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EAST WEST INSTITUTE OF TECHNOLOGY

DEPARTMENT OF

MBA & RESEARCH CENTRE

RETAIl MANAGEMent

SUBJEct CODe: 18MBAMM302

DEVARAJU N, ASSISTANT PROFessoR

RETAIL MANAGEMENT – (18MBAMM302)

Prof. Devaraju N, Assistant Professor, East West Institute of Technology, Bangalore.

UNIT - 01

Introduction to the World of Retailing

Introduction and Perspectives on Retailing World of Retailing, Retail management,

introduction, meaning, characteristics, emergence of organizations of retailing - Types of

Retailers (Retail Formats) - Multichannel Retailing -Customer Buying Behavior, Historical

Perspective, role of retailing, trends in retailing, FDI in Retail - Problems of Indian Retailing -

Current Scenario.

Meaning & definition of Retail:

The word retail is derived from the French word ―Tailler‖, which means that ―to cut a piece off or

to break bulk.

The word retail means, sale of goods to the public in relatively small quantities for use or

consumption rather than for resale. A retail sale occurs when a business sells a product or service

to an individual consumer for his or her own use.

Definition:

According to Philip Kotler, 'Retailing includes all the activities involved in selling goods or

services to the final consumers for personal, non-business use.

Retail management:

Retail management refers to, all the activities involved in selling goods or services to end users

for personal consumption, & ensuring customer satisfaction by performing all retail activities

commencing from merchandising, selecting store locations, and pricing, branding, visual

merchandising to deliver products in an efficient & effective manner.

Retail Management is the process which helps the customers to procure the desired merchandise

form the retail stores for their personal use. It includes all the steps required to bring the

customers into the store and fulfill their buying needs.

Characteristics of Retailing:

Important Characteristics of Retailing are given below:

Direct interaction with the customers:

None else in the channel comes across the customers as the retailer is the last point. It is he who

gets the feedback from the customers.



Small quantity makes large quantity:

A retailer is selling in small quantities through break bulk function. However, the small

quantities become large when aggregated.

Customer service as core product:

A retailer provides different services to the customers, like home delivery and credit facility.

Point of sales promotion:

A manufacturer going in for sales promotion has to provide it to the final point from where the

customers buy. Sale, Point of Purchase display, discounts, etc. have to be offered at this point

only.

Different forms:

Retailers have undergone a sea-change. Traditionally retailers were in the form of Hats, Melas,

and Mandies; then the forms changed to mom-and-Pop stores or Kirana stores, super bazars etc;

and now the organized retail is before us. From brick-and-mortar-stores now there are many

forms of non-store based retailers.

Location and Layout:

Location is very important for the retailers; otherwise customer footfalls may be a problem.

Customers are time-poor and hence location is very important. Apart from location, layout is

equally important especially in the new retailing environment. Ambience, the part of extended

marketing mix is the necessity rather than a luxury. It is because of this reason that most of the

mom-and-pop stores are undergoing interiors.

Big Employment Provider:

Retail sector is the second largest employer in India.

Role or functions or activities of retailing:

1. Sorting: Retailers are able to balance the demands of both sides, by collection an

assortment of goods from different sources, buying them in sufficiently large quantities

and selling them to consumers in small units. The above process is referred to as

the sorting process.



2. Arranging an assortment of offering: Supermarkets typically carry 20,000 to 30,000

different items made by more than 500 companies. Offering an assortment enables their

customers to choose from a wide selection of products, brands, sizes, and prices at one

location. Manufacturers specialize in producing specific types of products. If each of

these manufacturers had its own stores that sold only its own products, consumers would

have to go to many different stores to buy the groceries needed to prepare a single meal.

3. Breaking bulk: To reduce transportation costs, manufacturers and wholesalers typically

ship cases of frozen dinners or cartons of blouses to retailers. Retailers then offer the

products in smaller quantities tailored to individual consumers‘ and households‘

consumption patterns—an activity called breaking bulk. Breaking bulk is important to

both manufacturers and consumers. It enables manufacturers to efficiently make and ship

merchandise in larger quantities and enables consumers to purchase merchandise in

smaller, more useful quantities.

4. Holding stock: A major value-providing activity performed by retailers is holding

inventory so that the products will be available when consumers want them. Thus,

consumers can keep a smaller inventory of products at home because they know local

retailers will have the products available when they need more. This activity is

particularly important to consumers with limited storage space.

5. Extending services: Retailers provide services that make it easier for customers to buy

and use products. For example, retailers offer credit so that consumers can have a product

now and pay for it later. They display products so that consumers can see and test them

before buying. Some retailers employ salespeople in stores or maintain Web sites to

answer questions and provide additional information about products.

6. Additional services: channel of communication, transport & advertising functions.

Importance of Retailing:

Contribution to economic growth.

Provides high rate of employment opportunities.

Act as gate keepers with channel distribution.

Greater social responsibility.

Visibility in turn over & profits.

Retailing serves customer by functioning as marketing intermediary.



Creation of time, place, product, & ownership utility to the customers.

Scope of Retailing:

Retailing in India is one of the pillars of its economy and accounts for 14 to 15

percent of its GDP.

The Indian retail market is estimated to be US$ 450 billion and one of the top five

retail markets in the world by economic value.

India is one of the fastest growing retail markets in the world, with 1.2 billion people.

India's retail and logistics industry employs about 40 million Indians (3.3% of Indian

population).

Company‘s coming in after FDI will create 10 mn jobs subsequently.

The Indian retail industry is one of the most vibrant industries in the country.

It is currently ranked at 20th position among the top 30 developing countries

India‘s retail market is likely to touch a whopping Rs 47 trillion (US$ 738.71

billion) by 2016-17,

Indian online retail market is estimated to grow over 4-fold to touch USD

14.5 billion By 2019 on account of rapid expansion of e-commerce in the country.

The Government of India has taken various initiatives to improve the retail industry

in India. Some of these initiatives are:

IKEA has entered into a memorandum of understanding (MOU) with the Government

of Telangana to set up its first store in India at Hyderabad. IKEA retail outlets have a

standard design and each location entails an investment of around Rs 500-600 crore

(US$ 78.59-94.31 million)

Emergence of organizations of retailing:

Ancient retailing: Retail markets have existed since ancient times. The evidence for

trade, probably involving barter systems, dates back more than 10,000 years. As

civilizations grew, barter was replaced with retail trade involving coinage.

Weekly Markets, Village and Rural Melas: Source of entertainment and

commercial exchange, A haat bazaar, most often called simply haat or hat, is an open-

air market that serves as a trading venue for local people in rural areas. Which are



Emergence of self service

Development of superstores & convenience stores

Specialty stores, malls & others.

Rise of the web.

Types of Retailers (Retail Formats):

I. Retailers by ownership:

1. Independent retailer

2. Retail chains

3. Franchising

4. Leased departments

5. Co-operatives

II. Retailers by store based strategy mix:

1. General merchandise:

a. Departmental or variety stores

b. Discount stores

c. Specialty stores

d. Off-price retailers

e. Factory outlets

f. Membership club

g. Drug stores

h. Cash & carry.

2. Food merchandise:

conducted on a regular basis, i.e. once, twice, or three times a week and in some

places every two weeks.

Social development & their impact

Industrial revolution

a. Convenience stores

b. Conventional super markets

c. Food based super stores

d. Combination stores



e. Super markets & hyper markets

f. Limited line stores

g. Warehouse clubs & stores.

III. Multi-channel retailing:

1. Store channel

2. Catalogue channel

3. Electronic channel

IV. Web, non-stores & non-traditional retailers:

1. Direct marketing

2. Direct selling

3. Web or electronic retailing

4. Catalogue or mail order retailing

5. Vending machines

6. Video kiosks

7. Television home shopping

8. Airport retailing.

1. Department Store – This type of retailer is often the most complex offering a wide range

of products and can appear as a collection of smaller retail stores managed by one

company. The department store retailers offer products at various pricing levels. This

type of retailer adds high levels of customer service by adding convenience enabling a

large variety of products to be purchased from one retailer.

2. Mom-and-pop Stores: These are small family-owned businesses, which sell a small

collection of goods to the customers. They are individually run and cater to small sections

of the society. These stores are known for their high standards of customer service.

3. Supermarkets – Generally this type of retailer concentrates in supplying a range of food

and beverage products. However many have now diversified and supply products from

the home, fashion and electrical products markets too. Supermarkets have significant

buying power and therefore often retail goods at low prices.

4. Warehouse retailers – This type of retailer is usually situated in retail or Business Park

and where premises rents are lower. This enables this type of retailer to stock, display and

retail a large variety of good at very competitive prices.



5. Specialty Retailers – Specializing in specific industries or products, this type of retailer is

able to offer the customer expert knowledge and a high level of service. They also add

value by offering accessories and additional related products at the same outlet.

6. E-tailer – This type of retailer enables customers to shop on-line via the internet and buy

products which are then delivered. This type of retailer is highly convenient and is able to

supply a wider geographic customer base. E-tailers often have lower rent and overheads

so offer very competitive pricing.

7. Convenience Retailer – Usually located in residential areas this type of retailer offers a

limited range of products at premium prices due to the added value of convenience.

8. Discount Retailer – This type of retailer offers a variety of discounted products. They

offer low prices on less fashionable branded products from a range of suppliers by

reselling end of line and returned goods at discounted prices.

9. Category Killers: Specialty stores are called category killers. Category killers are

specialized in their fields and offer one category of products. Most popular examples of

category killers include electronic stores like Best Buy and sports accessories stores like

Sports Authority.

10. Malls: One of the most popular and most visited retail formats in India is the mall. These

are the largest retail format in India. Malls provide everything that a person wants to buy,

all under one roof. From clothes and accessories to food or cinemas, malls provide all of

this, and more. Examples include Spencers Plaza in Chennai, India, or the Forum Mall in

Bangalore.

11. Kiosks: Kiosks are box-like shops, which sell small and inexpensive items like cigarettes,

toffees, newspapers and magazines, water packets and sometimes, tea and coffee. These

are most commonly found on every street in a city, and cater primarily to local residents.

Drivers of Retail change in India:(Factors influencing changing the structure of

retailing):

Socio Economic Factors: Socio-economic factors are seen as fundamental to

development. India is today a nation which has a large middle class, a youth

population which is happy spending and a steady rate of growth of GDP.



Changing Income Profiles: Steady economic growth has fuelled the increase in

personal income in India. The middle class forms, the backbone of the India market

story and it is the rising incomes in the young middle class population that is fuelling

its growth.

Growth of middle class consumers: In India the number of middle class consumer

is growing rapidly. With rising consumer demand and greater disposable income has

given opportunity of retail industry to grow and prosper.

Changing role of women & evolving family structure: Today the urban women are

literate and qualified. They have to maintain a balance between home and work. The

purchasing habit of the working women is different from the home maker.

Emerging rural market: Today the rural market in India is facing stiff competition

in retail sector also. The rural market in India is fast emerging as the rural consumers

are becoming quality conscious. Thus due to huge potential in rural retailing

organized retailers are developing new products and strategies to satisfy and serve

rural customers.

Entry of corporate sector: Large business tycoons such as Tata‘s, Birla‘s, and

Reliance etc. have entered the retail sector. They are in a position to provide quality

products and entertainment.

Entry of foreign retailers: Indian retail sector is catching the interest of foreign

retailers. Due to liberalization multinationals have entered out country through joint

ventures and franchising. This further is responsible for boosting organized retailing.

