million households are classified As

'Consuming' as compared to 55 million in 1999-2000. While rich

households have income levels of greater than US$4700, the

consuming class enjoys average income of US$1000-4000.Also

the average income level of high-income households has been

growing @ 20% YoY since 95-96. This growth in income brings

along with it a higher disposable income,willingness to spend and

demand for better lifestyle. As income levels rise, one tends to

spend more on lifestyle related activities and products, which is a

key driver for these segments of the retail industry. These can be

clearly observed from the statistic that discretionary spending

has been seeing a 16% rise for upper and middle classes over

the past three years. The private final consm expenditure (PFCE)

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which is basically what a consumer spends on food and grocery,

apparel, medical services, savings, entertainment etc , is

estimated to grow from Rs.18.9 trillion in 2005 to Rs.53.62 trillion

in 2015 & expected to constitute 57.5% of India’s GDP.

Classification Number of Households( Millions) 2005 - 2006

annual household income) 1994 - 95 1999 - 2000 estimated Very

Rich ( > INR 215,000) 1 3 6 Consuming (INR 45000 - 215000) 29

55 75 Climbers (INR 22000 - 45000) 48 66 78 Aspirants (INR

16000 - 22000) 48 32 33 Destitutes (<INR 16000) 35 24 17

(Illustration 2)Source: The Marketing White Book, 2003-04

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 7

8. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

v Increased acceptance of "mall culture" to help growth The

organized retail boom was given a boost with the concept of

shopping malls.Currently, India has 179 operational malls and is

expected to have 412 malls by 2010.These malls attract footfalls

in ten of thousands everyday and have become family

destinations to shop, eat and for entertainment. While further

details are not available, we believe the expected growth in

shopping malls and increased acceptance of the "Mall culture"

should provide further boost to the organized retail sector. There

has been a sudden spurt in the number of malls coming up all

over the country and are attracting daily footfalls in millions. This

is attracting retailers to open stores in them. Malls provide not

only a great shopping experience but are turning out to be

places for family Outing and entertainment. This coupled with

the rise in incomes & willingness to spend is Only boosting the

growth of the industry. As of today, India has 179 operational

malls wi h t 47.4 million sqft of retail space, and is expected to

have 412 malls offering 205 million sqft Of retail space in 2010,

and by 2015 there would be more than 715 operational malls

offering 350 million sq ft of retail space and a very large chunk of

these developments would be in India’s Tier-II and Tier-III cities.

(Source: Images F&R Research) (Illustration 3)Source: ( Kotak

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Securities 2007) ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 8

9. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

v Category-wise spend In India's retail industry, food, beverages

and tobacco form a substantial portion, comprising 76% of the

total industry However, it is in this sector where organized retail

penetration is the lowest, i.e. 1%.According to a McKinsey report,

the share of an Indian household's spending on food is one of the

Highest in the world, with 48% income being spent on food &

beverage. The penetration of organized retail is highest in the

footwear category at 31% followed by Apparel, books,

music/gifts, consumer durables, home décor and furnishings. The

Indian Consumer is spending most of his income on food,

groceries and beverages. Taking into Account that penetration

levels in this sector are the lowest. We can see this segment

grow Fast pace. Also, big players such as Reliance, Bharti & RPG

are all betting big on this sector. They are focused on back-end

logistics. These players are aiming to provide groceries at a low

cost compared to small neighborhood shops, street vendors who,

as of today account for most of the sales in groceries, vegetables

etc. .Even segments such as jewelry, beauty care, books are

seeing good growth, mainly propelled by the growth in malls.

Segmentwise Share in Organised Retail - 2006 40% 37% 35%

30% 25% 20% 20% 18% 15% 10% 8% 6% 6% 5% 3% 2% 0%

(Illustration 4)Source: ( Kotak Securities2007) ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 9

10. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Opportunities for India through Retail Sector In our opinion, the

growth in the retail sector can have a multiplier effect on the

economy. Some of the benefits which can accrue are: Ø Farm

income in India can increase if organized retail enhances

farmer's realizations on food items from the currently estimated

low level of 30-35% of retail price to the International norm of

over 60% of retail price. Ø The supply chain for unprocessed food

Page 7: Competitive Retail Strategy for Fashion Merchandise New

items is fairly under-developed in India. It has Many layers

leading to high wastages & a high cost of distribution. Increased

penetr- ation of organized retail into food and grocery segment

can boost farm incomes. Ø The current farm realizations for

unprocessed items are estimated at around Rs.1.2 Trillion. If this

segment shifts entirely to organized retailing the realizations of

farmers Are at levels compared to international countries (60-

65%) Ø Higher farm income can boost the purchasing power of

60% of the population adding to GDP growth through higher

economic activity. If farmers spend 80% of their incremental

Income the economy will witness an incremental spending of

around Rs.1trillion which is Equal to 3% of India’s GDP even if

economic multiplier effect is excluded. Ø Companies are

spending heavily on marketing, hence improving the growth of

the marketing sector as well. Intense competition will only

further increase advertisement and marketing expenditure. Ø

Also, logistics and supply chain companies are set to benefit

from the retail boom.Thus growth in retail can have a multiplier

effect on economy. Indian consumers will be the Largest

beneficiaries. India's middle class as well as lower income

consumers will be the ultimate gainers with multiple benefits.

Reduction of prices in typical monthly basic needs Shopping bills

may reduce by at least 10% within the next 24-30 months,

leading to generation of an equivalent amount of surplus

disposable income, Improve- -ment in quality of fresh/perishable

products in the market, Improved assortment and reliable

availability of products. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 10

11. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Threats in Retail Sector v Foreign Direct Investment in Retail

Currently, foreign direct investment in retail chain stores is

restricted in India. Prior to 1997, there were no FDI restrictions in

the domestic retail sector. Players who entered were McDonalds,

which opened in India in 1996 and Foodworld, which was hived

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off as a 51:49 joint venture between Spencer & Company (RPG

Group) and Dairy Farm International. Companies that entered

prior to 1997 have been allowed to continue with their existing

foreign equity components. Drawbacks of FDI in retail would be

cut-throat competition, Promoting cartels and creating monopoly,

Increase in real estate prices, Marginalize small domestic

entrepreneurs. Displacement of unorganized players because of

financial strength of foreign companies, Unfair trade practices

like predatory pricing in case of absence of proper regulatory

guidelines v Steps being taken to protect margins Retail is a low

margin, high volume business. With the retail boom being

witnessed in the country, all companies are on an expansion

mode and adding stores at a fast pace. This expansion drive is

leading to cost pressures and biting into the margins of retailers.

In order to protect its margins and also with the aim to counter

competition in the industry companies are taking several

measures to stay competitive and also expand margins,a well as

offer best prices to the customer. Companies are setting up

massive supply chain systems , promoting private label apparels

and concentrating on their backend support by setting up

warehouses at different locations to reduce sourcing costs as

well as stocks reach the stores on time. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 11

12. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Risks and Concerns in Retail Ø Delays in mall construction may

delay launch plans of retailers Malls would account for half of the

total organized sector retail space demand in the next Five

years. However, the rising cost of retail space in India is affecting

the growth plans of Retailers. Real estate costs are hampering

their margins, which are already not very high. They are also

entering into long-term lease & revenue sharing arrangements

with mall Ø High employee costs Another major concern is staff

costs. Owing to increasing competition and new entrants in the

retail business, attrition levels for the industry have gone up

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drastically resulting in high Expenses to retain and hire new

people. Staff costs have gone up by 35% since 2006. Companies

are now focusing on retaining their employees and are forced to

offer them higher Salaries and bonuses, which in turn have an

impact on the profitability. Ø Delays in mall construction may

delay launch plans of retailers Malls would account for half of the

total organized sector retail space demand in the next Five

years. However, the rising cost of retail space in India is affecting

the growth plans of Retailers. Real estate costs are hampering

their margins, which are already not very high. They are also

entering into long-term lease & revenue sharing arrangements

with mall Ø Opposition to organized retail Opposition from the

unorganized sector and any consequent political opposition can

Hamper growth plans of retailers. Also, delays in opening up the

retail sector to FDI Ø Pressure on margins Another important fact

is the pressure on margins, which the retailers will face once

Competition enters. Retailing as such is low margin business.

EBITDA margins for food & Groceries are wafer [email protected]%.

Margins in the apparel business are in the range of 8-16%. Given

the big expansion plans of retailers, net profits may have to take

a hit in order to Increase volumes. Retailers are concentrating

more and more on private labels where Margins are higher.

However, going forward, this is a key risk in this business.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 12

13. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

An intuitive assumption on Indian Retail The Indian retail industry

leaders are very positive on the sector and believe current

players such as Pantaloon, are well positioned to take full

advantage of the growth in the sector. With the growth in

consumerism, urbanization and a young population the Retail

sector is clearly on an upswing. To protect margins, retailers

have now started to Concentrate on their supply chain and

logistics so as to ensure low cost of procurement. as such retail is

a high volume, low margin business and one which requires

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sizeable Investments in working capital. With organized retail

penetration levels of 3-3.5% of the total industry, and as low as

1% in segments such as food and grocery the scope for growth is

tremendous. layers such as Reliance Retail, Aditya Birla group

are all expected to do well, going forward. Looking at the size of

the market and the potential, there is a market large enough for

several large players to co-exist. ArunKumar Arunachalaiah –

Retail Consultant, email – [email protected], Mobile -

9740067765 13

14. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Why Study Retail Strategy on Fashion Merchandise? FASHION

BUSINESS: IN-TUNE WITH RETAIL EVOLUTION India in recent

years has been the focal point of continuous growth and

development making it one of the fastest growing economies of

the world. It is the 4 largest economy in terms of Purchasing

Power Parity, after USA, China & Japan, and is rated among the

top 10 FDI desti- -nations. The Indian consumer is evolving and

driving retail growth due to increased consumptn. Private

consumption growth contributes to more than half of the GDP

growth and is growing in double digit figures. Several businesses

are reacting to this evolution positively, both through pull and

push phenomenon. Following a similar trend, the Indian textile

and apparel industry is also experiencing rapid changes and

growth. Apparel today has the largest share of the modern

organized retail in India i.e. 20% of the current market of Rs.

56,000 crore and this is expected to grow at a constant rate of

20% over the next 4 years. This report puts together some of the

recent trends being witnessed by the textile and apparel

industry. The central theme woven through these trends is the

way the consumer at various income-levels is evolving, thereby

ensuring that businesses are reacting in multiple ways. India is

the second fastest growing major economy in the world

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 14

15. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

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The 'mass consumer' segment is moving from tailored clothes to

stitched apparel giving rise to discounted apparel

stores/retailers. This causes a shift from unbranded to branded

apparel. The 'middle end consumers’, already exposed to brands

is now looking to extend these brands into all aspects of their

life. Brands are thereby becoming lifestyle brands instead of

being product brands only. These consumers are also moving up

the social ladder and wish to flaunt the change in stature by

wearing affordable 'designer prêt wear'. This is prompting

designers to introduce prêt lines and corporatize their lines to

reach out to a larger audience. The 'high end Consumer' who is

exposed to international luxury brands, now demands them in

his/her vicinity. Apparel businesses are realizing this and tying up

with international brands to retail in India. These consumers are

also increasingly exposed to environmental issues and want to

use eco- friendly products (including apparel) to do their bit for

the society. Though this concept is at a very nascent stage in

India, apparel companies are reacting by 'going green' and using

natural fibers in some of their collections. As all consumers,

especially kids and the youth, are exposed to fashion and media,

they wish to associate themselves with characters and icons.

Picking on this trend, apparel companies are licensing these

characters/icons for apparel & accessories to increase their

customer base. Additionally, as consumers face hectic lifestyles,

they are looking for convenience in all aspects of life including

shopping. Fashion businesses are taking the lead from here and

taking on consumers at unconventional avenues of retailing like

airports, metro stations, cafes, beauty saloons, etc. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 15

16. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Recent Trends in Indian Fashion Retail Business è Fashion

industry is pushing to keep pace with the retail evolution

witnessed in India è Indian consumers are converting from

stitched apparel to ready-to-wear Causing a surge In discount

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retailing è Factory outlets have become distinct and important

shopping destinations è Consumers now desire branded products

in all aspects of their life è Traditionally brands that offered

formal wear are now extending into Casual wear, Accessories,

footwear etc. è Brands are opening large EBOs to showcase their

expanded product range. These flagship Stores are positioned as

ultimate one-stop destinations for the latest fashion trends. è

Kids and youth are influenced by icons & characters and desire

to possess them in their everyday life è India has become an

important market for character licensing specially in apparel.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 16

17. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Project – Objectives and Scope Successful Apparel Retailing has

always been said to be about getting nitty gritty right of

Merchandising, Forecasting, Supply Chain, Training and

Recruitment of high quality personnel and Category

Management. Building retail brands that offer value will, in future

overshadow all these areas and emerge as the dominant reason

for the success of the organized Indian Retailer. Indian Retailers

should understand that the retail experience has become a

popular Leisure activity and they are vulnerable to any new

competition for customer entertainment. Retailers must build a

brand with image to seek entertain and involve customers. It is

the Quality and value of the Retail Brands that they have sought

to establish that will determine the loyalty of the retail shopper

in future. Apparel Retailing is one of the most complex verticals

in the Retail Sector. This is because Forecasting sales for a

particular SKU is not possible as there is no sales history at the

SKU level. During every fashion season, Trends, Customer

demands, Styles and Fabrics/Colors keep changing it is

practically impossible to completely rely on previous sales data.

