retail management Strategy & Locations
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Retail
S.Shriram
The Road less traveled…
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My Retail Journey.com• Started scooping Ice-Cream at Basin Ro!!ins" #st outlet in Chennai $ #%%&
• 'ursued B.com( MB) in Mareting( '*+ International Business• ,ecutive ,ducation rom IIM Bangalore
• R'* Retail $ Music/orld and 0ood/orld
• The 0uture *roup $ Central Malls
• 1nited Colors o Benetton
• Bangalore International )irport 2td.
• Ca3 Coee +ay $ Set up over #45 caes
• Indiapla6a.com
• Royal ,nield $ Set up over #75 retail stores
• 8isiting 0aculty at B-Schools since 955:
• Smiling Ba!y $ Retail store or ne/ !orn !a!ies
• ;yeThere.com $
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=elcome to the =orld o Retail
>S/im upstream. *o the other /ay. Ignore the conventional /isdom.
I every!ody is doing it one /ay( there?s a good chance you can ind
your niche !y going eactly in the opposite direction.@
- Sam =alton A#%#-#%%9
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+einitionRetailing includes all the activities involved in selling goods or services
directly to inal consumers or their personal( non-!usiness use. ) R,T)I2,R or R,T)I2 ST;R, is any !usiness enterprise /hose sales volume comes
primarily rom Retailing.
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;rgani6ed Retail
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Some Important 0acts
SD1 - Stoc Deeping 1nit
=al-ins E 0ootalls
Fo. o Bills
Conversion Rate
)verage Bill 8alue
Topline ASales
Bottomline A'BIT
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Retail Strategy
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StrategyThe /ord Strategy comes rom the *ree /ord meaning the >art o the
general@. In Retail( the term Strategy is used so oten that it is otenconused /ith decision maing. ) Retail Strategy is a statement identiying
•The Retailer"s Target Maret
•The 0ormatAs the Retailer plans to use to satisy the target maret"s needs
•The !ases upon /hich the Retailer plans to !uild a sustaina!le Competitive
advantage
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Target SegmentThe Target Maret is the maret segmentAs to/ard /hich the Retailer plans to
ocus its resources and retail mi. Successul Retailers satisy the needs ocustomers in the target maret !etter than the competition does. The
selection o the target maret ocuses the Retailer on a group o consumers
/hose needs it /ill attempt to satisy.
The selection o a Retail ormat outlines the Retail Mi to !e used to satisy
the needs o those customers. The Retail Strategy determines the marets in
/hich the Retailer /ill compete.
Retail Maret is not a speciic place /here !uyers and sellers meet Alie in
ormer times $ a Ba6aar !ut a group o consumers /ith similar needs and a
group o Retailers using a similar retail ormat to satisy those consumer
needs.
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Competitive )dvantage
and *ro/th Strategies
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Competitive )dvantage)s the name implies( the Retailers need to !uild an advantage over their
Competitors. Most oten( success can !e replicated( as its is Guite simple toollo/ the leader. )nd over a period o time( smaller Retailers /ho ollo/
larger !rands( simply co-eist in the same maret( !ut operating across
dierent segments. To avoid competition eating up into its maret share(
Retailers must !uild a strong layer or itsel. The layer must !e so strong thatit /ould !e diicult or competition to !rea-in.
)nd even i they do( its strategies must !e so dierent that the successul
Retailer al/ays remains one-up. It is important hence to ensure that the
Retailer"s strategies are short-( medium- and long-term.
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The ollo/ing are opportunities !y /hich Retailers can !uild a sustaina!le
competitive advantage over rivals in the maret.•2ocation
•Merchandise
•Customer Service
•Customer 2oyalty
•8endor Relations
•+istri!ution 2ogistics
•
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*ro/th StrategiesMaret gro/th should !e continuous and sustained( or the Retailer"s success.
This happens mainly through a ocused approach and many other actorsalling in place. *ro/th is( and must !e !uilt over a period o time( so its
roots are strong to /ither any ind o /ind.
There are our main /ays o pursuing gro/th in any maret. They areK
•Maret 'enetration
•Maret ,pansion
•0ormat +evelopment
•+iversiication
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Maret 'enetration
This involves directing eorts to/ards eisting customers !y using the presentretailing ormats. The Retailer can achieve this !y attracting customers in its
current target maret /ho don"t shop at its outlets or !y devising strategies
that induce current customers to visit a store more oten or to !uy more
merchandise on each visit.This could !e done through opening more stores in the Target maret and
eeping the stores open or longer hours. )nother approach inside the store
could !e through cross-selling or through aggressive in-store promotions.