Technological impact: Technology is one of the dynamic factors responsible for the

growth of organized retailing. Introduction of computerization, electronic media and

marketing information system have changed the face of retailing.

Media explosion: There has been an explosion in media due to satellite television

and internet. Indian consumers are exposed to the lifestyle of countries. Their

expectations for quality products have risen and they are demanding more choice and

money value services and conveniences.

Rise of consumerism & change in consumption basket: With the emergence of

consumerism, the retailer faces a more knowledgeable and demanding consumer. As



the business exist to satisfy consumer needs, the growing consumer expectation has

forced the retail organizations to change their format of retail trade. Consumer

demand, convenience, comfort, time, location etc. are the important factors for the

growth of organized retailing in India.

Increased credit friendliness

Improves logistics & better infrastructure.

Problems or challenges to Indian retail development:

Regulatory barriers including, Restrictions on real estate purchases, especially as

imposed by local governments

Restrictions on foreign investment in retailers

Unfavorable taxation structures

Absence of developed supply chain and integrated IT management

High competitiveness among existing market participants and resulting low profit

margins

Constant advances in product design resulting in constant threat of product

obsolescence and price declines for existing inventory

Lack of properly educated and/or trained work force, often including

management, caused in part by loss in Business.

Lack of educational infrastructure enabling prospective market entrants to

respond to the above challenges.

Bargaining power of suppliers

Poor merchandise mix & inability in selecting right location.

Trends in retailing:

Making E-Commerce shipping faster

The rise of experiential retail

Shopping with AR(augmented reality)

Ethical and values-based brands

Brands will sell experiences at their stores, not just products.



The internet of things will make shopping easier, cheaper, and more convenient.

Expand into emerging markets and create new channels

Multi-channel is the new normal

Physical stores for digital native brands

Growth of multi-store retail chain

Large format retailing

Integrated & dedicated distribution system

Customer relationship management & loyalty programs.

Customer buying behavior:

The retail marketing effort must be so designed that the customer perceives its various

features as providing an answer to his perceived problems and felt needs.

Purchase Decision Influencers:

Psychological Factors: Motivation, Perception, Beliefs & Attitude

Personal Factors: Personality and Self- concept, Occupation, Lifestyle, Age and

life-cycle stage, Economic Situation/ Income

Cultural Factors: Culture, Social Class

Social Factors: Reference Groups, Role & Status, Family

Other Factors: Location of the outlet, Range of products available, Convenience

while shopping, Store image, Packing of products, Parking facility,

Entertainment, Time saving.

Historical Perspective of Retailing:

Retail markets have existed since ancient times. Archaeological evidence for

trade, probably involving barter systems, dates back more than 10,000 years. As

civilizations grew, barter was replaced with retail trade involving coinage.

In Medieval England and Europe, relatively few permanent shops were to be

found; instead, customers walked into the tradesman's workshops where they

discussed purchasing options directly with tradesmen.

By the 17th century, permanent shops with more regular trading hours were

beginning to supplant markets and fairs as the main retail outlet.



The modern era of retailing is defined as the period from the industrial revolution

to the 21st century. In major cities, the department store emerged in the mid- to

late 19th century, and permanently reshaped shopping habits, and redefined

concepts of service and luxury.

As the 21st century takes shape, some indications suggest that large retail stores

have come under increasing pressure from online sales models and that reductions

in store size are evident.

Traditional format:

Itinerant

salesman

Hats

Mandis

Established format:

Kiosks

Kirana shops &

Independent stores

Co-operative

Fair price shops

Emerging format:

Hyper markets

Malls / Plaza

Multiplex

Franchise

Specialty stores

Convenience stores

Discount stores

Food court etc..

FDI in Retailing:

FDI in retail industry means that foreign companies in certain categories can sell products

through their own retail shop in the country. At present, foreign direct investment (FDI) in

pure retailing is not permitted under Indian law. Government of India has allowed FDI in

retail of specific brand of products. As India is one of the developing countries, so FDI must

be promoted but must be kept under control as it can affect the economy of the country.

Advantages of FDI in Retail in India:

Growth in Economy

Job Opportunities

Benefits to Farmers

Benefits to consumers

Cheaper Production facilities

Availability of new technology

Long term cash liquidity



Conducive for the country‘s economic growth

FDI opens up a new avenue for Franchising

Disadvantages of FDI in Retail in India:

Impact on Local Markets ( Kirana Shops)

Growth in consuming class

Poverty is declining

Productivity is rising

Per capita is doubling

Limited Employment Generation

Fear of Lowering Prices

Negative Impact on Indian Economy

Negative Impact on Indian Domestic Market

Methods of FDI Retail:

Franchising

Joint venture

Setting of manufacturing unit

Distribution

Export trading

Social sector items

Medical & diagnostic.

Current scenario of Indian Retailing:

Retail Vs India:

Largest and fastest growing sector in India.

Modern retailing forms one point stop for all shopping.

Consumer gets a large product variety of brands to choose from one roof.

First it was a seller‘s market and now it‘s changing to buyers market.

Why?

Our population growth

Literacy is growing



2nd rank in consumer confidence

SWOT Analysis: (Indian Retail Industry)

Strengths:

Increasing demand driven by the country‘s young working population

Increase in per capita income which in turn increases the household consumption

Create win-win situation for all links in value chain (suppliers, producers, retailers and

customers).

Improvement in the standard of living.

Technology intensive industry

Weakness:

Lack of expertise in Supply Chain Management

Inadequate Infrastructure

Stringent Labour Laws

Lack of specialized professionals in Industry

Lack of industry status.

Government Restrictions on FDI

Non-Availability of Government Land.

Opportunities:

Change in consumer behavior pattern and increase in disposable income.

Indian rural markets offer a sea of an opportunity for the retail sector.

Upcoming international Players

Healthy prospect for the fashion industry.

Threats:

Indian taxation system favors small retail business.

Competition from unorganized Sector to the organized Sector.

Middle class Psychology.

Increasing Real Estate prices



UNIT - 02

Theories of Retailing

Theories of Retailing: Wheel of retailing, The Retail Accordion, Melting Pot Theory, Polarization

theory.

Introduction:

Retail development or growth of retailing can be looked from theoretical perspective –

theories of retail evolution.

The application of each theory arises from market to market depending on the level of

maturity & the socio-economic conditions in that market. (No single theory can be

universally applicable or acceptable.)

At different times, different retail formats have been popular. Strong retail formats have

become marginal and new retail formats have often emerged to dominate the retailing

scene.

The retailing theories explain how different retail formats emerge, mature and are then

replaced by another format.

Understanding how retail evolves can not only help us understand the history of retail but

what might be coming in the future as well. Researchers have come up with a couple

theories to try to explain how retail evolves.

The theories of retail development can be classified as,

1. Environmental / Natural selection theory

2. Cyclical theory

a. Wheel of retailing

b. Accordion theory

3. Conflict / Melting pot theory

4. Polarization theory.



1. Environmental or Natural selection theory:

Darwin’s theory of natural selection has been popularized by the phrase survival

of the fittest.

The retailers are operates in change in environment.

Retail institutions are economic entities and retailers confront an environment,

which is made up of customers, competitors and changing technology.

This environment can alter the profitability of a single retail store as well as of

clusters and centers. The environment that a retailer competes in is sufficiently

robust to squash any retail form that does not adjust.

Thus, the birth, success or decline of different forms of retail enterprise is many a

time attributed to the business environment. For example the decline of

department stores in the western markets is attributed to the general inability of

those retailers to react quickly and positively to environmental change. Those

retail institutions which are keenly aware of their operating environment and

which react without delay, again from the changes.

Thus, following the Darwinian approach of survival of the fittest, those retailers

that successfully adapt technological, economic, demographic and legal changes

are the ones that are most likely to grow and prosper. The ability to adapt to

change, successfully, is at the core of this theory.

2. Cyclical theory: Cyclical theory fundamentally describes the different phases in a

company. This theory states that change follows a pattern and all phases have specific

attributes linked with them.

a. The Wheel of Retailing:

Brown (1988) provides a clear representation of the Wheel of Retailing as consisting of

three distinct phases – Entry, Trading-up, and Vulnerability. Brown proposes that each

phase is characterized by distinct management activities and priorities.

The first theory is known as the wheel of retailing theory, which explains how new

retailers enter the marketplace. The theory proposes that retailers go through three stages:



Entry Phase: This is when a retailer is new to the marketplace. They offer low

prices but also have limited facilities and limited services. In this stage, new retailers

are able to be competitive and draw customers away from more established retailers

because of their low-price offerings.

The next important theories of retail change are the Retail Accordion. Proposed by

Hollander (1970) as a means of understanding the oscillations of prominent retailing

Trading-Up Phase: In the trading-up phase, retailers are expanding their services

and facilities, but they're also increasing operational costs. That means that the

low prices they once had are also increasing.

Vulnerability Phase: Because of the rising cost of doing business and increasing

prices for consumers, retailers enter a phase of vulnerability where they must

continue to raise prices to stay profitable and become susceptible to new retailers

entering the marketplace.

b. Accordion theory:



formats, it proposes that domination by wide-assortment retailers is subsequently

followed by domination by narrow-line specialized sellers.

A theory of retail institutional change that suggests that retail institutions go from outlets

with wide assortments to specialized narrow line store merchants and then back again to

will adopt strategies and tactics in the direction of that advantage.

The upgrading of retail products & facility by one retailer, in response to the

actions of its competitors, producers, therefore retailers are similar to each others.

Adopt the plans & strategies of opposition.

the more general wide assortment institution. It is also referred to as the general-specific-

general theory.

Assumptions & Implications:

All in one store concept.

Deep assortment with a limited number of categories.

General stores are succeeded by offering many category of merchandise under

one roof.

The stores follow the merchandise of category killers.

3. Conflict / Melting pot theory:

The theory was proposed by Thomas J. Maronick and Bruce J. Walker.

This model implies that retailers mutually adapt in the face of competition from ‗opposites‘.

Thus when challenged by a competitor with a differential advantage, an established institution



The retailers engage in taking competitive advantage.

The customers of competitive stores will earn rewards, bonus. Offers etc., each

stores attempt are very closer in their service policy; each store provides similar

service, facility, offerings, and price.

Dialectic Process of Melting pot theory:

Thesis

Specialty stores:

High margin

Low turnover

High prices

Full services

Narrow variety

Deep assortment Synthesis

Category killers:

Modest margin

Medium turnover

Low prices

Limited services

Narrow variety

Deep assortment

Anti-thesis

Full-line discount stores:

Low margin

High turnover

Low prices

Broad variety

Shallow assortment



The established retailers known for relatively high margins, low

turnover & plush facilities – Thesis.

Service oriented – Anti - thesis.

Characteristics from both department & discount stores were

synthesized from category specialist stores.

4. Polarization Theory:

This theory suggests that, in a longer term, the industry consists of mostly large

and small size retailers. The medium size becomes unviable. This is called

polarization. Large stores offer one stop shopping. The smaller ones tend to offer

limited range of products, but add Value to their offers with other services. It is

found that firms tend to be more profitable when they are either small in size or

big. The medium ones fall into the ―Bermuda Triangle‖ (fall).

Implications:

It‘s all about the shifts towards larger & smaller retailers with medium

sized business encountering the most difficulties.