Forecasting Sales is much more straightforward for staples than

for Fashion merchandise as there is an established sales history

for each SKU and standard statistical techniques are used to

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forecast sales. A Retailer is more vulnerable to face Stock outs,

Loss of Sales, Losing customer loyalty due to inadequate product

availability during peak season or face Excess stocks, increasing

inventory and operating costs due to excess buying exceeding

demand levels. Objective of this Project is also to carry out

extensive studies to make certain the right retail Strategy for an

apparel retailer to create a loyal and repetitive customer. The

project scope will also Include coverage of areas of establishing a

strong Retail image through Marketing Strategies, Brand

Building, Identifying the right Retail Mix, Pricing, Advertising,

Forecasting, Category Management, Retail Store Operations,

Supply Chain and usage of Information Tech- - nology

applications in Apparel specific retailing. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 17

18. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

To ensure the loyalty of the retail shopper any retailer has to

develop a strategy for long term Sustainable competitive

advantage. Few measure that a retailer takes to build

sustainable Competitive advantage Customer Loyalty Retail

Location Vendor relationship Effective and committed employees

Cost effective operations Below is an outline of Scope of this

project which will cater to accomplishing the above menti - -oned

objectives of the project to create a sustainable Competitive

advantage. • Retail Store • Financial Operations Operations

Mgmt Mgmt Information Retail System & Marketing Supply Chain

Strategy Competitive Advantage Merchandise Establishing

Planning, Retail Brand Buying, and Image Forecasting • Human •

Customer Resource Relationship Mgmt Mgmt (Illustration 5)

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 18

19. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Understanding the Retail Value Chain of Fashion Merchandise To

propose a Competitive Retail strategy it is imperative to first

understand the various functions involved in the different

Page 14: Competitive Retail Strategy for Fashion Merchandise New

channels of fashion merchandise. A brief outlook is provided

below to understand the value chain. Each function has a range

of processes for successful implementation which is described in

(Illustration 7) Marketing Consumer Planning Fashion

Merchandise Retail Outlet Design Retail Value Chain Distribution

Procurement Manufacturing (Illustration 6) Fashion Merchandise

Retail Value Chain ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 19

20. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Process functions in Fashion Merchandise Distribution Channel

We will look into greater detail into each of this process functions

in subsequent chapters • Market strategy • Demand Planning •

Product Lifecycle Mgmt • Inventory Mgmt • Segment/Target mkt

• Sales Forecasting • Product specification • Vendor Mgmt •

Retail Location • Merchandise Budget • Fashion Forecast •

Supplier Assessment • Brand Mgmt Plan • Design Trend •

Strategic Sourcing • Pricing • Buying • Product information •

EBO/MBO/Franchising Marketing Planning Design Procurement •

Manufacturing • Supply Chain Mgmt • Promotion/ Pricing •

Customer delivered execution • Transport Planning • Customer

Service Value • Quality Mgmt • Warehouse Planning •

Transactional Service • Repeat Sales • Compliant solution •

Reverse Logistics • Store Layout , Design • Word of Mouth •

Material Mgmt • Cross Docking • Operations mgmt • WIP

Tracking • Invoicing Manufacturing Distribution Retail Outlet

Consumer (Illustration 7) ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 20

21. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Retail Market Strategy A Retail Market Strategy is the statement

of identifying Ø The Retailer’s Target Market. Ø The format that

the retailer plans to use to satisfy the Target market needs. Ø

Building a sustainable advantage over competitors. Explore

Value Creation Opportunities through a appropriate

understanding of Customers – Consumers and Clients Company –

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Core Strengths and advantage over market competition

Competitors – Existing and New entrant competitors in market.

Collaborators – Suppliers, Channel Partners Context –

Government Policies Choose the right Retail Mix with the 4P’s of

Marketing Mix – Product/Price/Promotion/Place v Merchandise /

Product Sold – Food/Apparel/Pharma/Auto/General Merchandise v

Pricing of the Merchandise – Differentiating factor v Customer

Service Level – Gift wrap/Home delivery/Free

parking/Entertainment v Variety/Assortment of merchandise

offered – Breadth and depth of product line. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 21

22. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

The target market segment is a market which a retailer wants to

focus all its efforts and Retail mix. Target marketing requires

marketers to take 3 important steps. S T P Segmentation Target

Market Positioning STP Strategy Market Segmentation : Dividing

a market into distinct group with distinct needs. Its is important

to determine v Who the consumer is – Demographic base of age,

economic status, residence etc. v What the consumer buys –

Products, Brands, Colors, and Flavors etc. v What kind of

shopping trip is typical – In/Out, Convenience, Destination trip

etc. v How the consumer buys – By Promotion, Price or Product

or Place v How often the consumer buys – Daily Weekly or

Monthly Target Market Selection: Once the retailer has identified

a feasible market segment opportunities it has to decide on a

targeting approach which revolves around v How many

segments to target? v Which segments to target? v Single

Segment Concentration/Market Specialization/Product

Specialization ? Positioning: Positioning is not what you do to a

product but what you to do the mind of the prospect. A position

of a brand is its perception among its customers. It is placing the

brand in the appropriate slot in the customer’s mind so that

when need is felt it pops up in the mind of consumer without

much effort as humans are selectively attentive to marketing

Page 16: Competitive Retail Strategy for Fashion Merchandise New

comm. unications and selectively retail information. Positioning is

the art of placing entire marketing mix in the customer mind and

create relevant association, emotion and attitude through power

words so as to stand apart from other competitive offerings.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 22

23. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

We will consider a Retail Marketing Strategy for a Formal Wear

Apparel Brand to be launched by the retailer. A formal Brand is

an all season product not determined by the seasonal demand

factors. Factors to be considered to develop a formal wear retail

market strategy v Kind of Business: Medium Range Priced Formal

Wear Catering to both Men’s and Women’s segments v Future of

Business: • Uniform demand for formal wear throughout the

year. • Growing need for Services sector induces many working

professionals to be dressed in formal and professional for a

minimum of 5days per week. • Sales not determined by seasonal

demand factors. • Increased urbanization in Metro and Tier2 and

Tier 3 cities. v Target Customers: • According to a study the India

has about 14crore working professionals in the middle to junior

level executive cadres. This segment is known as “Aspiring India”

• Junior to Middle non managerial Executives Men and Women in

the age group of 22 – 35years with high spending potential. v

Long Term Goal of the Business: “To be the largest retailer of

apparel with pan India presence” ArunKumar Arunachalaiah –

Retail Consultant, email – [email protected], Mobile -

9740067765 23

24. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Situational Analysis Market Factors External Factors Competitor

Threats •Market Size-24-35yrs •Technology - Cost •Entry Barrier

- Low •Rising cost of Real •Growth Potential - high •Vendor

Bargain Estate prices Huge •Economy - Healthy power - high

•Absence of Supply •Business Cycle - Year •Regulatory - Helpful

•Competitor - chain round PeterEngland,John •Lack of trained

Player Human Resource •Scale of Economy- Achievable

Page 17: Competitive Retail Strategy for Fashion Merchandise New

Finalizing the Market Growth Strategy A Retailer has 4 options to

pursue any of the following Growth Strategies. Existing Mkt New

Mkt Market Market Current Retail Penetration Expansion Format

Strategy Strategy Retail Format New Retail Diversification

Development Strategy Format Strategy Rapid Market Penetration

Strategy An ideal growth strategy for a Formal wear fashion

merchandise business would be that ofa Rapid Market

penetration strategy which gives an edge to capture market

share quickly through Low pricing, High volumes and enhanced

and aggressive Advertising .t is used when I retailers seek larger

revenues by setting low price and selling many units Profit per

unit is low . but total profit is high. It offers growth opportunity to

target existing customers using the present retailing format. This

approach suits the target market as young middle level

executives are usually price sensitive to Formal wear and looking

for a best deal all the time. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 24

25. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Approach to Rapid Market Penetration Strategy ØConcentrated

Marketing targeting the needs of very specific defined market of

age group of 24-35year middle level cadre. ØAggressive display

of Merchandise to create impulse purchases. ØAvailability of

greater breadth of product assortment will be considered by the

consumer and hence stronger the salience as most consumers

today are time-constrained. ØAugment the depth of the Product

mix by extending the product Line into Ties, Leather Belts,

Wallets, Handkerchief, Socks, Cufflinks ØPromote the idea of

Cross selling approach to the customers by selling

Complimentary merchandise along with core merchandise. For

eg: A customer buying a Shirt would also want to buy Tie or

Cufflinks. ØProp up the point of Purchase counters with

unplanned purchase Items like Handkerchiefs or Wallets that can

comprise a significant Portion of consumers total shopping

basket size. ØOpen more stores in the Target market Area ØKeep

Page 18: Competitive Retail Strategy for Fashion Merchandise New

existing stores open for longer hours ØStimulate customers to

spend more time in the outlets on shopping Using clever tactics

such as filling up of loyalty card programs, Research

questionnaire, Superior lounges, in store entertainments to

create an enhanced Shopping experience which drives the

consumers to make repeat visits to the stores. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 25

26. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Pricing Strategy Pricing merchandise is one of the most

important activities in Retailing. Once the assortment Plan is

ready the retailer decides how to price the merchandise for

maximum sales and profit. A value of the product is determined

by the customer and not by the retailer or manufacturer. Correct

pricing decisions are a key to successful retail management. The

first step in Pricing is Identifying the costs. Only costs that will

rise or fall when price changes affect profitability of Different

pricing strategies, these are called incremental costs as they

represent increment to Cost that result from pricing decision.

Retailer must also consider Contribution for each product Sold.

Contribution margin as a % of price is the share of price that

adds to profit or reduce losses In other words the added profit or

loss due to additional sale. It is measure of leverage between a

firm’s sales volume & profit. An effective Pricing strategy

requires good understanding of value of product to the buyers.

Value refers to total savings or satisfaction customer receives

from the product. This is known as Economic Value referred as

price of customer’s best alternative plus value that differentiates

the offering from the alternative. The gap between buyer’s

willingness to pay and economic value of the product is known as

Price sensitivity of the customer. Evaluating customers on 2

dimensions of perceived value of a product’s difference and

perceived pain of price will reveal valuable value segments.

Different Groups of Buyers or Consumers • Price Buyers – High

pain of price, Low value of differentiation(Price Sensitive) •

Page 19: Competitive Retail Strategy for Fashion Merchandise New

Relationship Buyers – Low pain of price, high value of

differentiation(Brand Loyal) • Value Buyers – High Pain of price

and differentiation (Time Rich Value conscious) • Convenience

Buyers – Low pain of price and differentiation (Time Poor, Cash

rich) Goal of Pricing: • Profit maximization – Maximum revenue

leading to maximum profits. • GMROI – Target return on

Inventory Investment • ROS – Target return on Total Sale. •

Market Share – Grab a portion of competitor’s customers in

merchandise category. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 26

27. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Setting Retail Prices : • Cost oriented Pricing: (Maintained

Markup Percentage) Price determined by adding fixed % to cost

of merchandise Maintained Markup % = (Net Sales – COGS)/ Net

Sales Gross Margin = (Maintained Markup – Workroom cost –

Cash discount) / Net Sales Initial Markup =(Maintained markup +

Reductions) /(Net Sales + Reductions) • Demand Oriented

Pricing: Prices are based on what customer expects or is willing

to pay or determines the range Of price acceptable to the target

market. It assumes minimum price acceptable to the Firm to

reach a specified profit. Mostly used to estimate quantities that

customer would Buy at various prices. • Competition Oriented

Pricing: Prices are based on competition rather than cost or

demand of the product. This method Keeps a constant eye on

competitors pricing and promotion activities. • Combined Cost

Demand Competition pricing: Useful method where cost should

be basis for pricing, competition should provide insights to

market & demand orientation should be used to fine tune to

customer expectations. Implementation of Competitive Price

Strategy Pricing Strategy is not as easy as it sounds. Retailer

may have to customize strategy looking at various pricing

options. EDLP – Everyday Low Pricing and High Low Pricing

remains at the back ground and retail price is set as per Cost,

Demand and Competition consideration. Pricing Tactics Price

Page 20: Competitive Retail Strategy for Fashion Merchandise New

adjustments let retailers use price as an adaptive mechanism v

Full Price – When Retailer Sells to customer at a full retail price

when demand is high and Product is still new in the shelf of the

Retail Stores. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 27

28. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

v Markdowns – Tool for Retailer for pricing end of lifecycle

products, seasonal inventory Markdown prices are optimized to

reduce inventory and maximize contribution margin. It is lesser

than an item’s original price to clear out shop worn out

merchandise, reduce Assortment of odds and ends and increase

customer traffic and make way for new items On shelf space. v

Discounts – A discount is a reduction of price on the list price

granted by retailer to the Consumers usually to clear of end of

season inventories, outdated packaged items and dead stock

non moving inventory. Every Retailer makes sure irrespective of

which ever method of setting retail prices will consider an a

propionate percentage of markdowns sales and discount sales

and shrinkages in the Retail price of the product to consume

losses incase of sales dip or excess inventory. Special Pricing

Tactics: v Price Lining: Retailer establish price points for entire

product line like for a range of v Shirts in different designs Rs499

,549,799,949. v Odd even Pricing : It is a means of psychological

pricing where a price ending with odd number entail Bargain and

price ending with even number imply quality. Bata - Rs.99.99 v

Price induced Sampling: Promotional pricing for a limited period

of time. Eg: Tata Sky v One Price policy – Retailer charges one

price to all customers buying a particular item In a store. For eg:

One dollar store v Price Bundling : Marketing two or more

products in a single package at a special price often used for

complimentary products such as toiletries. Retailer use this to

push slow moving items or to induce trial for new products. A

related tactic would be unbundling reducing the number of

products sold with core product. ArunKumar Arunachalaiah –

Retail Consultant, email – [email protected], Mobile -

Page 21: Competitive Retail Strategy for Fashion Merchandise New

9740067765 28

29. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Retail Store Location approach Store Location is one of the prime

considerations in a customers store choice. Location Decisions

have long term strategic importance. Location decisions are hard

to change as they involve huge investment. If a retailer moves

from one location to another the potential problems he could

face are Loyal customers and employees might be lost, New site

might not have the same traits as the old one. Store fixtures and

renovations from old site usually cannot be transferred.