Maret penetration is usually a planned strategy and is normally undertaen
!y Retailers /ho preer to consolidate in a particular region( rather than
spreading all over at once.
,amples Supermarets
*ro/th Strategies
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Maret ,pansion
This involves the Retailer spreading its stores across geographical locations(due to limited eposure and opportunity in a Target Maret. This is usually
done !y Mono Brands /ho /ould preer a presence all across a region Aor
country than ocusing on Lust one city.
The main !eneit o epanding the maret is that the Brand is present in
more placesEareas that !rings in higher visi!ility. )lso( /hen Fational
campaigns are undertaen( the cost advantages could !e derived.
The disadvantage ho/ever( is that the Brand /ould never !e a!le to
consolidate its position in any one maret. Sooner than later( they have to
penetrate ey marets.
*ro/th Strategies
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0ormat +evelopment
This involves oering a ne/ ormat $ /ith a dierent retail mi to the sametarget segment. It could !e /ithin the same location or else/here( !ut the
idea is to capitali6e on the eisting customer !ase and sell more products or
services under one roo. The span o managerial control is also another
reason that necessitates developmentEintroduction o Fe/ 0ormats.
0ormats must !e developed in tune /ith the overall Strategy( 8ision and
'urpose o the Retailer. They must complement the eisting !usiness and not
compete. Fe/ ormats must al/ays !e tested in smaller marets( so as to
learn rom the eperience. Trying out ne/ concepts alongside eisting
successul !usinesses could prove to !e challenging.
*ro/th Strategies
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+iversiication
Many Retailers /orld/ide as /ell as in India have diversiied either into oroutside mainline Retail. =hile ITC and Reliance diversiied into Retail( +u!ai
!ased 2andmar *roup and India"s very o/n 0uture *roup diversiied outside
mainline Retail. Most oten( the purpose o diversiication could !eK
•Spreading the overall Ris element•Better usage o eisting resources
)t times( Retailers tend to lose ocus and get into unrelated diversiication(
that may divert the attention o the Senior Management( although the
venture may !e proita!le. Care must !e taen to ensure this doesn"t occur.
Many large ;rgani6ations that undertoo this have /ould up /ithout success.
*ro/th Strategies
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Retail Mi
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Retail MiRetail Mi is the com!ination o actors Retailers use to satisy customer
needs and inluence their purchase decisions. ,lements in the Retail miinclude the types o merchandise and services oered( merchandise pricing(
advertising and promotional programs( store design( merchandise display(
assistance to customers provided !y sales people( and convenience o the
store"s location.
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Retail Mi
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The three most important actors
in Retail are2ocation( 2ocation 2ocation.
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Retail Store 2ocations=ell !egun is hal-done( it is said. Similarly( the right location /ill reap rich
!eneits to the Retailer. The choice o the Retail outlet"s location /ill have an
impact on everything the Retailer does. The dierence !et/een selecting the
/rong location and the right site could !e the dierence !et/een !usiness
ailure and success.
Retailers /or tirelessly to procure !est locations or their !usinesses. =hile
conventional /isdom is the !ase( modern Retailers are /illing to tae higher
riss( that may result in higher returns. In India( ho/ever( Retailers are
!etting heavily on popular high-street locations and Malls( given the act that
there are only a very e/ o them in maLor cities.
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0actors $ Retail 2ocationRetailers must consider a e/ actors !eore deciding to venture into a ne/
location. Some o them are discussed !elo/K$8ision o the Retailer
$Span o Managerial Control
$Type o goods to !e traded
$Target SegmentAs
$Competition
$'ricing strategy
$+irect and Indirect Costs - Rent( Salary( )dvertising
$Retail ;utlets" eterior and interiors
$)rea ReGuired or various activities $ Sales( Storage( ;ice space
$2ogistics( Transportation o goods and people
$8ia!ility o conducting !usiness
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Span of Managerial Control
Retailers tend to ocus geographically( rather than nationally( /hile initiating
and epanding their !usiness. Most oten( the !iggest cities o the country
and test-marets or in some cases( it could !e cities /here the Company is
headGuartered. In India( +elhi( Mum!ai and Bangalore are the most avorite
launch cities or Retailers.