This provides retailers with the opportunity to offer different service models to

consumers while mitigating some of the traditional industry challenges in delivering

on that brand promise.

Retailers can transform the way they interact with consumers by providing them with

their weekly or monthly consumables as a subscription, simultaneously providing

customers with time savings, reducing the risk of price sensitivity, and lowering the

cost to serve.

By leveraging customer insights collected from loyalty data, retailers can:

Determine which products consumers purchase on a regular basis,

Calculate the typical frequency of usage for each individual consumer, and

Understand when customers typically shop in their stores.



Unit - 03

Retail Market Strategy:

Definition of Retail Market Strategy

A retail strategy is a statement identifying,

The retailer’s target market

The format the retailer plans to use to satisfy the target market’s needs, and

The bases on which the retailer plans to build a sustainable competitive.

Elements in retailing strategy

1. Target Market:

The market segment(s) towards which the retailer plans to focus its resources and retail mix. Segments

in terms of demographic, lifestyle buying situation or geographic location.

Ex: Nike and Puma outlets.

2. Retail formats:

The format of a retailer is the overall appearance and feels that it presents to customers, primarily its

look and layout, the sort of range it stocks and the approach taken to pricing. The retail format describes

the nature of retailer’s operations- its retail mix.

Some Types of retail formats:

Mom-and-pop stores (Ex: Kirana)

Hypermarkets/ Supermarkets (Ex: Big Bazaar.)

E-retailers (Ex Amazon.in)

3. Building a sustainable competitive advantage:

Three approaches for developing a sustainable competitive advantage are:

Building strong relationship with customers

Building strong relationship with suppliers

Achieving efficient internal operations

Retailing strategy for Setting up Retail organization and planning: Retail Market

Strategy - Financial Strategy - Site & Locations (Size and space allocation, location

strategy, factors Affecting the location of Retail, Retail location Research and Techniques,

Objectives of Good store Design.) – Human Resource Management, Information Systems,

and supply chain management & Logistics.

Retail Pricing and promotion: Factors influencing retail pricing, Retail pricing strategies,

Retail promotion.



Building strong relationship with customers:

• Customer Loyalty

• Brand Image

• Positioning

• Unique Merchandise

• Customer service

• Customer Relationship Management

Building strong relationship with suppliers:

Vendors Relation: By strengthening relationships with each other, both retailers and

vendors can develop mutually beneficial assets and programs that will give retailer

vendor pair an advantage over the competing pair.

Achieving efficient internal operations: Efficient internal operations enable retailers to have a

cost advantage over competitors or offer customers more benefits than do competitors at the

same cost.

• Human Resource Management

• Distribution and Information system.

• Location

• Multiple source of advantage

The Strategic retailing planning process

1. Establish Mission

2. Analyze Situation Objectives

3. Identify Options

4. Set Objectives

5. Obtain & Allocate Resources

6. Develop Implementation Plan

7. Monitor Progress & Control



1. Define mission or purpose

Mission statement is a long term purpose of the organization

It describes what the retailer wishes to accomplish in the markets in which he chooses to

operate

Retailers mission statement would normally highlight the following

The products and services that will be offered

The customers who will be served

The geographic areas that the organization chooses to operate in

2. Conduct a situation analysis

Once the retail mission is defined, the retail organization needs to look inwards

Understand what its strengths and weaknesses are

Look outwards to analyze its opportunities and threats

Situation analysis helps the retailer determine his position and his strengths and weaknesses

Helps formulate a clear picture of the advantages and opportunities

3. Identify options / strategic alternatives

After determining the strengths and weaknesses vis-à-vis he environment retailer needs to

consider various alternatives available to tap a particular market

Igor Ansoff presented a matrix which looked at growth opportunities

He focused on firm’s present and potential products in the existing and new markets

Ansoff’s matrix also helps to understand the options available to a retailer.

4. Set objectives

Translation of mission statement into operational terms Indicate

Results to be achieved

Give direction to and set standards for the measurement of performance Management sets

both long term and short term objectives

One or two year time frames for achieving specific targets are short term objectives Long

term objectives are less specific and reflect the strategic dimension of the firm.



5. Obtain and allocate resources needed to compete

o Human Resource

HR plan must be consistent with overall strategy of the organization

HR management focuses on issues such as recruiting, selecting, training,

compensating, and motivating personnel

These activities must be managed effectively and efficiently

o Financial Resources

Takes care of the monetary aspects of business

Shop rent, salaries and payments for merchandise

6. Develop the strategic plan

At this stage strategy is determined through which retailer will achieve objectives

The retailer determines and defines his target market

The retailer finalizes the retail mix that will serve the audience

7. Implement the strategy, evaluate and control

After implementation the management needs feedback and should focus on

Performance

Effectiveness of long term strategy by periodic evaluation

Ensuring that the plans do not degenerate into fragmented ad-hoc efforts

Ensuring that all efforts are in harmony with he overall competitive strategy of business

Management can also use the process to decide on

Any future policy change

Modifications if any, in the plan, to ensure that the combination of the retailing mix

variables support the firms strategy

Growth strategies for retailers:

a. Market Penetration

b. Market Development

c. Retail Format Development

d. Diversification



Financial strategy:

Finance is the backbone of any successful business, retiling is not an exception

Be it manufacturing, whole selling or even retailing, without finance no business can

Survive for long.

Retail firm requires finance to run their business and meet day-to-day requirements.

For the success of a business, there should be continuous movements of funds in and

Outside the firm.

Retail Cash Flow Management

It is the procedure of monitoring, analyzing, and adjusting the cash flow that comes

through selling merchandise.

For retail business managing cash is to avoid shortage of cash

The larger the gap, chances are of failure

Optimum balance is required

Thus, effective cash flow management is imperative at all stages

A retail firm may be profitable one as per financial statements but in actual it is unable to

Pay the bills on time

Budget and Budgetary Control

Retail Budget: A retail budget is a financial plan or blue print of overall financial

transactions that shows how the resource will be acquired and used over a period of

time.

Budgetary Control: It is the use of budgets as a means of controlling financial

activities.

Budgeting: Budgeting refers to the management’s action of formulating budgets to

facilitate various departments to operate efficiently and economically.



Income Statement

It is the statement of the profit earned or loss incurred during an accounting year,

usually a month, a quarter, or a year.

This represents a summary of a retailer’s revenues and expenses over a particular

period of time such as April1, 2018 to March 31, 2019.

A profit or loss account or an income statement has the following components:

Net Sales

Cost of Goods Sold

Gross Margin

Operating Expenses

Net Profit

Asset Management

Each retailer has assets to manage and liabilities to control.

It is the retailer’s ability and efficiency how effectively he manages the inputs and

outputs.

Balance sheet is a statement that reports the values owned by the retail firm and the

claims of the creditors and owners against these properties.

In an organization, balance sheet is known by different titles (name). These are:

Statement of assets and liabilities

Statement of resources and liabilities

Statement of financial position

Statement of financial soundness

Statement of assets, liabilities and owners fund etc

Balance sheet/ General balance sheet

Statement of stocks/position

Retail Site & locations:

Define Store:

“A store is place , real or virtual , where the shoppers comes to buy goods & services. The sales

transaction occurs at this junction.”

• The location of retail store has for a long time been considered the most important ‘P’ in

retailing.

• Locating the retail store in the right place was considered to be adequate for success.

• Location becomes a critical decision for a retailer for several reasons. As like;

• Location is generally one of the most important factors customers consider while choosing a

store.

• A bad location may cause a retailer to fail even if its strategic mix is excellent.. On the other

hand , a good location may help a retailer succeed even if its strategic mix is mediocre.



• Store location is least flexible element of retailer’s strategic mix due to its fixed nature, the

amount of investment, and the length of lease agreements.

Objectives:

• Factors which retailers consider in selecting a general area for locating stores

• Determining the number of stores to operate in an area

• Different approaches to evaluate a specific site

Factors affecting location of retail:

• Size and characteristics of market (population)

• Level of competition

• Access to transportation

• Parking space availability

• Attributes of nearby stores

• Property costs

• Length of agreement

• Population trends

• Legal restrictions

• Other factors

Types of Retail Location

• Various option are available to the retailer for choosing the location of store.

• The choice of the location of the store depends on the target audience and the kind of

merchandise to be sold.

• A retailer has to choosing among alternate types of retail locations available . It may locate in an

isolated place and pull the customer to the store on its own strength, such as a small grocery

store or paan shop in a colony which attracts the customers staying close by

Typically a store location may be:

1. Freestanding /Isolated store.

2. Part of Business District/Centers (unplanned Business Districts).

3. Part of a Shopping Center (Planned Shopping Centers)

1. Freestanding /Isolated store:

• Where there are no other outlets in the vicinity of the store and therefore store

depends on its own pulling power and promotion to attracts customers.

• A biggest advantages for freestanding stores is that there is no competition around.

• This type of location has several advantages including no competition, low rent, often

better visibility from the road, easy parking and lower property .

• Neighborhood Stores; colony shops serves small locality.

• Highway Stores :Ebony store in Ludhiana .



2. Part of Business District/Centers (unplanned Business Districts).

• A retail store can also be located as a part of a business district. Or we can refer this

as unplanned business centers

• A business district is place of commerce in a city which developed historically as the

center of trade and commerce in the city or town.

• A business districts can be a central, secondary, or a Neighborhood business district.

• A Central business District CBD is the main center of commerce and trade in the city.

(high land rates , intense development)

3. Part of a Shopping Center (Planned Shopping Centers)

• A shopping center has been defined as “ a group of retail and other commercial

establishments that is planned , developed, owned and managed as a single property”

• The basic configuration of a shopping centre is a “Mall ” or Strip centre.

• A mall is typically enclosed and climate controlled. A walkway is provided in front

of the stores.

• A strip centre is a row of stores with parking provided in the front of the stores.

4. Regional shopping centers or Mall: Regional shopping centers or mall are the largest

planned shopping centers.. Often they are anchored by two or more major department stores

have enclosed mall serve a large trading area and have high rents. (ansal plaza,spencers plaza

crossroads, DLF city in Gurgaon)

5. Neighborhood/community/shopping centers: Neighborhood /community centers usually

have a balanced mix of stores including a few grocery stores , a chemist, a verity store and a

few other stores selling convenience goods to the residents of the neighborhood.

Steps or process involved in choosing a Retail Location / site selection:

In order to arrive at the decision on where to locate the retail store a retailer needs to first on the

region that he wants to locate the store. After identifying the region the following steps Have to be

followed.

1. Identifying the market in which to locate the store.

2. Evaluate the demand and supply within that market i.e. determines the market potential.

3. Trade area analysis

4. Identify the most attractive sites

5. Select the best site available

1. Market Identification: The first step in arriving at a decision on retail location is to identify the

market attractiveness to a retailer. This is important that retail needs to understand the market

well.

2. Determining the market Potential:

• Demographics of population & area

• Competition

• Trade area analysis

• Laws & Regulation



3. Trade area analysis: A trade area is the geographic area that generates the majority of the

customers for the store.

• Primary trade area: primary trading covers between 50-80% of the store’s customers.

• Secondary Trading Area: this area contains the additional 15- to 25% of the store’s

customers.

• Tertiary trading area covers the balance customers. These trading areas are dependent on

distance and do not always have to be concentric in nature.