Attractiveness of a Retail Site for a Fashion merchandise store

depends on below factors Traffic & Demographics Competition

Site Factors Cost Factors Access •Lifestyle •# & type of •# &

types of •Size of Site •Terms of •Income vehicles stores in area

•Parking space lease/ rent potential •access to •Key players

•Visibility of •Rent rates •Occupation store analysis store

•Operation mix •street •Location of •Entry & Exit cost •Nearby

offices congestion competitor •Building •Local taxes •mass

transit condition •membership presence •Retailers cost of

Association Association of retailers Various options available for a

retailer to choose a retail location for a fashion merchandise

Depends on target audience, investment requirement and

competition. Fashion merchandise store can be in any of the

formats according to its location EBO’s – Exclusive Brand

Outlets(Specialty Stores) Exclusive Brand Outlets is a distribution

strategy whereby a retailer sells his products in only one retail

outlet in a specific geographical area.An EBO can be suitable in a

Central Business district/Shopping centre which is the main

centre of commerce and trade in the city. Usually every Metro

city has more than one Central Business district Bangalore

popular and .In well know Central Business district is created in

Commercial Street ,Brigade Road Indiranagar, , Koramangala and

Jayanagar. It is better to have EBO’s in each of these places as it

gives a significant presence of brand due to huge customer

traffic movement and also footfalls will increase and convert

Page 22: Competitive Retail Strategy for Fashion Merchandise New

suspect customers into prospective clients. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 29

30. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Multi Brand Outlet (MBO’s) Multi Brand Outlets are retail stores

owned not by the retailer but a channel partner of the Retailer

who has made agreements with various retailers to sell their

brands in their outlets This type of MBO for fashion merchandise

is suitable in a Secondary Business District which has a shopping

area that is smaller than a central business district and revolves

around at least one variety store at a major street intersection.

These MBO’s are available in plenty in Metro cities and also quite

popular in Tier2 and Tier 3 cities. Customers in these trading

areas are not specifically brand conscious but more of Value

buyers and they prefer to shop in a store which houses a variety

of brands. Franchising Franchising is a very specific innovative

method of distributing goods and services where Franchisor

(owner of business/retail) provides product and assigns to

Franchisees the right To market and distribute the franchisors

goods and service The Business format Franchise model is the

most popular method in Apparel Franchising Franchising model

of store operations best suits the retailer when the retailer needs

to Expand his business into new geographical areas where

limited knowledge is available to Conditions for business and

market potential is not very clear. Also having own stores in new

locations attracts lot of investment and riskier. It is better to

enter new geographical areas through franchising model and

with its success the retailer can plan to expand his own market

through opening EBO’s and Flagship stores. Primary Trading Area

- 50-80% customers Central Business district - Metro cities -

EBO's Secondary Trading area - 15-25% customers Secondary

Business District - Metro & Tier2 cities - MBOs Fringe Trading

Area - 10% of customers Stores in new States, expansion mode -

Franchising Model Store Mapping for Fashion Merchandise Retail

Outlets ArunKumar Arunachalaiah – Retail Consultant, email –

Page 23: Competitive Retail Strategy for Fashion Merchandise New

[email protected], Mobile - 9740067765 30

31. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Establishing a Retail Brand Image The emphasis here is on retail

as a brand rather than retailers selling brands. The focus should

be on branding the retail business itself. In their preparation to

face fierce competitive pressure, Indian retailers must come to

recognize the value of building their own stores as brands to

reinforce their marketing positioning, to communicate quality as

well as value for money. Sustainable competitive advantage will

be dependent on translating core values combining products,

image and reputation into a coherent retail brand strategy. Retail

branding creates a brand preference, which goes beyond the

product in itsef. What might it then mean, when branding is

applied to retailing? The issue is not of retailers selling brands

but branding the retail business itself, like the grocery

supermarket chain or the fashion store. The retailer must

attempt to brand himself differently, especially when today’s

product brands are being launched through their product brand’s

own shops.(Examples – Nike, Adidas and Reebok. Jeans segment

– Lee and Wrangler, Perfumes –Hugo Boss. ) Fundamental

characteristics of a brand (1) Recognizability: A true brand is

instantly recognized and identified. The brand name passes into

every day use (Nike’s ‘Just do it’) or (‘Make a Xerox of this

document’) (2) Meaning, story, value: This is the second

characteristic of a brand. The brand must have a value

proposition. It must stand for something and one of the most

effective ways is to have a story to transmit those values. (3)

Legitimacy: The meaning of the brand should be obviously

appropriated by the target customer group. In Retail business

Legitimacy rests on emotional authority, earned by the brand

and granted by the customers like unique shopping experience

warmth in store. (4) Consistency, alignment: A brand story

should contain no internal contradictions and should be appear

to be consistent over time, applicable across the business and

attempt at total brand integration. (5) Proximity: The brand

Page 24: Competitive Retail Strategy for Fashion Merchandise New

building process should culminate with assuring the brand’s

proximity to the consumer. The brand’s definition gets expanded

by opening stores in a number of locations to make it convenient

to the consumer. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 31

32. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

A retail organization, like any other corporate company, will have

to ensure that its own brand includes the characteristics of

product brands detailed above. Retailers need to work on three

dimensions to achieve this: ( 1 ) Brand value: The retail brand

has to embody and transmit clear values to the customer. (Like

‘value for money’, ‘Luxury shopping redefined’). Some

companies have attempted to define this in their mission

statements but they are often too vague and not actionable.

While many Indian product brands have successfully weaved

values around their brands (Hamam on ‘trust’, Godrej on ‘quality’

and TVS on ‘service’) retailers are yet to develop a consistent

value across their businesses. (2) Brand strategy: It is imperative

that retailers have a systematic strategy on issues like whether

to develop the retail brand or corporate brand and decisions on

one product/one brand that they may be selling in their shop.

Retailers can also decide to launch high quality retailer brands

(‘own labels’) backed by promotional campaigns, reinforcing

clear personalities. Pricing policies, today position retailer brands

as good value lines or premium lines.The view that retailer

brands offer a cheaper alternative to manufacturer brand is no

longer valid. There is even scope for retailers to develop

alternative types of ‘own labels’ targeted at different consumer

groups in their outlets. An essential ingredient for success, in

such cases, must be consumer-relevant added values – not just

lower prices. Experienced consumers are no longer primarily

motivated by low prices. There is scope to attempt a retail

segmentation strategy. ( 3) Brand structure : Operational levels

of the retail business have to be held together to integrate the

whole brand proposal. At this level, marketing, human resources,

Page 25: Competitive Retail Strategy for Fashion Merchandise New

distribution, logistics, administration and sales have to work

towards a common brand value that has to be communicated to

the consumer. The retail brand’s messages must be weaved into

the every day experiences that the consumer has with the retail

brand. Brand building constitutes a way in which the main value

of the retail store shifts to what has been traditionally called an

intangible. Indian Retailing is coming of age and needs to have a

clear brand proposition to offer the discerning Indian consumer.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 32

33. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Value of Brand Image Brands provide value to both customers

and retailers. Brands convey information to the Consumer about

nature of shopping experience, retailer’s mix. Brand image also

affect consumer confidence in decisions made to buy

merchandise from the retailer. Brands can enhance customer

satisfaction with the merchandise they buy. The value that brand

image offers the retailer is called Brand equity. A strong brand

image enables retailers to increase their margins. Retailers with

strong brand names can leverage their brand to successfully

introduce new retail concept with only a limited effort on

marketing. Building brand equity involves the following activities.

Brand Awareness Brand Awareness is the ability of a potential

customer to recognize or recall that the brand Is a type of

retailer or a product/service. Brand awareness is the strength of

the link between Brand name and type of merchandise in the

mind of the customer. Aided recall is when Consumer indicates

they know the brand when the name is presented to them. Top

of mind Recall happens when consumer mentions a brand name

when asked about a type of retailer. Retailers build top of mind

recall by having memorable names, repeatedly exposing their

Name through advertising, locations and using memorable logos.

Favorable association with the Brand Value of brand is largely

based on the association that customers make with brand

names. Eg: McDonalds link is so strong when customer thinks of

Page 26: Competitive Retail Strategy for Fashion Merchandise New

hamburgers it reminds them McDonalds Common associations

that retailer build with their brand names are • Merchandise

Category – Madura garments associates with Formalwear •

Price/Quality – Eg: Wall-mart associates itself with low prices •

Specific attributes – Retailer can link stores to attributes such as

service/convenience. • Lifestyle/Activity – Some retailers

associate their name with specific lifestyles. Reinforcement of

Brand Image Brand image is reinforced to deliver a consistent

image through retailer’s integrated Communication program

such as Advertising, Sales Promotion, Publicity, Store

Atmosphere Visual merchandising and Personal selling.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 33

34. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Indian Retail Brand Building – the road map ahead Indian

Retailers should learn quickly to build the retail brand directly

and not look to factors like prime location, value pricing or

product assortment to build their businesses. Indian retailers, to

build a strong retail brand presence, can use the following

strategies. Relationship management to enhance in-store

shopping experience: Competition will force retailers to think

about their customers as individuals, analyze their share of

customers and calculate their customer lifetime values. Retailers

need to build data bases using in-store data collection and

launch frequent shopper rewards, carry on an interactive

communication with them, make special offers, drive traffic and

add value outside the in-store relationship.Retail brands get built

by developing personal relationships with consumers rather than

only through product and pricing. For example, staff should be

trained to recognize their V.I.P customers. ‘Soft’ rewards for V.I.P

customers include priority service, free gift wrapping, enhanced

guarantees and sales pre-notifications. ‘Hard’ benefits include

privileged rewards and extra value offers as well as straight

discounts. The quality of management of the customer is

becoming an increasingly important source towards building the

Page 27: Competitive Retail Strategy for Fashion Merchandise New

retail brand. Education and training of staff needs to be done to

enhance customer service. Local store management can be

empowered to maximize the value of each customer visit.

Analysis of customer behavior can guide store merchandising to

match the profile of their customers and even the needs of the

shoppers at different times of the day. External communication

to add value outside the store: Retailers use advertising to build

their brands and promotions to drive store traffic. Retailers have,

still not felt the concept of individual customer communication

outside the stores as a necessity. It is necessary that they seek

to add a new form of dialogue with their customers. Retail chain

Subiksha, for examples, mails a broadsheet to its customers

giving them details of the promotional offers available and price

comparisons across brands that helps its customers to take more

informed decisions. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 34

35. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Motivating the staff to volunteer value The quality of in-store

service is a key factor in differentiating the retailer and winning a

higher share of customer spend. In one survey, shoppers were

asked, would they ask for the same salesperson on their next

purchase visit; the ‘yes’ respondents were found to more likely

give the store a 8-10 rating. Staff must be trained and motivated

to recognize their best customers and to offer them superior

service. Building retail brands that offer value will, in future,

overshadow all these areas, and emerge as the dominant reason

for the success of the organized Indian retailer. Indian retailers

must build their brands with images that seek to entertain and

involve their customers. It is the quality and value of the retail

brands that they have sought to establish that will determine the

loyalty of the retail shopper in future. Community Relations The

way retailer interact with the communities around them can

have significant impact on the brand image and performance.

Engaging in community oriented actions enhance their Stature.

Page 28: Competitive Retail Strategy for Fashion Merchandise New

Some of them can be listed below v Make sure Stores are barrier

free for disabled shoppers v Showing concern for environment by

recycling trash and cleaning streets v Supporting charity and

noting that support at the company website v Running special

sales for senior citizens and other groups v Sponsoring Youth

activities v Donating money and equipment to schools and

orphanages. ArunKumar Arunachalaiah – Retail Consultant, email

[email protected], Mobile - 9740067765 35

36. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Planning and Forecasting Retailers have a proactive approach to

respond to the fluctuations in Demand and Supply to increase

the overall profitability of the firm. Planning methodology is

adopted to manage allocation, production and distribution of

available resources and also to make trade-offs when necessary

between inventory and capacity. Forecasting Demand Every

Strategic and planning decision taken by a retailer has to be

based on Demand forecasts. Forecasting is a very important tool

which helps in taking accurate decisions. Different products have

different demand trends and are therefore difficult to forecast.

Products like milk and bread have stable demand and hence

easy to forecast whereas technology products like mobile phones

are extremely difficult to forecast. Characteristics of a Forecast: •

Forecast Error – Forecast must always include both an expected

value of forecast and a measure of forecast error (varies

between 2% to 5%) Et – Ft – Dt (Diff b/w actual forecast & actual

demand in period t) • Accuracy of forecasts – Long term

forecasts has larger standard deviation of error with respect to

mean than short term forecasts. Forecasts made for shorter lead

time products are more accurate. Aggregate forecasts have

small standard deviation of error relative to the mean and hence

are more accurate. • Information Distortion – As we move up the

supply chain the degree of information distortion increases.