Reliance Retail( ho/ever( /ent the unconventional /ay( !y choosing
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Types of Goods to be traded
2arge ormat stores need large !ac-end operations and hence( citiesEareas
/ith !est connectivity and inrastructure are relatively important or the
Retailer /hile choosing the location. India has one o the largest net/or o
rail/ays and road/ays in the /orld( and yet( more than :5 o our villages do
not have direct connectivity to maLor metro cities.
Reliance Retail /ill move its supplies and produce through its o/n 2ogistics
net/or /hereas The 0uture *roup( /hich /as until recently using eternal
logistics management companies( has no/ created 0uture 2ogistics to tae
care o its o/n as /ell as eternal logistics management.
0actors $ Retail 2ocation
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Target Segment
This is one o the most important actors( on the !asis o /hich Retail
2ocations are chosen. 1ltimately( the !usiness needs consumers and hence(
Retailers 6ero-in on such locations /here there already eists a considera!le
target segment. ,sta!lished Retailers such as the =al-Mart or Metro
internationally and our o/n 0uture *roup and Reliance Retail( ho/ever
create maret segments.
) classic eample in the recent years is the consumer dura!le maret. Both
operators( have created a ne/ identity /here-in the >emerging middle class@has !een targeted. )lso( these Retailers are indeed eperimenting ne/er
ormats in ne/er locations( there!y creating ne/ segments.
0actors $ Retail 2ocation
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Competition
In Retail( there are only t/o /ays o managing Competition $ either let the
Competitors ollo/ you or you ollo/ the Competition. It taes a lot to lead
competition.
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Pricing Strategy
'ossi!ly one o the most interesting actors( 'ricing is !ecoming moreimportant and relevant these days in Retail India. Retailers are ocusing on
'ricing aspects !y carving niche ormats and models or their !usiness. ) lot
also depends on other parallel actors such as 8ision( Competition( Target
Segment( etc.
=ith various Retailers adapting 'ricing techniGues to pull more customers(
it /ill get !etter or customers /ho shop at these retail stores. ) note o
caution is the eiciency o the Retailer to manage !ottom lines more
eectively.
0actors $ Retail 2ocation
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Direct and Indirect Costs - Rent, Salary, d!ertising
)ssociated +irect and Indirect costs /ill have an impact on the Retailer/hile choosing the right location. These may vary rom time to time and
could also !e seasonal. 0or eample( in India( /e still do not have the !est
inrastructure and connectivity or commuting or the employees and sta.
In the short run( transport costs may !e higher !ut /ith !etter roads andcommuting systems such as the Metro( these may come do/n.
0actors $ Retail 2ocation
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Retail "#tlets$ e%terior and interiors
The Retailer"s image is very important /hile communicating to itscustomers. +iscount Retailers such as )uchan have gone or a very ra/
version o the store interiors /hereas ashion retailers such as 2iestyle
Shoppers Stop go or chic and modern interiors designs and concepts.
)lso( the /ay the Retailers proLects its presence shall spea a lot in the
Retail districts. 0or eample( =)2-M)RT and BI* B)O))R have !old onts
and huge cut-outs that is very diicult to miss.
0actors $ Retail 2ocation
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rea Reired for !ario#s acti!ities ' Sales, Storage, "ffice space
The Retailer must include space or other ancillary and related activities
/hile calculating the Retail space or its outlets. This is orgotten most
times and that is /hy a space constraint is al/ays elt even among large
retailers.
(ogistics, Transportation of goods and people
Retailers must consider the movement o goods and people in the medium
term( /hich choosing the right locations. 0or eample( the transportation
costs are higher or moving goods in hill cities such as Manali or Dodaianal.
0actors $ Retail 2ocation
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Types o 2ocation
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Shopping Centers and Malls
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Shopping Centers and Malls) Shopping Centre or a Mall is characteri6ed !y similar looing outlets under a
common roo( sharing common /al/ays( acilities such as paring lots andrest rooms. )nalysts also reer them as 8ertical )nchor Stores@ and a num!er o smaller retail
outlets also no/n as 8anilla Stores. The anchor store /ould !e spread over
more than #5-#: o the total Mall si6e and hence /ould !e dominating themind space o visitors. The smaller outlets typically !eneit rom the ootalls
that are !rought into the Mall !y the )nchors.