4. Identify Alternate sites and select the site: After taking decision on the location and market

potential the retailer has to select the site to locate the store based on these,

• Traffic

• Accessibility of the market is also a key factor

• The total number of stores and the type of store that exist in the area

• Amenities

• To buy or to lease

• The product mix to be offered by the retailer

Retail Location Theories (Research):

• Central place theory

• Retail Gravity Theory

– Huff ’s Gravity Model

– Reilly’s Law of Retail Gravitation

• Saturation theory

• Herfindahl – Herschman Index

• Central Place Theory: Theory proposed by Walter Christaller in 1933 Christaller made a

number of assumptions such as:

• All areas have an isotropic (all flat) surface

• an evenly distributed population

• evenly distributed resources

• similar purchasing power of all consumers and consumers will patronize nearest market

• transportation costs equal in all directions and proportional to distance

• no excess profits (Perfect competition)

• Retail gravity theory: Suggests that there are underlying consistencies in shopping behavior

that yield to mathematical analysis and prediction based on the notion or concept of gravity.

Huff’s Gravity Model: Based on the premise that the probability that a given customer will

shop in a particular store or shopping center becomes larger as the size of store or center



grows and distance or travel time from customer shrinks.

Assumptions of Huff’s Law:

• The proportion of consumers patronizing a given shopping area varies with the

distance from the shopping area

• The proportion of consumers patronizing various shopping areas varies with the breadth

and depth of merchandise offered by each shopping area

• The distance that consumers travel to various shopping areas varies for different types of

products purchased

• The “pull” of any given shopping area is influenced by the proximity of competing

shopping areas.

Reilly’s Law of Retail Gravitation:

When two cities compete for retail trade area from the immediate suburban area, the breaking

point for the attraction of such trade will be more or less in direct proportion to the population

of the two cities and in inverse proportion to the square of the distance from the immediate

area of the city

• Saturation theory:

Examines how current retail establishments in comparison with other potential markets are

serving the demand for goods and services of a potential trading area.

• Herfindahl – Herschman Index

It is a measure of market concentration. The Herfindahl index (HI) is a measure of industry

concentration equal to the sum of the squared market shares of the firms in the industry.

SPACE MANAGEMENT:

A retail space is a place where you display and sell your merchandise. ... You have to plan out

your space so that it encourages the customers that visit your store to purchase your products.

Believe it or not, the way you display a particular product can either attract or repel your

customers.

• Where to locate category in store?

• Adjacent to what other categories?

• How much space is to be given to the category?

• Which items to stock?

• How much space is to be given to each brand, each SKU? (stock keeping unit)

• Where will the products be placed on the shelf?

Retail space can be very expensive, particularly in large towns and cities.

Retailers want to maximise the use of space in order to ensure profits continue to rise.

At the same time they will want to ensure that the customer flow around the store is not

impeded by overflowing displays.



Space is used differently according to the product they sell and the price they charge e.g A

furniture store needs considerable space to display their products and to allow customers to

move around freely.

Space mix – allocated space in retail stores:

• Check-in space: assign for products which attract the customer attention as soon the customer

enters in to store.

Eg: cosmetics, beauty products

• Red-carpet space: allocated as centre of the store.

• Pop display & selling space: assigned for interior display, product demo & sales.

• Merchandise stores: assign to items that are kept in inventory for selling.

• Customer or circulation space: assigned for comfort & convenience of customers.

Eg: café, food court, lounges, children areas.

• Personnel space: assigned to store employees for lockers, lunch, restrooms etc.,

• Back office space: inventory being stores, ware house, godown etc.,

• Check-out space: space from where the customer is suppose to take exit.

• Dead space: can’t be used by store & idle due to some reasons.

Space planning process:

• Measuring the retail space

• Dividing the space into selling areas

• Determine the layout

• Determine the space allocation of products line.

Retail Organization:

Through a retail organization, a firm structures and assigns functions, policies, resources,

authority, responsibility, and rewards to effectively and efficiently satisfy the needs of its target

market, employees and management.

A firm cannot survive unless its organization structure satisfies the target market, regardless of

how well employee and management needs are met.

Although many retailers do similar tasks or functions (buying, pricing, displaying, and wrapping

merchandising) there are many ways of organizing to perform these functions.

Process of setting up a retail organization:

Specifying tasks to be performed

Dividing tasks among channel members and customers

Grouping tasks into jobs

Classifying jobs

Developing an organizational chart



Specifying tasks to be performed:

• Buying, shipping, receiving, checking merchandise

• Setting prices, marking merchandise, inventory control

• Preparing merchandise and window display

• Cleaning, repairing, follow up, complaint handling

• Billing, handling receipts, financial records, credit management

• Gift wrapping, delivery, returning unsold or damaged merchandise

• Personnel management, coordination, sales

Dividing tasks among channel members and customers

• Retailer

• Manufacturer/ wholesaler

• Specialists (buying office, delivery firm, warehouse, marketing research, ad agency,

credit bureau etc.)

• Consumer (delivery, cash/credit purchase, self service, do it yourself)

Grouping tasks into jobs

Display, customer contact, gift wrapping, follow up –Sales personnel

Entering transaction data, cash handling, credit – Cashier

Receiving, handling, checking, shipment, returning and control of merchandise –

Inventory manager

Window dressing, interior display, mobile display - Display personnel

Employee management, sales forecasting, budgeting, pricing, coordinating –

Management personnel

Classifying jobs

Functional classification – Buying, sales promotion, store operation

Product classification – goods or services

Geographic classification- location, area

Combination classification – location + goods

Developing an organizational chart

Flat organization

Tall organization

Hierarchy of authority

Coordination and control

Objectives of good store design:

1. Implement the retailers’ strategy:

Primary objective: to implement retailers strategy • Design- consistent and reinforce the retailers

strategy by meeting the needs of the target market and building a competitive advantage.

E.g. Sam`s-price sensitive- floor design and racks – metal and concrete to reinforce the brand

image, Flooring and shelving also affect retailer’s image: glass-elegance.



2. Influence the customer buying behavior:

Store design- should attract customers, enable them to locate merchandise, keep them in the store

for as long time, motivate them to make unplanned, impulse purchase and provide them with a

satisfied customer experience. Buying behavior-influences store design: rise in nuclear families-

limited time.

E.g. P&G: “first moment of truth”- first 3-7 seconds, customer notices an item on the store shelf.

Mkt research – customers do not walk down one aisle and up the next. Park at the end of aisle-

walk partway to pick the product and return to the cart. Hence puts its best selling brands at the

middle of the aisle.

3. Provide flexibility:

Dynamic business- what may work today may not be applicable tomorrow- need to change the

merchandise mix- need to change layout, attempt to design stores with max flexibility. Two

forms: ability to physically move and store the components, and the ease with which components

can be modified. Ex: Bookstores

4. Control design and maintenance costs:

Cost of implementing the store design and maintain the store appearance, Free form design –can

encourage the customers to explore and increase sales • More lighting- expensive jewellery and

other merchandise • Good lighting- can make the merchandise look better and increase sales •

Store design – affect labour costs- traditional dept stores with diff depts. – comfortable shopping,

but require one person constantly to provide service

5. Meet legal requirements:

The store design should fully comply with the standards set by civic authorities.

Human Resource Management:

HRM includes recruitment and selection of appropriate employees at various levels.

The main objective of HRM is to help an organization to meet its strategic goals by attracting,

maintaining, and managing them.

HRM is the organizational function that deals with issues related to people such as compensation,

hiring, performance management, organization development, safety, wellness, benefits,

employee motivation, communication, administration, and training.

Objectives of HRM in Retailing:

To serve as standards against which performance is evaluated.

To promote harmony among human efforts & voluntary co-operation.

To fulfill the demand of retail industry.

To boost up survival-integrated activities such as employees’ recruitment, selection,

induction, training and development, supervision and compensation in the organization.

Right person at right position



HR Functions in Retailing:

Job analysis and job design

Recruitment and selection of retail employees

Employees’ training and development

Performance management

Compensation and benefits

Labor relations

Managerial relations

Role Played by HR in A Retail organization

Supply Chain Management in Retail:

Concept of SCM: Those activities associates with moving of goods from the raw materials stage though to the end user.

It not only includes the manufacturer and suppliers but also transport, warehouse, retailers and

customer also. These all activities are monitor by the information system.

Need of SCM in Retail

• Cost cutting

• Time saving

• Customer satisfaction

• Increase profit margins

• Physical flows

• Information flows

• Financial flows



Integrated Supply Chain Management

SCM is an integrated process where every activity is interrelated with the system for

efficient flow of material from supplier to the end users.

Benefits of Integrated Supply Chain

• Achieving the best delivery performance.

• Reduction in inventory

• Lower supply chain cost

• Improvement in overall productivity

• Accuracy in forecast

Functions of Retail Supply Chain

• Physically movement of goods from one outlet to another.

• Stocking the good at the outlets where needed.

• Management of the entire process.

A supply chain is a network of facilities and distribution options that performs the functions of

procurement of materials, transformation of these materials into intermediate and finished

products and the distribution of these products to the customers.

Retail Logistics:

Retail logistics is the organized process of managing the flow of merchandise from the source of

supply to customer.

The main objective of logistics management is to reduce the inventory – holding cost and

improve profits.

Functions of retail logistics system

1. The increased product variety in stores has forced the retailer to follow an effective logistics

system. It takes care of the

flow of merchandise from the producer or intermediary to the warehouse,

arrangement of transport to the retail units till the merchandise is sold and delivered to the

customers.

2. The system satisfies the customer by taking the right product to the right customer, at the right

place and at the right time. This requires a planned approach right from the starting point till the

point of delivery.



3. Profitability of the present and future are maximized by the logistics system by means of

fulfillment of orders in a cost effective way.

4. It ensures the availability of infrastructure such as warehousing, transport, inventory, and

administration. The inter relationship that exists between these elements are effectively

coordinated.

5. Retail logistics system strives to add value for the customer. For this purpose, the cost elements

in the supply chain are brought under the direct control of the retailer. Depending on sales

volume, retailers create central or regional distribution centres. They decide on major investment

in property, plant, and equipment with associated overheads.

6. The functions incorporated in the retail logistics are summarized.

The physical movement of goods

the holding of the goods in stock holding points

the holding of goods in quantities required to meet demand from the consumers

the management and administration of the process in modern complex distribution

system.

Information Systems in Retail:

Information systems are the tools, hardware and software that help retailers achieve success in a

dynamic environment. They serve several functions including planning, inventory control,

managing budgets and sales goals, and with point of sale transactions and logistics.

Some of the most frequently utilized information systems in retail.

Inventory management software (IMS) is a software system for tracking inventory levels,

orders, sales, and deliveries. It can also be used in the manufacturing industry to create a work

order, bill of materials, and other production-related documents. Companies use inventory

management software to avoid product overstock and outages. It is a tool for organizing

inventory data that before was generally stored in hard-copy form or in spreadsheets.

CRM (Customer Relationship Management): Customer relationship management software

looks at data about current and future customers to help a company understand the customer

better in hopes of retaining and building customer relationships.

Accounting Information Systems: An accounting information system (AIS) is a system of

collecting, storing, and processing financial and accounting data that are used by decision

makers. An accounting information system is generally a computer-based method for tracking

accounting activity in conjunction with information technology resources. The resulting

financial reports can be used internally by management or externally by other interested parties

including investors, creditors, and tax authorities. Accounting information systems are designed

to support all accounting functions and activities including auditing, financial accounting &

https://accountlearning.com/supply-channel-objectives-problems-manufacturer-functions/



reporting, managerial/ management accounting and tax. The most widely adopted accounting

information systems are auditing and financial reporting modules.