Forecasting Components: • Past Demand • Lead time involved in

the product • Economy • Advertising decision and discounts

offered • Competitors ArunKumar Arunachalaiah – Retail

Page 29: Competitive Retail Strategy for Fashion Merchandise New

Consultant, email – [email protected], Mobile -

9740067765 36

37. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Steps involved in Demand Forecasting • Forecasting Objective –

How much to sell, How much inventory to maintain, How much

discount to be allowed • Demand planning and forecasting

integration – Issues like capacity, production, promotion,

purchasing and advertising require planning to be done in

accordance with the forecast made. • Customer Segment

identification – Different customers may be grouped under

different segments to use different forecasting methods. •

Factors influencing Demand forecast – Demand, Supply and

features of product are main factors affecting forecast. Retailer

must understand what would the demand be in absence of

promotional activity. • Forecasting method determination –

Larger number of companies use multiple forecasting techniques

individually or in combination • Establishing Performance and

error measures – Actual accuracy compared with desired

accuracy and resulting gap should be called error, corrective

action is taken to reduce it. Forecasting Methods: • Qualitative

Methods – Used when there is no historical date. Expert

judgment is involved and highly subjective in nature • Time

Series – Use of historical data and past results when demand is

stable Mixed – {(L + T) x S.D}, Additive - {L + T + S.D},

Multiplicative - {L x T x S.D} Where L is Level , T is Trend, SD is

Seasonal demand. • Casual – Forecasts are correlated with

certain environmental factors like economy & market rates. •

Simulation – Methods imitate customer choices. Simulation can

be used by combining time series methods and casual methods

to arrive at a forecast. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 37

38. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Merchandise Planning and Category Management Merchandise

Management is the process where the financial goals of the

Page 30: Competitive Retail Strategy for Fashion Merchandise New

company are achieved by offering the right merchandise in the

right place at the right time in the right quantity. This

encompasses sales forecasting, buying merchandise, making the

assortment plan, pricing and determining the communication

mix. Category Management is the process of managing the retail

business with the objective of maximizing sales and profit from a

particular category. Category is the basic unit of analysis for

making merchandise decisions like Divisions in Apparel,

Electronics, Food, Department in Men’s, Ladies and Kids

segment, further category into formal, casual, sportswear and

ethnic wear. The planning for the merchandise category

culminates in an assortment plan. An assortment plan is a list of

merchandise that indicates in very general terms what should be

carried in a merchandise category like men’s formal wear

includes average number and percentage of each style/color/size

that the retailer should have in his inventory. Mission and Roles

of Category • Destination Category – Customer’s first choice of

retailer • Routine Category – Customer’s preferred retailer of

routine needs • Seasonal Category – Retailer is a major supplier

for a particular time or season. • Convenience Category –

Retailer is the supplier of fill-in products Some examples of

subcategories include • Traffic builders – Product with high

market share • Transaction builders – Products frequently

purchased on impulse. • Cash generators – Products with high

stock and margins • Image creators – Products that are

promoted with features that makes it unique. • Excitement

creators – Products with high impulse appeal. The goal of

category management is to improve operating results of a

retailer and its associate partners including manufacturers,

distributors & brokers. Category management is a strategy of

differentiation. It should drive multiple item purchase, not

selection of single SKU, should be a function of times, space and

product utilization. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 38

39. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Page 31: Competitive Retail Strategy for Fashion Merchandise New

Focus area of Category Management: Category Management has

its roots with the landmark Efficient Customer Response industry

initiatives of 90’s developed by GMA – Grocery Manufacturers of

Amercia. ECR established best practices guidelines that have

helped guide countless category management initiatives. •

Efficient Product Introduction • Efficient Product Promotion •

Efficient Store Assortment Merchandise Planning Process

Merchandising directions are set for the company by Top

management who look at the overall merchandising strategy

which involves 1. Defining Target Market 2. Establishing

performance goal 3. Deciding on basis of trends which

merchandise division should be given emphasis 4. Studying

category past performance 5. Project assortments for their

merchandise categories for coming season Merchandise Plan

tells the buyer and planned how much to spend on each

category every month/season. Once merchandise plan is set

buyer and planner set the assortment plan. The buyer works with

vendors choosing merchandise, negotiating prices and

developing promotions. The planner breaks down overall

financial plan into how many of each item to purchase and how

to allocate to stores. Assortment Planning Process • Variety –

Number of different merchandising categories within a store or

department. Large variety means to have a good breadth.

Variety is the most important defines the retailer in the

customer’s eye • Assortment – Number of SKU’s within a product

category. Stores with large assortment is said to have good

depth. • Product availability – defines percentage of demand for

a particular SKU that is satisfied. Also referred as support level or

service level. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 39

40. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Category Management Guide of determining Variety &

Assortment Ø Profitability of Merchandise Mix – Retailers are

always concerned with the amount of money they have to invest

in merchandise and space. Ø Corporate Strategy and Positioning

Page 32: Competitive Retail Strategy for Fashion Merchandise New

– Strategy towards assortment helps number of colors and styles

to purchase. The more diversified the stock portfolio less risk of

huge losses as on an average the category might perform well

even if a few don’t sell. With large assortment buyer runs risk of

broken sizes and hence usually take markdowns as they are hard

to sell. Ø Physical characteristics of Stores – Retailers much

consider how much space to devote to each category. The space

requirement increases with increase in assortment and colors.

The display area’s physical characteristics in terms of capacity

are also important. Retailers typically divide their chain into A, B

and C stores based on their ability to generate sale. “A” Stores

get the largest inventory allocation and assortment. Ø

Determining Product availability – Higher the product availability,

higher the amount of backup stock necessary to prevent out of

stocks on particular SKU’s. A very high level of service results in

higher inventory investment. The relation between cycle stock

and safety stock explains this better. Ø Assortment Plan –

Historical precedence is the starting point for developing

assortment plan for any season. Category manager uses

GMROI,Sales forecast and turnover ratios along with assortment

plans to develop a buying plan for the new season. It also

requires expert and subjective judgment. Ø Space Allocation - a.

Sales/Sq feet - Sales/Linear foot of shelf space which is annual

sales divided by total linear footage devoted to the product

category. b. GMROF - Gross profit per linear foot of shelf space

which is annual gross profit divided by the total linear footage

devoted to the product category. Ø Performance measures a.

GMROI – Gross Margin divided by average Inventory Investment

at retail price. b. Inventory Turnover - # of times in a year

average inventory on hand is sold. c. Direct product profitability –

Gross profit minus its direct retail cost. d. Average

sale/Transaction – total sale for day/total # of bills generated in

that day, measures customer spend per transaction and also

determines ticket size. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 40

Page 33: Competitive Retail Strategy for Fashion Merchandise New

41. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Merchandise Budget Plan for Fashion Merchandise The

merchandise budget plan aims to setup specific merchandise

objectives and to plan financial aspects of the merchandise side

of the business. It involves below steps Planning Data Ø

Assortment Plan - Historical precedence is the starting point for

developing assortment plan for any season Ø Sales Forecast – It

is a simple way to adjust past sales to make projections into the

future. Sources of information for sales forecast could be a.

Previous sales volume with which real trends are identified b.

Published sources c. Customer information – through

observation, sales people and market research d. Observing

competition e. Vendors, Distributors, Channel partners and

Expert judgments Method of forecast is mainly a. Time series -

Moving average – average of several months sale, as each new

period sale data is added the average the oldest period is

removed from total. b. Time series – Exponential Smoothing –

often used for Short range forecasting. New forecast = Old

forecast + f (Actual demand – Old forecast) where f is const b/w

0 & 1 that determine influence actual demand on the new

forecast. Ø Reductions – to have enough merchandise levels

apart from sales value of inventory may go down due to

Markdowns, Shrinkages and Discounts. Ø GMROI goal for

category is planned based on past performance of same

merchandise. Ø Inventory Turnover – when inventory turnover is

planned Gross margin is ignored as the budget plan is an

inventory plan and not a pricing or margin control plan. Ø

Average stock to sale ratio – To achieve planned inventory

turnover purchase must be kept in line with sale forecast with

the period. The average BOM Stock to sale ratio helps to do this.

Ø Monthly planned purchase - Monthly sales + Monthly

reductions + EOM Stk – BOM Stk ArunKumar Arunachalaiah –

Retail Consultant, email – [email protected], Mobile -

9740067765 41

42. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Page 34: Competitive Retail Strategy for Fashion Merchandise New

Evaluating the Merchandise Budget Plan GMROI, Inventory &

Sales Forecast are used for both planning and control as it is

based on top down planning process. After the selling process

the buyer determines how well they actually performed

compared to the plan. If actual GMROI, turnover and forecast are

greater than planned then performance is better than expected.

Questions should be answered as to why the actual performance

is above or below planned. Open to Buy Analysis OTB Analysis

starts where merchandise budget plan ends. The merchandise

budget provides a plan for purchasing merchandise to be

delivered in a particular month. The OTB keeps track of how

much is spent each month and how much left to spend. As such

OTB acts as a buyer Checkbook. The purpose of OTB is to keep

actual spending in line with the planned level of purchase to

avoid over investment and can maintain rate of inventory

turnover at planned levels. OTB is usually kept at retail price.

Steps in Buying Merchandise Ø Gathering data from Customers,

Suppliers, Sales staff, Competitors and Internet. Ø Selecting and

Interacting with Merchandise sources- Agents, Manufacturers etc

Ø Evaluating the Merchandise – Inspection, Sampling Ø

Negotiating the purchase and terms Ø Concluding Purchase Ø

Receiving and Stocking Merchandise – storing, GRN, invoice,

monitoring pilferage. Ø Reordering Merchandise – Inventory

holding vs ordering costs, turnover, cash outlay Ø Re-evaluating

on Regular basis ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 42

43. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Procurement and Inventory Management Sourcing can be

defined as the process by which companies acquire raw material,

parts, components, different products and services from various

suppliers in order to carry out their operations. Such a process is

called Procurement. The sourcing process comprises of the below

mentioned stages • Supplier selection • Supplier contracts

designing • Product design collaborations • Procurement of

material • Performance evaluation of suppliers. Supplier Scoring

Page 35: Competitive Retail Strategy for Fashion Merchandise New

and Assessment Supplier scoring and Assessment means rating

the supplier’s performance. Traditionally price was the primary

characteristic; however suppliers were ignored on other

characteristics like lead times, quality, reliability and design

capability and moreover, the impact of total costs doing business

with them. With the help of details received by supplier scoring,

Supplier selection is done to identify appropriate suppliers. Once

suppliers are identified Supplier Contracts need to be formulated

and negotiated with the suppliers. Once contracts are signed

product designs need to be prepared with the help of supplier

and in turn Product design collaboration takes place. While doing

this it is necessary to ensure that these designs are

communicated effectively to all parties involved in the

production and operations. The next stage is Procurement in

which supplier sends the products in response to the orders

placed and delivered on schedule at the lowest possible costs.

The final stage of Sourcing Planning and Assessing involves

identification of opportunities where buyers are able to decrease

overall cost of the product. Benefits of the sourcing process are •

Aggregation of orders resulting in economies of scale. •

Reduction in overall costs and distribution of risks with better co-

ordination. • Better forecasting and planning due to better

supplier relations. • Help to reduce inventories. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 43

44. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Some of the scoring points while identifying the right supplier

using Supplier Scoring and Assessment are noted below v

Replenishment lead time v Scheduled Performance v Supply

flexibility v Delivery frequency v Supply Quality v Transportation

costs v Pricing v Coordination of information v Product design

capability v Exchange rates and taxes v Supplier viability A

Sample of the Supplier Comparison Chart is illustrated below

supplier quality feature supplier 1 supplier 2 supplier 3 product

quality 2 5 3 service quality 3 4 1 ontime delivery 4 1 3

Page 36: Competitive Retail Strategy for Fashion Merchandise New

knowledge 2 2 4 reputation 2 4 3 customer focus 2 4 3 customer

service 2 4 4 responsiveness 3 4 1 average 2.5 3.5 2.8 average

2.5 3.5 supplier 1 2.8 supplier 2 3 supplier 3 responsiveness 4 1

2 customer service 4 4 2 customer focus 4 3 2 reputation 4 3 2

knowledge 2 4 4 ontime delivery 1 3 3 service quality 4 1 2

product quality 5 3 1 1.5 2 2.5 3 3.5 4 4.5 5 ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 44

45. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Supplier Contracts Administration It is very important to note

that contracts between suppliers and buyers are made keeping

in mind two basic aspects of supply chain profits and product

availability. In order to improve the overall profit of supply chain

the suppliers must design contracts that encourage retailers to

purchase in larger quantities and thereby increase the level of

product availability. But at the same time it is important for

suppliers to share some of the buyer’s demand uncertainty.

There are few types of contracts best suited for both suppliers

and buyers 1. Buy Back Contracts – This contract allows the

retailer to return the unsold goods up to a certain specified

amount at an agreed price. Allows retailer to order more number

of products resulting in higher product availability and higher

profits for both retailer and supplier, disadvantages is higher

inventory levels 2. Revenue Sharing Contracts – In this contract

buyer pays only a minimal amount for each unit purchased from

supplier but shares a fraction of the revenue for each unit sold.