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0ree Standing 2ocations
S d
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0ree Standing 2ocationsThis type o retail location is !asically any stand-alone !uilding. It can !e tuced a/ay in
a neigh!orhood location or right o a !usy high/ay. Retailers /ould al/ays have a valid
reason to have chosen such a location( the most common !eing the rent paid and loating
traic. The lipside could !e traic $ ootalls and there!y conversions( to ensure a steady
!usiness in the short- and medium term.
Big-!o Retail ormats such as
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;ice Complees and CB+It"s a common sight these days to see more and more Retailers( especially
Conveniencestores and 0ast 0ood ;perators( ind a place or themselves at CB+s and
;ices. The reason is o!vious ) captive audience and an inherent need that
eists among consumers( lac o time to go shopping and a positive intention
to spend. Many large Retailers have started to set-up their outlets here(al!eit /ith a !it o modiication to suit the contet that prevails.
)s the ,mployers see the shopping acility as an >etended service@ provided
to their employees( they do not charge very high rentals to the Retailers and
hence( the operator can manage to eectively mae more proits and also
pass on some to its consumers.
' !li 'l
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'u!lic 'lacesRetailing at 'u!lic places has !een /itnessing a phenomenal gro/th all over the /orld
in the past t/o decades. Increased travel is one o the most important actors or this
ledgling Industry. By pu!ic places( /e mean Bus and Rail/ay Stations( )irports(
Seaports( etc. )lthough a retail presence in these places has eisted or a very long
time( ;rgani6ed Retail has !een uelled in the past e/ decades.
0rom Convenience goods to 2uury( 0ast ood to 0ull Service Restaurants( one can indall o them at these places. 'eople shop not Lust on impulse goods( !ut also plan /hat
they need to !uy /hen they travel to dierent citiesE countries. 0or eample( one
/ould enLoy the !eneits o >duty ree@ goods in the International +eparture areas at
airports( as they have already emigrated rom the country o travel. Similarly( 2uury
cruises also oer shopping on !oard( /hich could ill !oredom or passengers.
In India( ;rgani6ed Travel Retail is a very small percentage compared to the overall
Retail Industry. But it is gro/ing at a very healthy rate and /ould play an important
role in main line Retail in the coming years.
)i
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)irports
C l l ti R t il S lli S
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Calculating Retail Selling Space
=hen planning a Retail store( the amount o selling space /ill !e one o the
most important actors in selecting a location. It can also !e one o the most
diicult to determine.
)s /ith any ne/ !usiness( most o your assumptions /ill !e !ased on industry
research and comparing similar stores operating in similar locations.
To get an estimate on ho/ much selling space your store must have( divide
the planned sales volume !y your industry?s sales per sGuare oot.
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Calculating Retail Selling Space;ne o the most important yet diicult tass or a Retailer is to determine
ho/ much o area is reGuired to carry out its operations. Feedless to say( this/ould depend on the vision and purpose o the ;rgani6ation in the Retail
!usiness. Most oten( Retailers !egin /ith one ormat and later venture into
dierent ones. This is natural and one o the most preerred and successul
options or Retailers /orld/ide.=hile determining space( The Retailer must thin o the ollo/ingK
•+isplay and Sale o 'roducts
•Customer ServiceE Complaints handlingP
•Billing and Chec-out
•Storage and sorting o 'roducts
•;ice Room
•)dditional space or uture needs or epansion
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The Right 2ocationCon!enience goods reGuire easy access( allo/ing the customer to Guicly
mae a purchase. ) mall /ould not !e a good location or convenience goods.
This product type is lo/er priced and purchased !y a /ide range o customers.
Specialty goods are more uniGue than most products and customers generally
/on?t mind traveling out o the /ay to purchase this type o product. This
type o store may also do /ell near other shopping stores.
) Department Store must !e located in a high-traic area so that as many
people are a!le to use them. )lso( other amenities such as 'romotions(
'aring etc.( /ould !e needed and hence such areas reGuire larger space.
H R t ili
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Happy Retailing…www.myretailjourney.com
Twitter: @shri611
Faceboo.com!TheShriram
http://www.myretailjourney.com/http://www.myretailjourney.com/