Retail Pricing & promotion:

The price at which the product is sold to the end customer is called the retail price of the product.

Retail price is the summation of the manufacturing cost and all the costs that retailers incur at the

time of charging the customer.

Factors Influencing Retail Prices

Retail price is affected by internal and external factors.

1. Internal Factors

Internal factors that influence retail prices include the following −

Manufacturing Cost − The retail company considers both, fixed and variable costs of

manufacturing the product. The fixed costs does not vary depending upon the production

volume. For example, property tax. The variable costs include varying costs of raw material and

costs depending upon volume of production. For example, labor.

The Predetermined Objectives − The objective of the retail company varies with time and

market situations. If the objective is to increase return on investment, then the company may

charge a higher price. If the objective is to increase market share, then it may charge a lower

price.

Image of the Firm − The retail company may consider its own image in the market. For

example, companies with large goodwill such as Procter & Gamble can demand a higher price

for their products.

Product Status − The stage at which the product is in its product life cycle determines its price.

At the time of introducing the product in the market, the company may charge lower price for it

to attract new customers. When the product is accepted and established in the market, the

company increases the price.

Promotional Activity − If the company is spending high cost on advertising and sales

promotion, then it keeps product price high in order to recover the cost of investments.

2. External Factors

External prices that influence retail prices include the following −

Competition − In case of high competition, the prices may be set low to face the competition

effectively, and if there is less competition, the prices may be kept high.

Buying Power of Consumers − The sensitivity of the customer towards price variation and

purchasing power of the customer contribute to setting price.

Government Policies − Government rules and regulation about manufacturing and

announcement of administered prices can increase the price of product.

Market Conditions − If market is under recession, the consumers buying pattern changes. To

modify their buying behavior, the product prices are set less.



Levels of Channels Involved − The retailer has to consider number of channels involved from

manufacturing to retail and their expectations. The deeper the level of channels, the higher

would be the product prices.

Retail pricing strategies:

1. Demand-Oriented Pricing Strategy

The price charged is high if there is high demand for the product and low if the demand is low.

The methods employed while pricing the product on the basis of demand are −

Price Skimming − initially the product is charged at a high price that the customer is willing to

pay and then it decreases gradually with time.

Odd Even Pricing − the customers perceive prices like 99.99, 11.49 to be cheaper than 100.

Penetration Pricing − Price is reduced to compete with other similar products to allow more

customer penetration.

Prestige Pricing − Pricing is done to convey quality of the product.

Price Bundling − the offer of additional product or service is combined with the main product,

together with special price.

2. Cost-Oriented Pricing Strategy

A method of determining prices that takes a retail company’s profit objectives and production

costs into account. These methods include the following −

Cost plus Pricing − The company sets prices little above the manufacturing cost. For example,

if the cost of a product is Rs. 600 per unit and the marketer expects 10 per cent profit, then the

selling price is set to Rs. 660.

Mark-up Pricing − The mark-ups are calculated as a percentage of the selling price and not as a

percentage of the cost price.

Break-even Pricing − The retail company determines the level of sales needed to cover all the

relevant fixed and variable costs. They break-even when there is neither profit nor loss.

Target Return Pricing − The retail company sets prices in order to achieve a particular Return

On Investment (ROI).

Early Cash Recovery Pricing − When market forecasts depict short life, it is essential for the

price sensitive product segments such as fashion and technology to recover the investment.

Sometimes the company anticipates the entry of a larger company in the market. In these cases,

the companies price their products to shorten the risks and maximize short-term profit.

3. Competition-Oriented Pricing Strategy

When a retail company sets the prices for its product depending on how much the competitor is

charging for a similar product, it is competition-oriented pricing.

Competitor’s Parity − the retail company may set the price as close as the giant competitor in

the market.



Discount Pricing − A product is priced at low cost if it is lacking some feature than the

competitor’s product.

4. Differential Pricing Strategy

The company may charge different prices for the same product or service.

Customer Segment Pricing − The price is charged differently for customers from different

customer segments. For example, customers who purchase online may be charged less as the

cost of service is low for the segment of online customers.

Time Pricing − The retailer charges price depending upon time, season, occasions, etc. For

example, many resorts charge more for their vacation packages depending on the time of year.

Location Pricing − The retailer charges the price depending on where the customer is located.

For example, front-row seats of a drama theater are charged high price than rear-row seats.

Types of Pricing Strategies:

Demand Pricing: Demand pricing is also called demand-based pricing, or customer-based

pricing. This pricing method uses consumer demand of a product or service as the main element

of setting a price for a product or service. Also known as dynamic pricing. It is affected by

consumer demand. Which is based on the perceived value of a product or service.

Competitive Pricing: Also called the strategic pricing. Competitive pricing is a method that uses

the prices set by other businesses (i.e. the competition). More or less using competitor’s price to

price your own products.

Cost-Plus Pricing: This pricing strategy is a cost-based one for setting prices of products and

services. When setting the cost-plus price, you take the cost of the raw materials and the cost of

production and add them to the overhead costs of a product or service.

Penetration Pricing: This pricing strategy uses low prices to enter a new market or to launch a

new product or service. This strategy is used to entice customers to patronize a certain product or

service. It also serves as a deterrent to the competition. To prevent them from entering the market

with a similar product, because they will have to make their prices lower.

Price Skimming: Also called the skim-the-cream pricing. This pricing strategy is used by

businesses with a strong competitive advantage. They enter the market with high-priced products

and services. This is to gain the most revenue. To get an immediate return on production costs

before other businesses can come in with similar, cheaper products or services. Later in the

product cycle, the companies will gradually moderate their prices to accommodate customers

with more moderate price tastes.

Economy Pricing: A very familiar pricing strategy with retailers and wholesalers. Economy

pricing is a basic, low-cost marketing method. It keeps the prices of goods low, targeting sales at

a particular segment of the market that is very price-sensitive.



Psychological Pricing: This is a common pricing technique used by businesses. A minor

difference in prices is a huge difference for customers.

Discount Pricing: A pricing strategy that offers products and services at a reduced price.

Discount prices can come in the form of seasonal discounts, loyalty rebates, etc.

Geographic Pricing: This pricing strategy is one where different prices are charged in different

geographical locations or markets for the exact same product or service.

Price Bundling: Also known as product bundling. This is a strategy is used when two or more

products or services a priced together as a package, with a single price. These product bundles

come in two types: pure bundles are products or services that are sold and bought only as a

package; and mixed bundles, which are products or services that can be bought and sold as a

package, or as individual products.

Retail Promotion Strategy:

Push Strategy: A retail push strategy includes offers that convince trade intermediaries channel

members to “push” the underline product through vigorous distribution channels to the ultimate

customer via some sales promotion schemes and personal selling efforts.

Pull Strategy: A retail pull strategy efforts to get customers to pull the product from the

manufacturer through its marketing channel. Under this strategy, company focuses its marketing

communication efforts directly to customers with the hope that it encourages curiosity and

requirement for the product at the end-consumer level.

Mixed Strategy: As the very name implies, this strategy is the combination of above mentioned

two strategies. Electronic and car dealers often use such type of strategy. Most of the car dealers

near festival season advertise or offer cash discount or cash back offers to customers and dealer

incentives which is the combination of both the push and pull strategies.



Unit - 4

Stores Management: Stores management is part of the overall function of materials management. In order, therefore, to

understand the function of the former it is desirable to have a clear understanding of what materials

management stands for.

According to Alford and Beatty “storekeeping is that aspect of material control concerned with the

physical storage of goods.” In other words, storekeeping relates to art of preserving raw materials,

work-in-progress and finished goods in the stores.

Objectives of store management:

Following are the main objectives of an efficient system of storekeeping:

To ensure uninterrupted supply of materials and stores without delay to various production and

service departments of the organisation.

To prevent overstocking and under stocking of materials,

To protect materials from pilferage, theft fire and other risks.

To minimize the storage costs.

To ensure proper and continuous control over materials.

Functions of store management:

Receipt

Storage

Retrieval

Issue

Records

Housekeeping

Control

Surplus management

Verification & packaging

Interaction &coordination

Retail Store Manager:

An individual responsible for managing the overall functioning of the store is called so. He takes care

of the day to day operations of the store and ensures max profitability for his store.

Duties and Responsibilities of store manager:

1. Management of employees

2. Maintaining the sales environment

3. Cost minimization

4. Recruitment, Training and Development

5. Budgeting and Forecasting

Store Management and Visual Merchandising: Store Management: Responsibilities of Store Manager,

Store Security, Parking Space Problem at Retail Centres, Store Record and Accounting System, Coding

System, Material Handling in Stores, Management of Modern retails –Store Layout, design: Types of

Layouts, role of Visual Merchandiser, Visual Merchandising Techniques, Controlling Costs and Reducing

Inventories Loss, Exteriors, Interiors Customer Service, Planning Merchandise Assortments –Buying.



6. Implementing Marketing plans

7. Team Leadership

8. Maintaining Leave and Salary Record

9. Holding Inventory

10. Extending Customer Services

Store Security:

Theft in retail stores is an enormous problem, as determined shoplifters can be quite skilled and

hard to catch.

Evaluate your security status

Provide employees with security policies and training.

Methods of store security:

Appointment of uniformed security

Thorough check at entry and exit points

Without uniformed security guards can be located in the store

Use of TV cameras can be beneficial to catch the stealers

Cash deposits in banks must be made frequently

Brighter lighting should be arranged

Coordination between all security personnel

Access to storage areas and ware houses should be restricted

Best Practices in store security:

Develop a “zero tolerance” reputation. Apply the “broken window” theory of justice by

pressing charges for all theft to send a strong message of deterrence.

Stay up-to-date with local, state, and federal laws to make sure you know how to fully enforce

your rights while staying within legal bounds. Violating a suspected shoplifter’s rights could be

even more costly than the theft.

Keep shelving low to maintain visibility throughout the store.

Ensure your store has complete 360° high-resolution video camera coverage. In the past,

video images tended to be grainy, but current technology produces sharp images that can more

easily be used to identify thieves. Also the better the clarity, the more likely the footage can be

successfully used in court to prosecute offenders. Include coverage of the exterior and parking

areas.

Be aware that if your security system operates through your phone line rather than

wirelessly, it may be vulnerable to a break-in in which the criminal cuts the phone line before

entering the store to disable the system.

Minimize the number of employees who have keys and unsupervised access to money and

sensitive information. This will reduce risk by increasing accountability and narrowing suspects.



Install a bell or buzzer at your front entrance to signal when customers enter and leave.

Shoplifters want to remain invisible. When their presence is announced, they know that you

know they’re there.

Keep merchandise displayed neatly. “If your store is messy, disorganized, or a maze to get

through, it can be harder to notice that you’ve been ‘gotten’ until it’s too late,

Be alert and carefully watch those who are suspicious. Give them great customer service,

asking if you can help them, to let them know in a friendly way that you’re paying close

attention.

Watch for shoppers exhibiting suspicious behavior, such as nervousness, picking up and

putting down random items with no apparent interest in them, and watching store employees

more than looking at merchandise.

Be especially alert during peak shoplifting times, which are typically the busiest shopping

periods.