This also increases the level of product availability meanwhile

increasing profits. Best suited for products having low variable

costs and higher cost of return. 3. Quantity Flexible contracts –

This contract allows buyer to modify the order within certain

limits as notified by supplier as and when the demand visibility

inches closer to the point of sale. This contract has less

information distortion than those above. This contract is suitable

for suppliers serving multiple retailers and also must possess

flexible capacity. 4. Contract for Supply chain cost co-ordination –

Page 37: Competitive Retail Strategy for Fashion Merchandise New

Quantity discount contract there is a reduction in overall cost but

lead to higher lot sizes and thus higher levels of inventory in

supply chain. 5. Two Part tariff contract – offers right incentives

for dealer to exert right amount of effort to increase supply chain

profitability 6. Threshold contract – offers the dealers an increase

in margin for sales exceeding a certain threshold limit. 7.

Performance improvement contracts – are structured at

instances where a buyer wants performance improvement from

supplier who has little incentive to do so. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 45

46. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Vendor Management The use of the following sourcing practices

makes sourcing easier and managing vendors efficiently

resulting in lower product costs and increasing the overall

profitability of firm. Ø Use of Multifunctional teams

Multifunctional groups help develop better strategies for

sourcing. It helps purchasers to stress and focus on purchase

price. Collaboration between the purchasing, manufacturing,

engineering and planning departments is much more likely to

identify correct costs. This collaboration must be continued up to

the procurement stage to realize the benefits of a good sourcing

strategy. Ø Co-ordination across regions and business units To

maximize economies of scale in purchasing and reducing

transaction cost, co- ordination of purchasing across all levels of

firm and supplier is essential Ø Evaluation of Total cost of

ownership An effective sourcing strategy should not make price

reduction its main objective. Primarily the factors that influence

total cost of ownership should be identified and used for supplier

selection. The performance of the supplier should be evaluated

and its impact on the total cost be quantified. Focusing on total

cost of ownership also allows a buyer to identify opportunities in

designing and planning in better way Ø Building long term

relationship with the suppliers Sourcing itself is essential to both

supplier and buyer working together as this generates more

Page 38: Competitive Retail Strategy for Fashion Merchandise New

opportunities for savings than the two parties working

independently. Trust should be established between the buyer

and supplier in order to maintain a long term relationship. At the

time of sourcing direct materials these capabilities are very

important and thus such relationships should be nurtured with

suppliers of critical and strategic direct material. Better

relationships result in better profitability for both supplier and

the buyer. ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 46

47. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Inventory Management Inventory is a very large and costly

investment that every stage of the supply chain needs to incur.

Every stage works independently to make supply chain

profitable. Thus it is very important that every stage of supply

chain co-ordinates and together forms the inventory policy. A

large number of firms make use of following two approaches in

combination when managing the inventory in order to meet

predictable variability. The two approaches are 1. Use of

Common components - This approach involves manufacturer to

design common components that can be used in multiple

products which have a predictably variable demand that result in

overall constant demand for the components. Eg: Buttons in a

Shirt 2. Developing Inventory for highly demanded products -

Products that are highly demanded or that have a high

predictable demand it is important to decide upon which of their

products will have highest demand and therefore build inventory

for that product in the off season because there are less chances

of fluctuation in demand for these products closer to peak

season. Need for holding inventory • Achieve Economies of Scale

• Balance demand and supply • Specialization • Protection from

uncertainty and order cycles • Act as a buffer between the

stages of the supply chain. Types of Inventory A. Cycle Inventory

Defined as average inventory that exists in the supply chain

either due to production or purchase of products in lot sizes that

are larger than those demanded by the customers. Cycle

Page 39: Competitive Retail Strategy for Fashion Merchandise New

Inventory = Lot size/2 = the average inventory = 1000 / 2 =

500pcs Average flow time = Average inventory / Average flow

rate. ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 47

48. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Average flow rate is the demand itself Average flow time

resulting from cycle inventory = cycle inventory / demand =

500/100 = 5 days EOQ – Economic order quantity = Twice the

Cycle inventory = 500x2=1000pcs. B. Safety Stock Safety

inventory can be defined as inventory carried for the purpose of

satisfying the demand that exceeds the amount forecasted for a

given period of time. Due to the uncertainty in the demand a

product shortage may result. The table below shows the

summary of alternate service levels, safety stock levels and also

the total average inventory to be maintained. Fill rate represents

the magnitude of a stock out. It represents the percentage of

units demanded that are on hand to fill the customer’s orders.

Service Level # of Std Deviations Safety Stock Average Total

Average reqd Requirement Cycle Stock Inventory 84.10% 1.0

175 500 675 90.30% 1.3 228 500 728 94.50% 1.6 280 500 780

97.70% 2.0 350 500 850 98.90% 2.3 403 500 903 99.50% 2.6

455 500 955 99.90% 3.0 525 500 1025 C. Speculative Inventory

Stock held for reasons other than satisfying current demand.

Reasons can be bulk purchases larger than demand to get bulk

discounts or because of a future price increase or future shortage

expected. D. Seasonal Inventory Form of Speculative demand

accumulation of inventory before a season begins. E. Dead Stock

Products which have no demand registered over a large period of

time. Products are obsolete and block working capital.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 48

49. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Symptoms of Poor inventory level Ø Increase in number of back

orders Ø Increase in inventory investment with back orders

remaining constant Ø High customer turnover rate Ø Lack of

Page 40: Competitive Retail Strategy for Fashion Merchandise New

sufficient space Ø Increase in number of orders being cancelled

Ø Wide variance in inventory turnover among distribution

centers and major items Ø Deteriorating relationships with

intermediaries in stages of supply chain. Inventory Holding Costs

Holding cost is estimated as the sum of the following mentioned

costs.Usually the holding cost is a percentage of the cost of the

product Ø Cost of Capital – Weighted average cost of capital on

inventory is calculated before taxes are paid. Pre Tax WACC =

Post tax WACC / (1 – t) Ø Spoilage costs Rate at which value of

product the firm stores drop following drop in market value due

to quality deterioration usually high on perishable food items Ø

Handling costs Include receiving and storage costs of products. Ø

Occupancy costs Show an incremental change in the space cost

due to the change in the cycle inventory. If a firm is charged on

# of units stored we call it direct occupancy costs. Ø

Miscellaneous costs Deal with large number of costs such as cost

due to theft, damage, tax and insurance that may be incurred by

the company. Ø Ordering costs Costs associated with placing or

receiving an extra order independent of the size of the order Ø

Transportation costs A fixed transportation cost is often incurred

by firms regardless of the size of the order. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 49

50. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Objectives of Inventory Control Avoid shortage of material

Prevent excess material Reduce costs Provide proper customer

service Selective Inventory Control v Visual Control – Examine

inventory visually to determine if addtnl inventory reqd. v Tickler

Control – Physically count small portion of inventory each day v

Click sheet Control – Record items as it is used on paper for

reorder purposes. v Stub Control – Retain a portion of price ticket

when an item is sold v Point of Sale terminal – relay information

on each item used or sold. v ABC Analysis – 20% of the items

contribute to 80% of total sales , Decision based on 80:20 rule,

A-important, B-moderate imp, C – least imp. % Sales 100% 80%

Page 41: Competitive Retail Strategy for Fashion Merchandise New

80% 80% 60% 40% % Sales 15% 15% 15% 5% 5% 5% 5% 5%

20% 0% A A B B B C C C C C v FSN Analysis – Based on speed of

movement of inventory , F- Fast, S – Slow and N – Non moving

goods v Two Bin System – Principle of reorder level physically

separates entire stock into two bins. Reorder Qty is EOQ , Second

Bin Qty = Minimum Stk + Lead time consm First bin Qty = Order

Qty – Lead time consumption. v HML Analysis – H – High priced

item, M – Medium priced item, L – Low priced items. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 50

51. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Retail Operations Management Operations Management is an

area of the business that is concerned with the production of

goods and services and involves the responsibility of ensuring

business operations are efficient and effective. It is also the

management of resources and distribution of goods and services

to customers. A typical retail operating process is focused

towards ensuring efficient attending on the customer all the time

he or she is in store. For doing this the operations department

has to work on the following steps. 1. Connect with customer:

Salesman has to be humorous, sweet, shy or confident while

interacting with customers. 2. Probe need subtly: By

communicating freely with customer & striking a humorous note,

needs of customer could be understood even if they don’t spell

out clearly. 3. Presenting Merchandise: Salesman should initiate

the trial of product by the customer and give truthful opinions at

the same time give personal space. He should not insist. 4.

Handling objections and indecisions: Customer doubts are to be

clarified by the salesperson to his or her satisfaction. 5.

Recognizing buying signals: Must respond quickly to buying

signals which may come in the form of positive statements. 6.

Closing the Sale: Preparation of cash memo and guiding the

customer to the invoice counter. To ensure this, the operations

have to carry out jobs for which the broad retail activities are

classified as below and each of these topics will be touched upon

Page 42: Competitive Retail Strategy for Fashion Merchandise New

in detail. v Store Layout and Designing / Visual Merchandising v

Customer Service Management v Store Facility Management and

Maintenance v Loss Prevention v Store Operations Parameters

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 51

52. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Store Layout and Designing / Visual Merchandising Store Layout

and Designing is one of the most vital ways of communicating

and helping customers to buy. Any retailer while designing the

store layout must consider following: Ø Store atmosphere must

be consistent with the store and brand image of retailer Ø Store

designing must help influence customer’s buying decisions. Ø

Optimization of Productivity from retail space. Store Layout It

refers to planned physical location and arrangement of

merchandise, departments, displays, checkout counters and non-

selling areas. In doing this first consideration must be given to

customer convenience and then comes the retailer’s

convenience. In designing a good store layout the retailer must

consider the following 1. The layout must entice customers to

move around the store to purchase more merchandise than

planned. 2. Customers should ideally be exposed to layout

pattern that facilitates a specific traffic pattern. 3. Effective

merchandise presentation and balance between sale and

shopping space. A typical layout divides the store into four

different kinds of space Ø Selling Space – Assigned for interior

displays, product demonstrations and sales transactions. Ø

Merchandising Space – Allocated to items that are kept in

inventory for selling. Ø Personnel Space – Assigned to store staff

for lockers, lunch breaks and rest rooms. Ø Customer Space –

Assigned for comfort and conveniences of customer including

food court, dressing rooms, lounges and recreational space for

children. Once the selling to sales support ratio is known

designers can begin the planning process. The planning of store

layout consists of five distinct steps 1. Selection of layout type 2.

Division of Merchandise by department 3. Allocation of selling

Page 43: Competitive Retail Strategy for Fashion Merchandise New

space by department 4. Assignment of department location 5.

Organization of Merchandise within departments. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 52

53. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Layout Patterns The basic arrangement of the selling floor is of

primary importance, because it affects all other design decisions.

Each type of layout has inherent strengths and weaknesses

resulting from the traffic flow patterns they create. With

changing formats and increasingly sophisticated store design

research and techniques, retailers have been experimenting with

many combinations of these plans. Layouts may be categorized

into three basic types: Grid Layout: A linear design for a selling

floor where fixtures are arranged to form vertical & horizontal

aisles throughout the store. Supermarkets, discounters, grocery,

drug store and other convenience –oriented retailers, typically

use it. This layout is done for more of the store’s convenience

and the need to get a lot of product out on display. The basic

advantages of using this kind of layout can be summed up as it is

efficient in terms of space use, Allows orderly stocking, Helps

shoppers see a great number of items easily, Is simple and

predictable to navigate, Efficient to maintain, Simplify inventory

maintenance. In a self-service format, this arrangement permits

customers to shop in a quick manner. Strategic location of

departments ensures that customers are drawn through the

store and exposed to all merchandise categories. Weaknesses of

the layout include the psychological effect on customers is one of

feeling constrained and rushed, which reduces the time they

spend browsing, Not aesthetically pleasing, Contains long

gondolas of merchandise and aisles in a repetitive pattern, which

creates a monotonous effect that makes the customers feel

bored after a certain time. It is not necessarily convenient for all

consumers or the most effective selling approach. Certainly the

main aisles will get lots of exposure, but the secondary aisles are

often over looked and as a result sales are missed. ArunKumar

Page 44: Competitive Retail Strategy for Fashion Merchandise New

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 53

54. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Free-flow Layouts - It is an asymmetrical arrangement of

merchandise that encourages an unstructured traffic flow. It is

mainly used in specialty stores and within departments of

department stores that emphasize mainly on ambiance and

personal selling. This layout is the most flexible of the three

plans. Advantages: The main advantages of this layout are:It

does not restrict the customers who do more browsing and

unplanned purchasing.It also enhances interior design, as

individual departments are more easily distinguished.Tends to

provide more relaxed atmosphere. Personal selling is

emphasized. Disadvantages: The major disadvantages of this

layout can be summed up as Its main weakness lies in the

inefficient use of space and customer disorientation. Also

requires higher labor & security expenditures. Lends itself to

higher rates of theft because of blocked vision. Setup is

expensive because the setup is custom made. Critical factor is

providing enough room between fixtures ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 54

55. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Loop or Boutique or Racetrack Layouts - It exposes shoppers to a

great deal of merchandise as they follow a perimeter traffic aisle

with departments on the right and left of the circular, square,

rectangular or oval racetrack. This layout divides the selling floor

into shops within the store. This layout is employed in a discount

or a department store. This layout exposes shoppers to a great

deal of merchandise. It forces the customer to visit multiple

departments as they pass through. This loop effect facilitates

impulse buying. The newest merchandise is prominently

displayed on these main aisles. Overhead directional signs and

departmental graphics provide visual cues to the location of

other departments, helping shoppers while shopping,

Page 45: Competitive Retail Strategy for Fashion Merchandise New

Construction, interior design and security costs are substantial,

however. Soft Aisle Layout - This layout treats merchandised

walls as some of the most important sales generators in the

store. Floor fixtures are arranged into groups with a 5-foot aisle

along merchandised wall sections. Encourages customers to

shop the walls and move easily around the store. Minimal floor

Layout - Almost gallery-like in its simplicity, shows small

selections of Hand crafted or very exclusive merchandise. This

layout is used in very high-end retail stores with designer

merchandise. The products are presented dramatically on the

walls of the store much like the art objects- with a minimal use of

selling fixtures on the floor. It allows for wide-open spaces in the

center of the store. Combination floor Layout - It has best

features of several floor layouts in an overall plan that suits a

retailer’s specific strategy. It is a blend of free-flow layout in the

1st third of the store & a grid layout for a clearance department

in the rear of the store. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 55

56. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Division of Merchandise by Department Merchandise is organized

into groupings or classifications for the purpose of store layout &

design. The creation of the various merchandise departments

should be based on a logical plan that allows customers to locate

desired items and make comparisons. Criteria used to divide

merchandise by departments are: Function/usage – includes

sports goods, kitchen appliances, home entertainment products.

Customer purchase motive - Impulse items, Diet foods etc. Price

points –Bargain, moderate, and better dresses. Vendor

identification – Giorgio Armani, Gucci etc. Storage and display

considerations – frozen foods, dairy products, etc. Target

Audience – men’s, women’s and children’s clothing. Allocation of

Selling Space When designing a store layout, it is important to

have a clear analysis of the yearly sales & gross margin

contributed by each merchandise grouping. Naturally those with

Page 46: Competitive Retail Strategy for Fashion Merchandise New

the highest return per square foot of selling space will have

contributed the most to the business. Every retailer should plan

on allocating space to also highly appealing. Merchandise located

in the primary (main) traffic aisles will receive more customer

exposure and less in the secondary (other) aisles. A higher level

of customer exposure will occur at the junction of two or more

primary aisles. Certainly the performance of any merchandise

group will improve if it is moved to a prime location. However, do

not waste valuable selling space by assigning it to merchandise

that will not provide adequate gross margin dollars. Locating

Departments within the Store The value of a space varies by

location within the retail store. The best locations are on the

main floor near the entrances and escalators, as they are the

highest traffic areas. In a multi-level department store, the value

of space decreases from the 2nd to the 3rd floor, since

customers are less likely to go up another flight. Within level, the

best locations are near the main aisles. Floor space that is

located on the right of an entrance is most attractive. The major

factors that help a retailer in deciding about the location of

departments within a store can be summed up as under:-

Amount of space needed-Amount ArunKumar Arunachalaiah –

Retail Consultant, email – [email protected], Mobile -

9740067765 56

57. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

of inventory needs to be displayed-The type of merchandise-

Profitability of the department. The amount of space needed and

the amount of inventory to be displayed are both adjustable

numbers for most retailers, but within limits. The retailers know

that certain merchandise requires specific fixtures or will need to

be displayed in a certain fashion. This will put a lower limit on the

space to be allocated. Departments requiring excessive space

are often displayed in the back of the store, eg: office furniture is

often placed in the back of the office supply store since it

requires so much space. To relegate the smaller departments to

the back of the store would result in them possibly being over

Page 47: Competitive Retail Strategy for Fashion Merchandise New

looked consumers. Presenting your store is a very strategic part

of your business. You need to have a reason for positioning every

item in your store beyond the usual… “It was the only place left

available so that’s where it ended up!” Organizing Merchandise

within the Departments A number of criteria may be used to

arrange merchandise, including brand, category, size, and price.

New or heavily advertised products often are distinguished, as

are items with particular service specifications. Retailers give

their best selling merchandise the best selling area of the stores.

The most favorable locations for merchandise are feature floor

displays, end-aisle units, eye-level positions on gondolas and wall

fixtures, and point-of- sale counter areas. Consider these

suggestions for positioning departments: High margin / High

profit - The merchandise that is highly profitable for the store

sales can afford the “high rent” district in the store. Demand

Merchandise - This is the merchandise; the customers make a

point of coming to the store to get and will hunt for it. This

should be put in a less valuable space and make them walk buy

the more impulse related items. Impulse Items - These are the

unplanned purchases customers make on a shopping trip. Items

with high impulse success get great locations in the store.

Related merchandise - Put merchandise even though it may be in

separate departments, near each other if they are coordinating

or complementary items. This will make them visible to the

customer and make shopping easier. Seasonal stock - Some

stores designate an area of the floor for merchandise that is on

hand on only a short-term basis. This makes for efficient

changeover of that area when a new season arrives. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 57

58. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

High Frequency Items - Customers want convenience; so position

items that they buy frequently in a convenient area of the store.

Department size - Smaller departments typically get better

positions in the store than a larger department in order to help

Page 48: Competitive Retail Strategy for Fashion Merchandise New

them be seen by the customer. Giving a small dept a poor

visibility area in the store is like putting the “kiss of death” on

that department. New Departments - If your trying a new

department or line of merchandise, give it best chance possible

to succeed by giving it a prime selling area. This is but obvious

through the above discussion that high margin/high profit items

go on the best shelf. Research shows that eye level and just

slightly below is the best shelves to sell from. Planogram Process

Plano gram is a computer –based technique for designating a

precise placement for every item stocked in a department. It

illustrates exactly where every SKU should be placed. These are

used by chain stores to display merchandise in the best way and

to achieve standardization across company locations. A

planogram is nothing more than a picture of how various

fixtures, shelves and walls will be presented with merchandise.

But while it is a relatively simple concept, it is a very powerful

one too. The planogram will force the retailer to consider very

carefully what products go where, why and how many. It will also

take into consideration what is known about the psychology of

consumer buying habits. The Planogram is a detailed plan that

gives store guidelines for: • Storefront, window display or

department setup. • The quantities of merchandise to be used

and how they are to be displays. • The type of fixture to use and

its placement • Price and description of the merchandise. • Signs

are to be used. Using this type of planning system provides

continuity from the storefront to the display & fixture positioning

in the store; the customer will recognize the store by its uniform

merchandise presentations and visual displays. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 58

59. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Merchandise Presentation With labor costs continually

increasing, the retailer must take advantage of every opportunity

to sell merchandise. Appropriate presentation tools placed

correctly on selling floors and dressed properly are a successful

Page 49: Competitive Retail Strategy for Fashion Merchandise New

silent sales force. A primary goal of the fashion retailer is to

create and maintain a quality fashion image. Merchandise

presented interestingly to the public can contribute greatly to

both a store’s and a department’s image. To achieve this goal, a

retailer needs to remember how the customer sees the store and

the merchandise displayed in it. Each item of merchandise,

properly arranged, is part of he image development process.

Principles of Merchandise Presentation There are certain basic

principles for each display that a retailer maintains for the store.

T 1. The merchandise should be displayed in a manner

consistent with the store’s image. 2. Consider the nature of the

product (e.g., Levis can be stacked, dresses can be hung) 3.

Packaging often dictates how the product is displayed (e.g.bulk,

self service vs. pkgd) 4. Profit potential influences display

decisions (e.g. low profit, high turnover items require less

elaborate displays.) Types of Merchandise Presentation The

different kinds of presentation techniques followed by retailers

while displaying merchandise can be summed up as under: Idea

–Oriented Presentation - It is a method of presenting

merchandise based on a specific idea or the image of the store.

E.g. Furniture displayed as room settings. In this kind of

presentation the products by one manufacturer are displayed

together. The basic idea of this presentation is to encourage

complementary purchases. Style/ Item Presentation - In this type

the organization of merchandise is done by style or item type

e.g. products in a grocery store, electrical supplies in a hardware

store. Within a specified area in this presentation style, types,

size, etc also organize the merchandise. For example, casual

cotton dresses may be offered in jumper styles, and low-waisted

styles. These should be presented on separate fixtures, or atleast

on separate arms of the same fixture. ArunKumar Arunachalaiah

– Retail Consultant, email – [email protected], Mobile -

9740067765 59

60. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Price Lining Presentation - It means organizing the merchandise

Page 50: Competitive Retail Strategy for Fashion Merchandise New

in price categories. Retailers offer a limited number of

predetermined price points within a classification. Also that the

merchandise is presented in accordance of their price line. E.g.

merchandise of same price line can be stacked together in a

display. End use Presentation - A dress department may carry

dresses for several different end uses- casual, career, evening,

and formal wear. Therefore the merchandise can be displayed on

different fixtures as per their classifications of their end use.

Fabrication Presentation - Each classification of merchandise

should also be separated by fabrication. E.g. casual jumpers may

be offered in both linen and cotton, and these fabrications must

be presented separately to give a well-designed presentation.

Color group - All fashions can be separated into one of the seven

groups of color. This is a method of display in which the

merchandise is organized into color blocks, from left to right,

from light to dark. The effect is to create a display that is visually

appealing to the customers. For example, if you were arranging

T-shirts on a hanging fixture the display would look like: Yellow-S,

M, L Blue- S, M, L Red – S, M, L Also remember that neutrals can

be presented separately or combined with any of the other color

groups. Vertical presentation - In this type of presentation

merchandise is presented vertically using walls and high

gondolas. People scan merchandise like they read: top to

bottom, left to right. Tonnage presentation - Large quantities of

merchandise are displayed together, and the merchandise is the

display in this type. E.g. cap displays of soups, soda, chips etc.

Frontal presentation - A method of displaying merchandise in

which the retailer exposes as much of the product as possible to

catch the customer’s eye. E.g. one frontal display of books with

the rest showing spines, one frontal display of an apparel item

with the rest racked. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 60

61. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Planning the Store The retailer must consider the store

Page 51: Competitive Retail Strategy for Fashion Merchandise New

personality and design the exteriors and interiors accordingly 1.

Store Personality Each retail store has a unique personality. To

the consumers a store can be warm, expensive, sterile, exciting

or dull. Store’s personality is in reality the image the consumer

has of the store. There is a multitude of factors that go into a

store image formation. Location, Merchandise, Price, service,

promotional effort and the attitude of the store personnel all

have an important role to play. Store atmosphere and store’s

physical facilities contribute heavily to the store image. 2.

Developing a central theme Many merchants effectively create a

store personality through the development of a central theme.

This can be accomplished by co-coordinating the décor and

fixtures through out the entire store. Retailer may generally

create a central theme during seasons, holidays, festivals etc to

attract customers. Such themes are temporary and will have to

be changed more often. 3. Exterior Design consideration The

images the consumers have of a store include its exterior design

as well as its parking facilities. The external character of the

store should reflect its interior character. In this way it conveys a

message to the consumers regarding the nature of merchandise

inside the store. Three important aspects of exterior design are:

Ø Store Signage – Every store should have an identifying sign

that tells the consumer the name of the store and if needed the

nature of the business. Included on the sign should be a store’s

logo. The store name or logo should be chosen with care & shd

be distinctive, easy to pronounce & remember. Ø Display

windows – Windows can be highly effective in attracting

customers into the store, especially when a high pedestrian

exists and the merchandise mix of the retailer is composed of

shopping goods. Display windows should reflect the atmosphere

and merchandise that will be found in the store Open Back –

permits customer to look directly inside the store. Closed Back –

Completely blocks the view of the store interiors Semi-Closed

back – contains partition below line of vision allowing display of

merchandise and same time to look into the store partially

ArunKumar Arunachalaiah – Retail Consultant, email –

Page 52: Competitive Retail Strategy for Fashion Merchandise New

[email protected], Mobile - 9740067765 61

62. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Ø Store Entrances Customers should have an easy access to the

store. Doors should be easy to open without subjecting the

customers to a tug of war. Entrances should be wide enough so

that entering and exiting customers can pass without knocking

into each other. The entrances should be inviting enough to

induce customers to step inside. Some retailers have automatic

doors for entry/exit 4. Interiors of the Store The interior designs

of the store are of utmost importance as it gives the first

impression about the store and merchandise. Important variables

in interior designing of a retail outlet are : Ø Fixtures – To hold

and display merchandise Ø Equipments – Elevators, escalators,

air conditioners Ø Store Atmosphere – Effects of a good store

atmosphere can be as below Attention creating medium –

creative use of colors and visuals Message creating medium –

brand message, company profile, values Affect creating medium

– Slow music, slowing the shopper’s speed Sense of Smell – Good

smell attracts customers to visit & shop more. Sense of hearing –

Tinkling bells, ringing wind chimes, rock music in coffee shops,

blast of space in video game rooms Sense of touch – people

prefers to feel product before they buy. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 62

63. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Customer Service Management Customer Service is the set of

activities undertaken by the retailer to make the shopping

experience more convenient and rewarding for the consumers. It

is an integral part of store management. The retailers job is to

identify the needs and wants of every group of customers and

develop different levels and type of customer service that will

keep the customers happy. CRM in retailing have focused on

improved productivity of the consumers shopping experience.

The five C’s of consumer efficiency are v Clarity – Maintaining a

clear focus on what you offer and what consumer can expect v

Page 53: Competitive Retail Strategy for Fashion Merchandise New

Choice – Too much or too little choice can waste customer’s

time. v Control – Customers like to be in control of their shopping

dislike pushy salesguys v Communications – Methods of

communicating – Signage, Brochure, Phone, Internet v Checkout

– Inefficient handling at checkout will waste customer’s time.