Security System Features and Options:

Video camera features: cloud storage; Burglar alarm

Intrusion detection

Glass break detection

Motion sensor

Remote security monitoring and control

Smoke detection and notification

Carbon monoxide detection and notification

Freeze and flood damage detection and notification

Digital door key cards

Electronic access control / tracking by employee and time, integrated with time and

attendance

Parking space problems at retail centers:

Parking by non-shoppers

Parking space used by the store employees

Inadequate parking place

Expansion of selling space.

Factors considered in allocating parking place:

Total Quantity of Parking: The total amount of parking which must be provided for any

shopping center must necessarily depend, of course, upon the size of the shopping center and

the number and type of tenants within the center.



Size of the Parking Area: The size of the area devoted to parking is in reality the total

quantity of parking translated into area rather than numbers of cars. Although this translation

appears to be a simple mathematical one, this is not actually the case.

Parking Area Location: The location of the parking area is perhaps equally as vital for

success in a shopping center as is the total amount of parking area available.

Single or Multiple-Level Parking: Very few centers have employed multiple-level parking.

The reason for this is that adequate parking was planned for initially or was included in plans

for future expansion of the parking area.

Walking Distance: Past studies have revealed that shopping center customers avail

themselves of the goods and services of the various shops only if they can park their

automobiles at a distance which they deem reasonable.

Parking Patterns: The geometric design in which parking areas are laid out vary from center

to center. Essentially the parking pattern adopted by any given center will be either 90 0, i.e.,

head-on parking, or at some angle less than the 900 figure.

Employee Parking: Until the more recent shopping centers were developed no provision

was made for separate employee parking facilities.

Store record:

Keeping the records of financial transactions outside of an accounting software programme.

A retailer needs a method to keep receipts, sales records loan statements, bank information &

past tax data.

Sales associates, managers & anyone else with a connection to a store’s financial activities

needs to know which documents to keep & how to file them.

Functions:

Store functions

Pricing of purchased material.

Pricing of store returned material.

Material received account.

Issue of material from store.

Types of store record:

Bin card: A BIN Card is a table that records the status of a good held in stock. A typical

retailing business with a large stock warehouse will use a BIN card to record a running

balance of stock on hand, in addition to information about stock received and notes about

problems associated with that stock item.

Stock control card: Stock control, otherwise known as inventory control, is used to show

how much stock you have at any one time, and how you keep track of it. It applies to every

item you use to produce a product or service, from raw materials to finished goods.

Store ledger: A stores ledger is generally a record of materials used in production. It records

items purchased as an increase to the inventory and items issued to the production department



as a decrease to inventory so as to show the available inventory of that material at any given

time.

Techniques of recording stock:

Periodic stock verification

Automatic or perpetual verification

Spot checks

Stock-out verification

Annual stock taking

Methods of stock valuation & records:

specific identification

first-in, first-out (FIFO)

last-in, first-out (LIFO)

weighted-average

Standard pricing

Base stock or minimum stock method

Replacement price method

Accounting system:

A retail business involves sales, inventories and other elements, making accounting detailed

and complex. Accounting, also known as the language of business, helps owners and

managers make sound decisions based on real data.

To identify GAP in Target.

To identify opportunities for improvement

To evaluate past & present position.

Components of Accounting System:

Income statement

Balance sheet

Business ratios.

Coding system:

A code system should have the following characteristics to be scientific and easily adoptable.

Simple to use: easy to understand with minimum and /or no need for training,

Flexible: ease to expand and accommodate more codes,

Good formulation: adopted system should be able to be used in all functional areas in the

entire organization.

Store Layout:

It a retail store floor plan showing where everything goes. Where are the checkout lanes in

proximity to exits and entrances? In a grocery store, should the milk or the cereal be at the back

of the store? How much space do you want between displays of merchandise? Where do you

put chairs and changing rooms? These decisions aren't arbitrary or aesthetic; they are one of the

tools for increasing sales.



Types of store layout:

1. Grid (Straight) Design

Best used in retail environments in which majority of customers shop the entire store

Can be confusing and frustrating because it is difficult to see over the fixtures to other

merchandise

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

them to look elsewhere.

Most familiar examples for supermarkets and drugstores

2. Curving/Loop (Racetrack) Design

Major customer aisle(s) begins at entrance, loops through the store (usually in shape of circle,

square or rectangle) and returns customer to front of store

Exposes shoppers to the greatest possible amount of merchandise by encouraging browsing

and cross-shopping.

3. Free-Flow Layout

Fixtures and merchandise grouped into free-flowing patterns on the sales floor – no defined

traffic pattern

Works best in small stores (under 5,000 square feet) in which customers wish to browse

Works best when merchandise is of the same type, such as fashion apparel

If there is a great variety of merchandise, fails to provide cues as to where one department

stops and another starts.



4. Spine Layout

Variation of grid, loop and free-form layouts

Based on single main aisle running from the front to the back of the store (transporting

customers in both directions)

On either side of spine, merchandise departments branch off toward the back or side walls

Heavily used by medium-sized specialty stores ranging from 2,000 – 10,000 square feet.



Visual merchandising:

The use and manipulation of attractive sales displays and retail floor plans to engage customers and

boost sales activity. In visual merchandising, the products being sold are typically displayed in such as

way as to attract consumers from the intended market by drawing attention to the product's best features

and benefits.

Visual merchandising is the art of presentation, which put the merchandise in focus.

It educates the customer and create desire to buy.

It is a presentation of a store.

The objective of a store sale promotion plan. A team involved - the senior management, architects, merchandising managers, buyers, the

visual merchandising director, industrial- designers, and staff is needed.

Visual merchandise involves,

Skills

Creativity

Lighting

Props

Background

Interiors

Flooring

Importance of visual merchandising

• Increase Sales generation

• Profit

• Expansion of the store

• Corporate image

• Big share in market

TIPS FOR GOOD VISUAL MERCHANDISING

1. Take It Outside- If the weather's good and you're allowed to do so, set up a display of

merchandise outside your store. This can create a sense of excitement and buzz: consider a

"Street Faire" environment, with flags and balloons.

2. Identify everything- Customers are in a hurry. Use signage to identify not only departments but

categories -- this will help customers pinpoint what they need and inspire additional purchases.

3. Embrace All The Senses:- Great merchandising appeals to more than the eyes. Consider how

your store sounds, smells, and even feels are all of these 'messages' you're sending with music,

scents, and other environmental factors in keeping with the displays you create? You can evoke

senses without addressing them directly. For example, putting a pair of red bowls and spoons

with a display of tomato soup can get mouths watering!

4. Show Them How It Will Look At Home

Use your displays to show customers how the merchandise will look in their home: Example:- if



you're selling furniture, set up a grouping of chairs. jewelry presented in the gift box,

perhaps with some curls of ribbon still clinging to the box...

5. Group Like With Like/Theme

Organize your store logically: customers should be able to find all of one type of

merchandise easily. Create 'groupings' within categories, so all the merchandise that is

one color, type, price, or size is positioned together.

7. Group by Lifestyle

Display merchandise from several categories -- that all share the same theme in the

appropriate home or workplace setting. For example, in an office supply store, a display

could reflect the workplace of a high-tech wizard.

8. Use the Spotlight

Lighting attracts customers; well-placed spotlights can draw attention to key pieces of

merchandise. Make sure to use spotlights within your store as well as in the windows.



Unit-05

Relationship Marketing & International Retailing

RELATIONSHIP MARKETING

Relationship Marketing is an integrated effort to identity, maintain, and build a network with

individual customers and to continuously strengthen the network for the benefit of both the sides.

DEFINITIONS: Relationship marketing is defined as the process of attracting, maintaining and, in multi-service

organizations, enhancing customer relationships. (BERRY,1983).

VAVRA(1992) defines it as a customer retention program in which a variety of after marketing

tactics are used for customer bonding or staying in touch after the sale is made.

Relationship marketing is defined by Gronroos (1994) as the process related to establishing,

maintaining, and enhancing relationship with customers and other partners in order to improve

customer base and profitability. The core concept of relationship marketing is to

establish relationships with consumers.

Role of relationship marketing in retailing

• Builds Good Will

• Effective Technique

• Loyalty & Satisfaction

• Restrict Switching

• Image Projection

• Caring To Customers

• Keep Competitors Away

• Differentiation

Methods of relationship marketing

• Customer satisfaction

• Building trust & loyalty

Management & Evaluation of Relationships in Retailing, Retail Research in Retailing: Importance of Research in Retailing, Trends in Retail Research, Areas of Retail Research. Customer Audits, Brand Management in retailing, Internationalization of Retailing and Evolution of International Retailing, Motives of International Retailing, International Retail Environment – Socio-Cultural, Economic, Political, Legal, Technological and issues in international retailing.



• Adding value to relationship

• Reordering of goods

• Offering privileges to customers

• Problem solving

• Creating barriers to exit

Relationship marketing strategies

1. Networking: Networking, online and off, can be a powerful relationship marketing technique.

This is not just for job seekers! Think about the interests that you have as a business, and then

join groups that share your affinities. This not only helps your brand awareness, but also expands

your potential customer base. It is a win-win. Not to mention that the only tool you will need for

this is your brain. Pick something you like and keep in mind what people similar to you might

enjoy.

2. Cherish Each Customer: Not just in the way that every company says that they do. Make

sure that every interaction you have with your customers shows them that they are valued.

Spontaneous recognition of your current customers can go a long way. When people feel valued,

they let others know. Delight your customers with the unexpected (in a good way) and be there

for them no matter what. Social monitoring tools, such as Brand watch, can help you gauge your

impact. Particularly with tying a physical campaign to digital gains.

3. Listen to Your Customers: Listen to your customers! Every business says they do, but not all

follow through or apply what they have heard. Even listening and responding to compliments

can be beneficial. People love knowing they’ve been heard. Even complaints can be a blessing in

disguise. People often just want someone to share their concerns with. By listening to these

concerns, you ensure that your customers feel valued. Moreover, if you learn what people love

and dislike about you, you can leverage the feedback to improve your business. If you use

Microsoft Dynamics CRM, Power Survey and Power Survey Plus are great tools that allow you

to get this kind of feedback. They also allow for anonymous responses, meaning you can survey

the web!

4. Build a Brand Identity: A memorable brand will make it easy for customers to find you and

your product(s). Customers will gravitate toward what they find that is memorable. If your brand

resonates, they will likely remember you and you can develop the relationship further. Once you

have a strong brand identity, those that wish to become a raving fan will know what you stand

for and why they should care.

5. Give Your Customers Free Information: What’s better than free? Not much. Your

customers are seeking information about your product(s). They have questions. Give them

answers! Identify the topics and interests your customers have. Then, create something cool

around those topics and give it to them free access. People know that you are just trying to get

https://www.brandwatch.com/



their contact information to sell to them if you gate it. You can certainly generate leads this way,

but you’ll want to also give away some stuff for free. Answer the people!

6. Loyalty Rewards: No, I am not talking strictly about loyalty cards and perks programs.

Though those are great, if you want to truly succeed at relationship marketing, and you should,

you need to expand beyond the traditional types of programs. People love getting stuff and

people love being recognized. Combine the two along with some of what we have been

mentioning. Cherish your loyal customers and reward them! You can create the perfect loyalty

program and manage it with a tool like Big Door.

7. Communicate Often: Relationships are based on communication. Your customers and users

want to communicate with you, so be sure to communicate with them often. Relationship

marketing works well when you strive to be there for your customers. Social media, email,

advertising, and content are all ways to communicate to your customers that want to receive

messages that way. Be sure to send follow-up communications where appropriate.

8. Special Events: Holding a special event for your existing or prospective customers is a great

way to build relationships. If you put on a great event about a topic that your customers care

about, they will remember that experience and remember your business. Likely, they will rave

about the event you held and how great it was. You can also leverage exclusivity here by holding

an event for your top customers. It is a way to add incentive, but it is also a way to simply thank

your customers.

9. Face-To-Face Time: Similar to a lot of what we have been mentioning, it comes back to

interactions. While electronic communication is great, and often preferred, having a face-to-face

meeting can help the customer feel valued. Consider stopping by your customer’s place of

business, or work in some face-to-face time by holding a special event. Whichever method you

choose, you can be sure that it will bring a level of personalization to your relationship

marketing strategy.

Transactional v/s relationship marketing

Transactional marketing is a business approach that concerns on “single point of sale”

business dealing. ... Besides, relationship marketing is a business approach that focuses on

carrying out a long lasting relationship with its clients rather than pushing the business towards

establishing only sales transactions.

Transactional marketing is completely focused on making sales. It has strategies such

as; advertising and promotions, which direct the processes towards instantaneous sales.

“A sale is a onetime event.” In other words, this is clearly a business tactic that concerns

on “point of sale” transactions alone rather than improving a connection with the buyers.

Relationship marketing has severed targets comparatively to transactional marketing.

This is highly focused on improving and building up an enduring connection with its

clients. The aims and goals of relationship marketing are to build up a long-lasting

relationship with clients, securing future sales of the business.

http://bigdoor.com/



Key Elements in Relationship Marketing

• To identify and build a database of the current and potential customers

• To deliver the right messages to the right target customers at the right time through

proper communication channels.

• To keep track of each and every relationship and monitoring the cost of acquiring the

consumers and their lifetime value.

• The emphasis on the interaction between suppliers and customers is shifting from a

transaction to a relationship focus.

• The relationship marketing focuses on maximizing the lifetime value of desirable

customers and customer segments.

• Quality, customer service and marketing are closely related, but most of the time they

are managed separately. The relationship marketing makes these elements coherent.

• Delivering differentiated messages to these people through established and new media

channels based on the consumers characteristics and preferences.

RELATIONSHIP MARKETING PROGRAMS

By observations of the corporate practices, there are three types of relationship marketing

programs

• Continuity marketing

• One- to – marketing

• Partnering programs

They take different forms depending upon whether they are meant for end-customer, distributor

customers, or business –to- business customers.

Marketers use a combination of one or more types of theses to build closer and mutually

beneficial relationships with their customers.

Steps in management of relationship

• Mission & objectives setting

• SWOT analysis

• Market analysis & segmentation

• Strategy formulation

• Developing the relationship marketing mix



Research in Retailing: Marketing research is "the process or set of processes that links the producers, customers, and

end users to the marketer through information used to identify and define marketing

opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing

performance; and improve understanding of marketing as a process. Marketing research

specifies the information required to address these issues, designs the method for collecting

information, manages and implements the data collection process, analyzes the results, and

communicates the findings and their implications. Components or Types of Research in Retailing:

Marketing research is often partitioned into two sets of categorical pairs, either by target market:

Consumer marketing research, and

Business-to-business (B2B) marketing research.

Alternatively, by methodological approach:

Qualitative marketing research, and

Quantitative marketing research.

Qualitative marketing research involves a natural or observational examination of the

philosophies that govern consumer behavior. The direction and framework of

the research is often revised as new information is gained, allowing the researcher to

evaluate issues and subjects in an in-depth manner.

Quantitative research means asking people for their opinions in a structured way so

that you have facts and statistics to guide you. To get reliable results, it's important

to survey people in fairly large numbers and to make sure they are a representative

sample of your target market.

Areas of Retail Research:

Store location

Consumer

Merchandising

Advertising & promotion

Customer service

Sales methods

Retail Research Process:

Define the Problem or Opportunity: The most important part of the marketing research

process is defining the problem. In order to do any research and collect data, you have to

know what you are trying to learn from the research. In marketing research, defining the

problem you need to solve will determine what information you need and how you can

get that information. This will help your organization clarify the overarching problem or

https://en.wikipedia.org/wiki/Consumer

https://en.wikipedia.org/wiki/Business-to-business

https://en.wikipedia.org/wiki/Qualitative_marketing_research

https://en.wikipedia.org/wiki/Quantitative_marketing_research



opportunity, such as how to best address the loss of market share or how to launch a new

product to a specific demographic.

Develop Your Marketing Research Plan: After you’ve examined all potential causes of

the problem and have used those questions to boil down exactly what you’re trying to

solve, it’s time to build the research plan. Your research plan can be overwhelming to

create because it can include any method that will help you answer the research problem

or explore an opportunity identified in step one.

Collect Relevant Data and Information(Gathering primary data): In marketing

research, most of the data you collect will be quantitative (numbers or data) versus

qualitative, which is descriptive and observational. Ideally, you will gather a mix of the

two types of data. For example, you might run an A/B test on your website to see if a

new pricing tier would bring in more business. In that research study, you might also

interview several customers about whether or not the new pricing tier would appeal to

them. This way, you’re receiving hard data and qualitative data that provide more color

and insight.

Analyze Data and Report Findings: Now that you’ve gathered all of the information

you need, it’s time for the fun part: analyzing the data. Although one piece of information

or data might jump out at you, it’s important to look for trends as opposed to specific

pieces of information. As you’re analyzing your data, don’t try to find patterns based on

your assumptions prior to collecting the data.

Recommend & Implement finding (Put Your Research into Action): Your research is

complete. It’s time to present your findings and take action. Start developing

your marketing strategies and campaigns. Put your findings to the test and get going! The

biggest takeaway here is that, although this round of research is complete, it’s not over.

Importance of research in retailing:

Analysis of retail trends

Implementation of category management more efficiently and effectively.

Making the right assortment decision for every division.

Self-assessment of sales based on the basis of market trends.

Helps deal better with the competitors. It also helps them to know about the status of

their rival companies.

An updated assessment of brand and item sales specific to their stores.

https://www.smartbugmedia.com/blog/the-anatomy-of-a-solid-inbound-marketing-campaign



Trends in Retail Research:

Focus group

Human resource retention

Retail location

Retail structures

Retail strategy

Distribution channels

Environment

Consumer behavior

Logistics

Business management

Performance

Brand Management in retailing:

A brand is an identifying symbol, mark, logo, name, word and/or sentence that companies use to

distinguish their product from others. A combination of one or more of those elements can be

utilized to create a brand identity. Legal protection given to a brand name is called a trademark.

A brand is a name given to a product and/or service such that it takes on an identity by itself.

Brand management is a communication function in Retail that includes analysis and planning on

how that brand is position in the Retail house, which target public the brand is targeted at, and

maintain a desired reputation of the brand.

Types of Store Brand in Retailing:

National (Manufacturer) Brands: National brands are the name brands you recognize

from some of the world's largest manufacturers, like Downy, Tide, Jif, Crest and

Cheerios. These brands enjoy great popularity and brand loyalty, are some of the higher-

priced items on store shelves and have recognizable branding and packaging. They are

widely available, whether you are in a smaller grocery store or a large superstore.

Private-Label and Premium Private Label (Store) Brands: Private-label and premium

private-label products sit on store shelves right beside manufacturer brand products, and

may even tout, ''Compared to...,'' naming the manufacturer's brand right on its packaging.

These products compare closely to their name brand counterparts, but offer a discounted

price tag and are marketed by the store itself. You will recognize these labels as ''Equate''

at Walmart or ''Kirkland Signature'' at Costco, for example.

Copycat Brands: Copycat brands are so-named because they take on the appearance of

the manufacturer's brand right down to the packaging, though they are typically a store

brand or a generic brand. These products are offered at a lower price and are usually

considered to be of lesser quality. You will spot these on store shelves because you might

https://www.investopedia.com/terms/b/brand-identity.asp



accidentally pick one up, thinking it is the national brand due to similar coloring and

package wording.

Exclusive Brands: Exclusive brands, sometimes referred to as co-brands, are products

that are created by a large, national brand, but are sold exclusively by one particular

store. For example, fashion designer Vera Wang created a more affordable clothing,

jewelry and footwear line called, ''Simply Vera,'' that is available in an exclusive

partnership with Kohl's. Another example is Pottery Barn's partnership with Sherwin-

Williams, to develop an exclusive line of paints to sell to consumers in Sherwin-Williams

stores.

Role of branding in retailing:

• Improved sales

• Higher price

• Higher profitability

• Barriers against competitors

• Higher customer loyalty

Steps in developing retail brand:

• Articulate brand identity: Brand Identity is the tool marketers use to articulate the rules

for brand gestures. It explains how the brand will support the organization's overall

mission and objectives, and forms a bridge to making decisions about more than just

marketing.

• Establish customer value proposition:

• Explain how your product solves customers' problems or improves their situation.

• Quantified value, Deliver specific benefits.

• Differentiation, Tell the ideal customer why they should buy from you and not

from the competition.

• Define the optimal customer experience: customer experience (CX) is the product of

an interaction between an organization and a customer over the duration of their

relationship. A good customer experience means that the individual's experience during

all points of contact matches the individual's expectations.

• Cultivate relationship with customers:

• Continuously Learn About Your Customers.

• Anticipate Customer Needs.

• Handle Different Customers Differently.



• Interact With Customers.

• Focus on revenue and retention more than on reducing costs.

• Increase value for your customers and of your customers.

• Strengthen the brand over time:

• Map your brand's touch points. When thinking about what a brand is, you need to

understand that it is not just 2-3 pieces like your website, logo, or catalog but

all the pieces.

• Align your brand.

• Connect your brand to your customer.

• Brand is built on consistent, helpful service.

Internationalization of retailing:

Retail internationalization is the expansion of a retailer's operations into a foreign market. The

store format may or may not be similar to that in the home market. Identical operations may well

trade under a different brand than that operated in the domestic market.

Retail internationalization is the transfer of retail operations outside the home market. It involves

the international transfer of retail concepts, management skills, technology, and even the buying

function.

Factors involved in International Retailing:

A careful examination of the definition for international retailing reveals certain concepts, which

are key to the process of international retailing.

These include-

• Operations

• Concepts

• Management Expertise

• Technology

• Buying

• Operations: Retail internationalization is the expansion of a retailer’s operations into a

foreign market. The store format may or may not be similar to that in the home market.

Identical operations may well trade under a different brand than that operated in the

domestic market. This decision is largely dependent upon the method of market entry.

For example, in 1999 Wal Mart (the retail giant) bought UK grocery chain ASDA and

retained the original ASDA brand.



• Concepts: Retail concepts lay emphasis on innovations in the industry. The self service

concept first emerged in California in 1912. Later, the concept was followed in a number

of international markets in the next two decades. Similarly, the convenience store

format which originated in USA in 1920s was taken up in Europe in the 1970s.

Now, the focus in on globalization. The retail concept currently by operated by retailers

may also become successful in a foreign market.

• Management Expertise: The transfer of concepts is linked with the of management

expertise. This encompassed the internationalization of skills and techniques used in the

management of the business.

• Technology: Retailers who operate internationally require the use of technology

advances. Use IT in central management of retail operations has improved its decision-

making in areas such as finance, personnel, and logistics. Technologies such as EPOS

(Electronic Point of Sale) are also used at operational levels of retail stores.