Customer Service Strategies Customer service can be leveraged

as a competitive advantage. To do so, there are 2 important

tools. Standardization – involves requiring service providers to

follow a set of rules and procedures while providing service . By

strict enforcement of these procedures, inconsistencies in the

services are minimized Customization – approach encourages

service providers to tailor the service to meet each customer’s

personal needs. This approach can result in customer’s receiving

superior service. But service might be inconsistent because

service delivery depends on judgment and capability of the

service providers. Customer Evaluation of Service Often

customers use some tangible cues to judge the quality of service

of the retailer. Tangibles – store appearance, merchandise

display, appearance of salesperson Understanding customer –

provide individual attention, recognize regular customers

Security – safety in parking lot, communications/transactions

treated confidentially Credibility – reputation of honoring

commitments, trustworthiness of sales staff Information provided

to customers – explanation, infm on sale, customer assurances

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 63

64. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Courtesy – friendliness, respect and interest shown to customers

Access – Waiting time in queue, convenient operating hours,

location Responsiveness – Returning a customer’s call, customer

query answered Reliability – Billing accuracy, time conscious

service performance. Classification of Customer Service

Customer service starts well before the customer can step into

the store and extends much after he/she has left the store

premises. 1. Pre-Transactional Services – Convenient hours,

Page 54: Competitive Retail Strategy for Fashion Merchandise New

Information aids and Manuals / Brochures 2. Transactional

Services – Offering credit, Transaction time (Queuing Theory),

Layaways, Gift wrapping, Credit and debit cards acceptance,

Personal shopping (assembling an assortment of goods, selecting

a wedding gift), Merchandise availability, Personal selling. 3.

Post-Transactional services – Complaint handling, Servicing and

Repair, Home delivery. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 64

65. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Store Facility Management and Maintenance A facilities

department in retail stores is responsible to maintain all facilities

of store which include both internal as well as external facilities.

Some of the responsibilities of the facilities department are 1.

Overseeing the retail facilities service including repair,

maintenance and capital improvements 2. Supervising the retail

facilities department to maintain equipment and facilities in

stores for regular equipment maintenance, upgrades and re-

models. To ensure proper functioning of all facilities all the time

the facilities are required to be maintained properly, For this

there is a separate maintenance department which is in charge

for all types of maintenance such as alarm systems, conveyor

repairs, Tele - communications, electrical and elevator services,

Fire inspection service, Lighting, Janitorial, Gate installations,

Trash service and cleanups, Upholstery and repairs. Maintenance

Management The maintenance department is one of the greatest

levers of profitability that any capital intensive organization has.

An average of 40 – 50% of a capital intensive industry operating

budget is consumed by maintenance expenditure. With advances

today in technology this figure can be greatly reduced.

Maintenance is the single largest controllable expense. A

planned and scheduled job is executed after which we should

record what was done in order to enable analysis of potential

future problem. Some of the maintenance measures available

and followed in retail industry are: v Predictive Maintenance

Page 55: Competitive Retail Strategy for Fashion Merchandise New

(PDM) – Condition monitoring, applying corrections based on

predictions. Also known as Just in time method v Preventive

Maintenance (PM) – Systematic inspection, detection and

correction of incipient failures either before they occur or before

they develop into major defect v Corrective / Breakdown

Maintenance – conducted when an equipment ceases to function.

Mean down time = Mean wait time + Mean time to repair v Total

Productive Maintenance (TPM) – Systematic execution of

maintenance by all employees through group activities. Dual

goal of TPM is zero breakdown and zero defects. Minimizes

inventory costs associated with spare parts. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 65

66. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Loss Prevention Loss Prevention is not a very glamorous part of

retail. It is however an important element of the success

equation. Theft or Shrinkage erodes 100% pure bottom line

profit. Know what your annual inventory shrinkage / loss figures

are Shrinkage = Book Value of Inventory - Actual Inventory on

Hand Shrinkage% = Shrinkage at Retail value / Total Sales Have

a systemized procedure for doing physical counts of inventory •

Preperation – Precount any merchandise that wont be sold before

the official count • After hours – Count your inventory when the

store is closed. • Supervision – Supervise the counting process

by an Senior not from store. • Count sheets – Should be pre-

numbered printed and padded. Every count sheet must be

accounted for. Steps for Loss prevention by employee theft 1.

Basic Loss prevention steps involve good procedures in hiring,

training and supervision of employees and managers 2. Have an

employee reward system for reducing shrinkage 3. Have a

policies and procedures manual 4. Make staff aware of the

effects of shrinkage 5. Attentive sales staff: Thieves do not want

to be watched upon. Stay with your customer as much as

possible. This also improves staff’s selling skills 6. Store design to

minimize shoplifting opportunities – Blind spots, cash counter

Page 56: Competitive Retail Strategy for Fashion Merchandise New

and merchandise displays should be in such a way that at no

point customer cannot hide himself from sales staff vision 7. Use

of security system – A centrally monitored security system can

reduce shrinkages plus give reports that who was in store and at

what time. Security mirrors help eliminate blind spots 8.

Management of Keys – Limit access of keys as much as possible.

Keep record of who has the keys, use non duplicating type of

keys 9. Account all markdowns – Strict policies must be in place

to handle markdowns. 10. Spot checks – False refunds are

popular method for dishonest employees to get cash from the till

and still balance at the days end. To control this customer name,

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 66

67. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

address and contact number must be recorded on special form

and signature. Spot calls to customers must be made on validity

of refund 11. Cash register – Daily audit trail gives indication of

everytime the cash drawer is opened for which reason. Ideally

drawer is opened for recording sales and if any other reason

explanation is needed 12. Entry and Exit – Back door is a prime

route for dishonest employees to get merchandise from store.

Access to and from back door must be restricted. 13. Garbage

disposal – Putting merchandise along with garbage is one of the

oldest tricks. Have second party check garbage before disposal

14. Employee checking – Hard one to implement but is a must,

physical checks on person and bags and belongings before exit

from store. 15. Reference checks on new employees – Checking

employee history with past employer and immediate supervisor

on work habits etc 16. Staff purchase program – generous staff

discount off retail price will minimize theft in stores by

employees Steps to avoid shop lifting • Fix your fixtures –

Minimize blind spots on the sales floor • Alternate clothing

hanger directions prevents thief from a quick grab from the rack

• Take receipt for all returns – Thieves steal merchandise and

return for refund hence always ask for receipt • Lock up

Page 57: Competitive Retail Strategy for Fashion Merchandise New

attractive expensive merchandise to prevent shop lifting • Be

Smart about EAS tag placement – Electronic Article Surveillance

is tagged on merchandise in hidden areas which is removed

when item is purchased, if not removed it triggers alarm when it

passes sensors near store exit • Monitor your fitting rooms –

customer must encounter staff when entering fitting room as it is

an ideal place to conceal merchandise • Signage – Correct signs

around store deter shoplifters – “ Smile- You’re on Candid

camera” even if you do not use cameras • Camera domes –

CCTV systems can be costly but very effective • Prosecute all

thieves as they will continue their practice if let off • Exceptional

customer service also can deter shoplifting by knowing who your

customers and offering assistance and attending their needs.

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 67

68. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Store Operations Parameters Customer Transactions Customer

conversion ratio – Retailers ability to turn potential customer into

a buyer = No of transactions / Customer traffic x 100 Return to

Net Sales – indication of customer satisfaction by showing value

of returned goods and allowances as %age of net sales = Total

Returns and allowances / Net Sales x 100 Transaction per hour –

Keep track of number of transactions they carry on per hour/

day/week or season = Number of Transactions / Number of Hours

Sales per transaction – Measure to give rupee value of average

sale = Net Sales / No of transactions Hourly customer traffic

Tracks total customer traffic/ hour/day/week. Can apply to each

dept or entire store. = Customer Traffic / Number of hours Stock

Transactions Inventory Turnover – Number of times stock is sold

and replaced in a period of time = Net Sales / Average retail

value of Inventory % Inventory carrying costs – Track % age of

netsales represented by fixed inventory cost = Inventory

carrying cost / net sales x 100 Gross Margin return on Inventory –

Margin on sales with original cost value of merchandise to yield a

return on merchandise investment = Gross Margin / Average

Page 58: Competitive Retail Strategy for Fashion Merchandise New

value on inventory at retail price Markdown Goods percentage –

if ratio increases retailer need to look at merchandising practices

and pricing. Markdowns are symptoms of poor buying,

advertising, store layout = Net Sales at Markdowns / Total net

sales x 100 Shrinkage to Net Sales – To determine % of net sale

lost due to shrinkage Actual Inventory –Book inventory / Net

Sales x 100 ArunKumar Arunachalaiah – Retail Consultant, email

[email protected], Mobile - 9740067765 68

69. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Space Transactions Occupancy cost/ Square foot selling space –

Measure of comparing performance of units at different locations

= Occupancy Cost / Square feet of selling space Gross Margin

return on Floor space (GMROF)– Gross profit per linear foot of

shelf space which is annual gross profit divided by the total linear

footage devoted to the product category. = Gross Margin / Total

linear footage devoted to a product category or entire store

Sales per square foot – Total sales value in rupee for every

square feet of retail space = Net Sales / Square feet of selling

space Stock per square foot – Use of space involving different

product lines or compare performance of different departments

or stores using common standard = Net Stock / Square feet of

selling space Employee Transactions Net Sales per full time

employee = Net Sales / Total full time employee Customers

served per full time employee = No of customers served / Total

no of full time employees Labor productivity = Total labor costs /

Net Sales Gross Margin per full time employee = Gross margin /

Total full time employees Supplier/ Quantity or value purchased

per buyer = Total suppliers / quantity or value purchased / Total

buyers ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 69

70. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Supply Chain Management Framework Supply Chain

management in retailing is the total process of planning,

implementing and coordinating all the activities required for the

movement of merchandise from manufacturer to retailer to

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customer in the most timely, most effective and cost efficient

manner. SCM includes the following points which need to be

integrated and coordinated • Inventory Management •

Warehousing • Material Handling • Transportation • Customer

service • Order processing and fulfillment Goals of SCM in

retailing 1. Place and receive orders as easily, accurately as

possible 2. Minimize time between ordering and receiving

merchandise 3. Coordinate shipments from various suppliers 4.

Have enough merchandise on hand to satisfy customer demand

without having much inventory that heavy markdowns will be

necessary 5. To place merchandise on sales floor efficiently 6.

Process customer orders in smooth manner 7. Have backup plans

in case of breakdown in the system 8. Optimize cost to enable

fulfilling all activities as economically as possible Decision phases

in Supply Chain • Supply chain design Decisions regarding

configuration of supply chain based on company’s strategies like

location of warehouse, manufacturing facilities, the production,

different modes of transportation to be used and the information

systems applied are all very critical. These decisions are long

term & expensive. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 70

71. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

• Supply Chain Planning It is the second phase on supply chain

decision process which requires decisions to be made in

considerations with the corporate time frame. Since the

configurations involves constraints it is important for careful

planning to be done in terms of forecasting demand, supplies to

be made from different locations, manufacturing decisions

whether in-house or outsourced, policies regarding inventory,

timing and size of the marketing promotions. • Supply Chain

Operations Here the time horizon is extremely short. Decisions

are based on individual customer orders. Main objective of this

phase is to handle the incoming customer’s order in the best

possible manner by allocating inventory or production capacity

to individual orders, fixing the transport and delivery schedules

Page 60: Competitive Retail Strategy for Fashion Merchandise New

of trucks and also placing replenishment orders. The Macro

Processes of Supply Chain 1. Customer Relationship

Management (CRM) – interface between firm & its customers.

Function of marketing, promotions, sales & website management

2. Internal Supply Chain Management (ISCM) – process that takes

place internally within the concerned firm 3. Supplier

Relationship Management (SRM) – Function of evaluation and

selection of suppliers, negotiation of supply terms and

communication regarding new products and orders with

suppliers CRM ISCM SRM •Market Research •Strategic Planning

•Source •Sell Products •Demand Planning •Negotiate •Call

Centres •Supply planning •Buy •Order Management •Fulfillment

•Design collaboration •Field Services •Supply collaboration

ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 71

72. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Achieving a Strategic fit in Supply chain strategy A retailer is said

to be strategically fit when its competitive strategy and supply

chain strategy coincide and have the same goal. Factors which

retailer has to emphasize to achieve this strategic fit are

Understanding the customer uncertainty and supply chain

uncertainty – In terms of price of product, variety of products

required, service level required, Tolerable response time,

Quantity required in each lot, Rate of product innovation Implied

demand uncertainty – uncertainty exists because of that part of

demand that a supply chain is required to fulfill. Demand

uncertainty is the uncertainty of customer demand of a particular

product whereas the implied demand uncertainty is the

uncertainty for only that part of the demand that the supply has

to fulfill keeping in view the attributes of the customer.

Understanding capabilities of supply chain – This is the spectrum

which has to be given the trade-off between the Efficiency and

Responsiveness of the supply chain in terms of Range in quantity

demanded, meet short lead times, meet high service levels,

tackle supply uncertainty and introduce innovative products.

Page 61: Competitive Retail Strategy for Fashion Merchandise New

Other issues affecting strategic fit – large number of products

and market segments, Product life cycles, time related

competitive changes. The Best strategy in terms of achieving a

strategic fit is maximizing the supply chain surplus view within

Intercompany and inter-functional scope. Suppliers Manufacturer

Distributors Retailers Customers Competitive Strategy Product

Development Strategy Supply Chain Strategy Marketing Strategy

Inter Company Inter-Functional scope of Strategic Fit

Horizontally: Supply Chain stages, Vertically: Functional

Strategies ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 72

73. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Major drivers in achieving a strategic fit in a supply chain are 1.

Facilities Facilities include those places where the material is

stored, assembled and produced. Components of facilities

decision are Location – Whether to centralize facilities to achieve

economies of scale or it needs to be more responsive by opening

more facilities closer to customers Capacity – Decide on capacity

to perform its intended function. Excess capacity allows more

flexibility to large fluctuations in demand but also increases costs

and decrease efficiency. Operations Methodology – Company

should take decisions regarding design of facility whether a

product focused facility or a function focused facility

Warehousing methodology – Warehouse design decisions

whether as a Stock keeping unit storage or a Job lot storage or

Cross docking. 2. Inventory Existence of inventory is because of

mismatch between supply and demand. Such mismatch occurs

where it is economical for firms to produce excess and stock

goods due to production constraints or in anticipation of future

demands. Components of Inventory decisions are Cycle Stock:

Average amount of inventory used to satisfy demand between

receipts of supplier shipments Safety Stock: Held incase of an

increase in demand more than expected. Seasonal Inventory –

Company builds inventory in order to counter the predictable

variability in demand Sourcing – Set of business processes

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required to purchase goods and services from a single supplier or

a host of suppliers. 3. Transportation Transportation moves a

product between different stages in a supply chain and has a

great impact on the efficiency and responsiveness of the supply

chain. Quick ArunKumar Arunachalaiah – Retail Consultant, email

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74. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

transportation methods increase the responsiveness but lower

the efficiency by increasing costs. Components in transportation

decision making are: Modes of Transportation – Air, Sea, Road,

Rail, Pipeline, E-transport Selection of routes /network – Path

along which goods travel is called Route Inhouse or outsourced

transportation – owning vehicles or leasing/renting 4. Information

Information has no physical presence yet this driver plays an

important role in the supply chain. Information is collected at

each and every stage of supply chain and it helps to rectify,

reconfigure itself and maximizing supply chain profitability. The

day to day operation of any facility requires analysis of

information available so that production schedules can be made,

produce on time, maintain a good inventory and provide on time

delivery and becoming more responsive and efficient.

Components of Information decisions are Push versus Pull – If the

retailer wish to execute a push process then it needs to have

proper information on raw material requires and needs to plan on

their timely availability, incase of a pull process information

regarding actual demand of products from customers must flow

through supply chain. Forecasting and Proper Planning –

Projecting future conditions in advance with the help of

projecting techniques. Once projection is made on future

demand it is time for action to decide upon how much to produce

and plan production schedule, marketing technique and pricing

Information coordination – Every stage of supply chain must

coordinate with each other in order to fulfill the objective of

maximizing the profitability of the supply chain. If there are no

proper coordination there would be disorder as “Information is

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the Life Blood of the Supply Chain” Pricing and Managing

revenue – It is vital to keep check on demand and supply info at

the time of altering the prices, analyze impact of price change on

future demands, costs incurred and market competition.

Technology – Varied technologies are used to help it work

efficiently like Electronic Data Interchange (EDI), Internet,

Enterprise resource planning, Supply chain Management

software etc. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 74

75. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Decision Making in the Supply Chain Competitive Facilities

Strategy Efficiency / Strategic Fit Responsivenes Supply Chain s

Stragegy Inventory Supply Chain Drivers Transportatn

Information Information Technology Perspective in Supply Chain

Management IT would help retail in providing the right product at

the right place at the right time with a price tag acceptable to

customers. It provides hardware and software capabilities to

cover end to end retail / business processes/ operations and also

be critical in efficiently and effectively carrying out all the core

functions which would include global sourcing, procurement,

distribution, transportation, logistics, demand forecasting,

product innovation, merchandising, compliance, Point of sale

data management, Property management, Marketing, CRM and

loyalty management. • It can leverage sales history and

anticipated demand to create an accurate forecast of customer

demand • Simulate midterm and long term planning options,

allocate resources and make strategic sourcing decisions in a

timely fashion to best meet operational goals. • Integrate

sourcing, purchasing, production, distribution and transportation

to create a demand plan. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 75

76. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

• Create a calculated, time phased replenishment plan based on

customer demand forecasts and using automated state of the art

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algorithms within the supply chain • Institute real time inventory

tracking across all channels enabling the retailers to manage and

monitor stocks and values and minimize the inventory levels

while avoiding out of stock situations. • Ensure an efficient

warehouse management system, picking and packing,

controlling logistics documents and in-bound and out-bound

monitoring. • Integrate GIS/GPS and mobile devices or RFID

technology to gain reliable, real time information about the

storage and movement of goods between warehouse locations •

Move from a product push to a customer pull approach and reap

the rewards of reduced operating costs and larger profit margins.

IT Applications: The technology perspective Applications of IT in

Retail span a very wide spectrum from store front right up to

Business intelligence tools integrated with ERP/SCM and CRM

applications and further to MPLS/VPN. The front end applications

are mainly in the form of Point of Sales Terminals and Barcode

readers for faster clearance. Then there are the SCM tools for

constraints based supply chain planning and forecasting. CRM

tools cater to trend analysis, customer usage pattern, purchase,

promotion management and lifecycle analysis. Use of data

warehousing, data reviving and BI tools has made the campaigns

and promotions associated with stores more focused to target

customers at all levels. BI Tools along with CRM have also made

it possible to offer customer loyalty programs to intend benefits

to retail and have loyal customers. E-Commerce covering

inventory visibility, on-site merchandising, cross selling, price

comparison and multi channel congruity would be the next phase

in Retail. MPLS-VPN Networks are more recent trends converting

stores of centrally networked infrastructure with 100% network

uptime would offer precise information related to merchandise,

logistics, online customers and would help in reducing the turn

around time required to take decisions. ArunKumar

Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 76

77. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Page 65: Competitive Retail Strategy for Fashion Merchandise New

Points of Sale - POS systems capture data about orders at the

POS are are frequently found in fast-food chains and grocery

stores. The POS systems provide immediate update to sales and

inventory systems and allow firms to monitor sales trends as

they happen. They also allow firms to capture customer data and

preferences and add information to their data warehouses. The

information available from POS becomes input to the financial

accounting systems which then supply data to marketing

information systems. Bar Code/ UPC - Bar code or Universal

Product code is used in point of sales systems in supermarkets

and retail stores. It is a product identifier and is made up of

series of bars and spaces which represent alphanumeric

information pertaining to product code, price etc. Barcode help

enhance accuracy in demand forecast, real time stock

management, faster checkout at POS, product tracking and

tracing and reduced labeling and administration costs. RFID -

Radio frequency identification is a wireless barcode which

provides wireless communication between objects and readers.

RFID uses embedded microchips containing information about

item, location. It has the ability to identify and track products

and equipment in real time without contact or line of sight. It

offers reading, waiting, transmitting and storing and updating

information. It can track inventory and tasks performed by

employees in store, customer profiles, transaction history &

levels of stock. VPN - Virtual private network is a secure

connection between 2 points across internet, enables private

communications to travel securely over public infrastructure. It

saves long distance communication costs. EDI - Electronic data

Interchange is the in charge of business information through

standard interfaces by using computers without requiring re-

keying information. Main benefits are saves time and data

transmission is immediate, reduced manual errors, no paper

handling. Data Warehousing and Data Mining - Retail

organizations are data rich but information poor, hence data

warehousing and data mining provides users with tools to store

summarized information from multiple heterogeneous bases in a

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single repository. Data mining is an information analysis tool

involves automated discovery of patterns and relationships in

data warehouse. ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 77

78. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Summary Report and Conclusion To conclude the project we can

say that the project report explains the best practices in retail

business processes that can be applied effectively in a Fashion

Merchandise Retail concept to improve the profitability and the

overall operating effectiveness of the business. The summary of

the project is listed as below • The project gives a detailed

insight into the value chain processes involved in the Fashion

Merchandise life cycle. • Market Entry - The Project describes the

best strategy for a Market entry which is the rapid Market

penetration strategy with high volume, high advertising and low

cost products. • Pricing - The pricing strategy describes effective

implementation of pricing tactics to counter competition and also

promotional pricing techniques to eliminate excess stock. •

Location – The checklist evaluation provides in depth details on

selection of a retail site for fashion merchandise retail outlets

and also describes what type of stores suit which market areas. •

Brand Image – The project outlines detailed explanation on

establishing a healthy brand image of the retailer which helps to

connect better with customers and gives a top of mind aided

brand recall. • Demand forecasting – This section provides

factors and methodologies in arriving at an accurate forecast for

buying to prevent loss of sales and excess stock in the stores •

Procurement – Detailed analysis of Supplier selection policies,

scoring, contracts while negotiating have been provided to select

the best sourcing policy for a fashion merchandise retail

strategy. • Retail Operations – explains the designing of layout,

visual merchandising concepts, merchandise presentation

techniques, store maintenance, loss prevention and customer

service management • Supply chain management – Section

outlines the importance of IT applications in retail end to end

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coverage to maximize the profitability of the supply chain and

the organization ArunKumar Arunachalaiah – Retail Consultant,

email – [email protected], Mobile - 9740067765 78

79. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Annexures - I Proposal Name of the Learner: Arun Kumar

Arunachalaiah Registration No: 200711493 Program: Post

Graduate Diploma in Retail Management Address: #291, 20th

Main, Nandini Layout, Bangalore - 560096 Title of the Project:

Competitive Retail Strategy for Fashion Merchandise Objectives:

Objective of this Project is also to carry out extensive studies to

make certain the right retail Strategy for an apparel retailer to

create a loyal and repetitive customer. The project scope will

also Include coverage of areas of establishing a strong Retail

image through Marketing Strategies, Brand Building, Identifying

the right Retail Mix, Pricing, Advertising, Forecasting, Category

Management, Retail Store Operations, Supply Chain and usage of

Information Tech-- nology applications in Apparel specific

retailing. Successful Apparel Retailing has always been said to be

about getting nutty gritty right of Merchandising, Forecasting,

Supply Chain, Training and Recruitment of high quality personnel

and Category Management. Building retail brands that offer

value will, in future overshadow all these areas and emerge as

the dominant reason for the success of the organized Indian

Retailer. ArunKumar Arunachalaiah – Retail Consultant, email –

[email protected], Mobile - 9740067765 79

80. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

Need for the Topic: India in recent years has been the focal point

of continuous growth and development making it one of the

fastest growing economies of the world. It is the 4 largest

economies in terms of Purchasing Power Parity, after USA, China

& Japan, and is rated among the top 10 FDI destinations. The

Indian consumer is evolving and driving retail growth due to

increased consumption. Private consumption growth contributes

to more than half of the GDP growth and is growing in double

digit figures. Several businesses are reacting to this evolution

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positively, both through pull and push phenomenon. Following a

similar trend, the Indian textile and apparel industry is also

experiencing rapid changes and growth. Apparel today has the

largest share of the modern organized retail in India i.e. 20% of

the current market of Rs. 56,000 crore and this is expected to

grow at a constant rate of 20% over the next 4 years. This report

puts together some of the recent trends being witnessed by the

textile and apparel industry. The central theme woven through

these trends is the way the consumer at various income-levels is

evolving, thereby ensuring that businesses are reacting in

multiple ways. The 'mass consumer' segment is moving from

tailored clothes to stitched apparel giving rise to discounted

apparel stores/retailers. This causes a shift from unbranded to

branded apparel. The 'middle end consumers’, already exposed

to brands is now looking to extend these brands into all aspects

of their life. Brands are thereby becoming lifestyle brands

instead of being product brands only. These consumers are also

moving up the social ladder and wish to flaunt the change in

stature by wearing affordable 'designer prêt wear'. This is

prompting designers to introduce prêt lines and corporatize their

lines to reach out to a larger audience. The 'high end Consumer'

who is exposed to international luxury brands, now demands

them in his/her vicinity. Apparel businesses are realizing this and

tying up with international brands to retail in India. These

consumers are also increasingly exposed to environmental issues

and want to use eco-friendly products (including apparel) to do

their bit for the society. Though this concept is at a very nascent

stage in India, apparel companies are reacting by 'going green'

and using natural fibers in some of their collections. As all

consumers, especially kids and the youth, are exposed to fashion

and media, they wish to associate themselves with characters

and icons. Picking on this trend, apparel companies are licensing

these characters/icons for apparel & accessories to increase their

customer base. Additionally, as consumers face hectic lifestyles,

they are looking for convenience in all aspects of life ArunKumar

Arunachalaiah – Retail Consultant, email –

Page 69: Competitive Retail Strategy for Fashion Merchandise New

[email protected], Mobile - 9740067765 80

81. Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008

including shopping. Fashion businesses are taking the lead from

here and taking on consumers at unconventional avenues of

retailing like airports, metro stations, cafes, beauty saloons, etc.

Methodology: Analyzing the correct and a competitive retail

strategy for a fashion merchandise office wear brand through a

detailed study and thorough understanding of retail concepts

explained in the curriculum of the course program PGD in Retail

Management by the Symbiosis Faculty program and extensive

research conducted through various reference books and

internet links in google and various top retail organization

company websites. ArunKumar Arunachalaiah – Retail

Consultant, email – [email protected], Mobile -

9740067765 81

Jul. Competitive Retail Strategy for Fashion Merchandise 1,2008 Annexures - II References • Technopak Retail Outlook • Indian Consumer Trends 2006 – The knowledge company • Wipro Technologies • Kotak Securities Limited • www.google.com • www.fibre2fashion.com • Symbiosis Institute of Retail Management • Rai – Retailers association of India • Bharatidasan Institute of Management, Trichy • Hindu Business Line • Economic times ArunKumar Arunachalaiah – Retail Consultant, email – [email protected], Mobile - 9740067765 82