• Buying: The proportion of consumer expenditure on retail is considerably important. As

the population becomes more wealthy a greater proportion of income is spent on

nonessentials. Only a small percentage of total spend goes on food and clothing.

Motives of international retailing:

1. Push factors: are reactive reasons, are compulsions of domestic market like saturation of

market, Unskilled man power etc. (acting in response to a situation rather than creating or

controlling it).

• Saturation

• Recession

• Planning restriction

2. Pull Factors: are Pro-active reasons, are motivating forces which attract business. E.g.

Profitability & Growth prospects. (reacting or controlling a situation rather than just

responding to it after it has happened.)

• Attractive markets

• Rise of the middle class

• Harmony of market concepts

• Choice of ownership

• Supplier strategies

Reason for Internationalization of retailing:

• Inadvertent internationalization,

• Non-commercial motives,

• Commercial objectives,

• Government regulations,



• Capitalizing on existing or potential sales opportunities.

• Inadvertent internationalization: Inadvertent internationalization is due to political

instability. Sometimes, changes in the demarcation of national borders take place. This

may mean a retail company is operating in a different market although its stores have not

physically moved.

• Non-commercial motives: It includes entering the market, which gives retailers

competitive edge. Gaining important market knowledge before moving in on a larger

scale learning about innovations may be other commercial objectives of retail

internationalization.

• Commercial objectives: Non-commercial reasons of political, personal, ethical, or social

responsibility have motivated retailers to move into foreign markets.

• Government regulations: Retailers prefer the markets with fewer restrictions on their

growth. Severe regulations at home push retailers into the international arena.

• Capitalizing on existing or potential sales opportunities: Retailers seek the best growth

potential possible. If they perceive profitable opportunities in overseas markets, they are

likely to capitalize on them.

Market entry strategies:

• Acquisition

• Joint venture

• Organic growth

• Share holding

• Franchise

Issues in international retailing:

• Empowered customer

• Emergence of new market

• Technology enabled efficiencies

• Rise of the E-age

• Legislation & regulation

• Taxation & cross border shopping

• Variation in retail practices – consumers

• Variation in retail practices – sales people.

International Retail Environment:

• Socio-cultural environment

• Economic environment

• Political environment

• Legal environment

• Technological environment



Unit-6

Retail Audit and ethics

Retail Audit:

Retail audit is the study of selected retail outlets for collecting data about the health /

visibility of a brand’s products. This is a primary physical research process, wherein a trained

auditor visits the establishment and validates information such as:

Sales volume

Stock levels (shelf and backstock)

Descriptions of in-store displays and promotional materials

Competitor activity

Planogram compliance (shelf location, number of facings present, number of SKUs

present, missing/inaccurate shelf tags)

Pricing

In-store location of products

Product damage

Importance / Significance of retail audit:

There are dual benefits of conducting a retail audit. One, the audit serves as a tool for

suppliers to confirm that retailers are adhering with pre-established protocols on product

placement, pricing, and promotion. Two, the audit allows brands to precisely measure their

success in the retail atmosphere

To improve in-store performance

Financial Efficiency

Asset Management

Improving Compliance

Channel and Category Management

Evaluating ROI

Advertising impact,

Retail Audit and ethics in Retailing Undertaking an audit, responding to a retail Audit, problems in conducting a retail audit. Ethics in retailing, social responsibility and consumerism.



Effectiveness of promotions, and marketing trends.

Types of Retail Audit

Merchandise Audit: are conducted to ensure that product location, shelf space,

displays, pricing, and promotions are executed as agreed between CPG (Consumer

Packaged Goods) companies and retailers.

Inventory levels

Stock outs

Condition of products

Amount of available shelf space

Units ordered

Retail price

General shelf appearance

Retail process audit: to examine efficiency in operations.

Customer audit:

Greetings & courtesy

Grooming

Communication

Awareness

Sales presentation

Purpose of Retail Audit:

Retailer Audit: The objective of retailer audit is to measure the brand's performance.

Inventory levels

Availability of the products

Quality of products & competition



Shelf life

Reorder Level

Maximum retail price

Discounts and others.

Distributor Audit: One audit that brands should not overlook is the competitor's

survey, which reveals invaluable insight into how their brand is positioned against the

competition of that category. TechSci identifies:

Who are direct and indirect competitors present in the store?

Pricing strategies

Is your brand being significantly stacked?

Location of the competitor's products

Prime placement at eye-level or near a checkout counter

Location (high- or low-traffic area)

Steps in Retail Audit: Undertaking an Audit-

Articulate your goals: Determine the main objectives of your retail audit. Are you

primarily concerned with monitoring competitor activity? or do you care about how

quickly your products are moving off the shelf? Put in writing exactly what you are

trying to measure through the audit and assign numeric or qualitative values to each goal

as a parameter for success.

Design audit criteria: Select the exact questions you will be asking in the audit and the

acceptable answer types. Will you use “yes/no” questions, have reps write-in responses,

or use a scale such as 1-5? Avoid frivolous questions; only ask for information that can

help your business improve (i.e. brand performance, competitor activity, retailer

compliance, etc.) See below for an example of the level of detail to include in your

survey questions.

Schedule appointments: Once you know what you’re trying to gain from the retail

audit, it’s time to make it happen. Aim for consistency in terms of who you send to which

accounts. This way, individual reps can become extremely knowledgeable about their

stores and build a rapport with store management. Recognize that some retailers might

want to be notified before reps will be visiting their store.

Gather data and photos: Make sure reps collect data that directly corresponds to the

goals and criteria you have laid out. It might make sense to have some retail survey

questions be marked as “mandatory” if they are extremely significant to company



objectives. Including photos in audits is a great way to depict exactly what is happening

in a store at any given time, and promotes accountability and compliance.

Evaluate results: Once audits are completed, organize your data in an easily digestible

format. Numerical values can be depicted graphically, whereas notes could be tagged by

a select quality.

Implement changes: After analyzing the findings, execute on what needs to be done in

the short term. For example, perhaps you discover that a particular SKU is performing

significantly worse than others across several locations and you decide to pull it from

shelves immediately.

Repeat the process: After conducting several retail audits, you will be able to adjust

your retail audit process as needed to tailor it to your company’s unique needs. Regularly

conducting audits will allow your business to be as agile and rapidly adjust to the ever -

changing retail landscape.

Problems in conducting retail audit:

Lack of co-operation

Incomplete & inadequate data

Consumer behavior

Expensive process

Lengthy process

Requires more time

Customer behavior audit:

A complete understanding of the influences that affect consumer behavior is an essential

foundation for building a marketing strategy.

Hawkins, Best, and Coney (2001) suggested a process for identifying information associated

with the critical decisions that marketing managers must make about major elements of

marketing.

Areas of Customer behavior audit:

Market segmentation – division of all possible product users (i.e., consumers) into

groups with similar needs to satisfy for product development and media selection.

Product positioning – determination of a desirable product or brand position in the mind

of the consumer relative to competing brands.

Price – pricing policy consistent with the determined product position. The price is the

all-inclusive set of consideration that the consumer must tender in exchange for the

product or service, such as time, patience, learning, and money.



Place (Distribution Strategy) – channel or distribution strategy, such as retail,

wholesale, or Internet, etc. consistent with the determined product position at which title

to the product is relinquished or the service is performed.

Promotion – advertising, visual packaging, publicity, promotion, website, telemarketing

and direct sales force activities.

Product – physical product characteristics or service to be experienced for each market

segment.

Customer satisfaction – post-purchase policies to promoted customer use, loyalty,

reference, and repeat purchases.

Ethics in retailing:

Ethics is a branch of philosophy that deals with values relating to human conduct, with

respect to right or good and wrong or bad actions. Here ethics relates to retailers moral

principles and values.

Ethics is a set of rules for human moral behavior. For retailers they can have explicit code of

ethics or implicit code of ethics.

Explicit code of ethics: Written policy that specifies what is ethical and

unethical behavior.

Implicit: Unwritten but well understood set of rules/standards of moral

responsibilities.

Ethical practices:

Ethical practice towards consumers: The retailers should charge fair price for the

products offered to them. The consumers have the right to get correct and precise

knowledge about the products sold to them in respect of warranty, guaranty, price,

usage, ingredients etc. Ethics is essential for the long run of the business. Ethical

business is essential in today’s competitive and dynamic environment.

Ethical practice towards investors/shareholders: The shareholders are the owners

of the business. Shareholders must be given fair returns on their investment at regular

intervals. The share holders should be disclosed with correct information about the

financial status of the business organisation. The business organisation must act in the

interest of the shareholders.

Ethical practices towards employees: Ethical practices must also be followed

towards the employees. The retail industry employs large volume of retail staff.

Therefore proper policies and procedures must be framed for the employees

regarding recruitment, selection, training, promotion, welfare etc.



Unethical practices in retailing:

Duplication of original brand

Inadequacy & insufficiency in warranty offering time & service

Not offering quality products

Improper product safety

Promoting products which causes environmental pollution

Price discrimination

Misleading advertisement & false promises

No fairness, transparency in relation with suppliers & retailers

Artificial raising in prices

Not holding adequate stock

Defaming competitor

Pressuring the employees

Tracking the customer database for self.

Decision areas in ethics in retailing:

Ethics in buying:

Product quality

Sourcing

Slotting fees

Bribery

Ethics in selling:

Products sold

Selling process practices

Ethics in relationship:

Misuse of company assets

Job switching



Employee theft

Ethical Norms:

Responsibility towards society, customers.

Honesty, Integrity & Quality

Organizational relationship

Long-term loyalty

Avoiding harmful tactics

Building trust & confidence

Practicing of fundamental ethical values.

Social responsibility in Retailing:

Social responsibility is an ethical framework which suggests that an entity, be it an

organization or individual, has an obligation to act for the benefit of society at large. Social

responsibility is a duty every individual has to perform so as to maintain a balance between the

economy and the ecosystems.

A trade-off may exist between economic development, in the material sense, and the

welfare of the society and environment.

Issues in Retail Social Responsibility:

Social Issues:

Ethical trading practices

Strategic CSR

Community investment

Corporate governance

Information sharing & collaboration.

Economics Issues:

Stakeholders interest

Product quality at affordable prices

Healthy competition.

Green Issues:

Promoting green consumerism



Investment in sustainable technology

Zero waste

Retail re-engineering

Consumerism in Retailing:

Definition- the "social movement seeking to augment the rights and power of buyers in relation

to sellers," (Kotler, 1972).

It is manifest in new laws, regulations, and marketing practices, as well as in new public

attitudes toward government and business.

Consumerism is a social and economic order that is based on the systematic creation and

fostering of a desire to purchase goods or services in ever greater amounts.

Need for Consumerism:

Less literate & aware population

Economically week consumers

Vast variety of goods & services

Deceptive advertising

Consumer support

Act as a feedback

Minimizing imperfections

Responsive environment.

Consumerism in India:

India is a developing economy

Not all Indian consumers are well educated.

Consumers are often exploited, misled by deceptive advertisements, packaging poor after

sales service, adulteration, price collusion and so on.

Liberalization and competition

Survival of the fittest



Rise of Consumerism:

Consumers are more knowledgeable, price conscious & selective

Customer – oriented preference

Increasing in self service

Innovative technology

Rise against defective products

Personal attention on each customer is required & expected from the customers.

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