RetailManagement Notes

7/31/2019 RetailManagement Notes

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Retail Management

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Point 1.1

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ByVivek Rastogi

Retail Consultant


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Manufacturing Distribution Retailing

Retailing

Retailing is defined as the activities involved in the sale ofgoods and services to consumers for their personal, family, or

household use.


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Retailingcont.

Retailing is the final step in the distribution of merchandise -

the last link in the Supply Chain

No significant change in the product except breaking the bulk

Value proposition a retailer offers to a consumer is easy

availability of the desired product in the desired sizes at the

desired times (at desired prices).


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Typical Marketing Channels for

Consumer Products


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Retailing - Evolution

Trade and Retail Boom

Mom and Pop stores

Convenience

Large Format

Mail Order

e-Commerce


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Classification By Channel

Non Store

Mail OrdersCatalogue

Teleshopping

e-tailing

Call Centers

Direct Selling

Store


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Classification of Retail StoresClassification By Ownership

Unaffiliated independents

( Medical Shops, Fruit seller)

Corporate retail chains

( Food world, Trent, Target, Best buy )

Cooperative chain

(Co-optex, Cooperative societies, Janata Bazaar)

SIS

Franchise/Distributor systems

(McDonalds, Pizza hut)


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Classification By Assortment and Variety of

Merchandise

General-line Stores Department Stores

(Shoppers Stop, Sears, JC Penney, Marshall Fields)

Supermarkets

(Royal Super Market, Cub Foods, Nilgiris)

Factory Retail Outlets(Arrow, Nike, Sony)

Membership Warehouse Stores(Sams Club, Costco)

Variety Stores(F.W.Woolworths, Dollar Stores)


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Classification By Amount of Customer

Service Self-Service Retailers(Vending Machines)

Limited Service Retailers

(JC Penney, Sears, Target)

Full Service Retailers

(Tanishq, Nalli Silks, Prada)


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Classification Others

Other Types

Combination Super stores

Convenience Stores (7 Eleven)

Hypermarkets (Star India, GIANT)

Discount Stores(Target, Walmart)

Limited-Line Retailing

Specialty Stores (GAP,Music World, Kids Kemp)

Boutiques

Category Dominant Stores (Toys r US)


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Types of Retailers

Retailers Use Different Retail Mixes

-merchandise: variety (breadth) /

assortment (depth)

-services-store design, visual merchandising

-location

-pricing

Infinite Variations

Some combination of retail mixes

satisfy the needs of significant

segments and persist over time.


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Types of Merchandise Retailers

Mom and Pop Stores

Convenience Stores

SupermarketsSupercenters

Department Stores

Specialty Stores

Discount Stores

Category Specialists

Off-Price Retailers

Warehouse Clubs

Value Retailers

Food Retailers GeneralMerchandise Retailers


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Merchandise Offering

Variety (breadth of merchandise): wide vs. narrow- The number of merchandise categories

Assortment (depth of merchandise): deep vs. shallow

-the number of items in a category (SKUs)


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ALDI: Germans Wal-Mart

ALDI provides quality merchandise at low prices by reducing its assortment in

order to control store operating expenses


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ALDIs Strategy

4,100 stores in Germany and 6,600 worldwide, including 800 stores in 26 USstates

Cheap..

Only two brands of toilet paper and one brand of pickles

STRATEGY:

Stores sell less products

ALDI exclusive label

High quality of products at cheaper prices

HOW?

Strong control over quality and price

Simplify shipping and handling

Reduce labor costs by keeping limited store staff, etc.


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PLAN BUY SELLMOVE

Overview of Retail Functions

Strategic

Positioning

Procurement

Financial

Planning

SiteLocation

Store

Planning

STRATEGIC

PROCESSES

OPERATIONALPROCESSES

SUPPORT

PROCESSES


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What will you PLAN for retailing?


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BUY MOVEPLAN SELL

Retail Operational ProcessesPLAN

Major

Plan Processes

- Merchandise Plan

- Distribution Plan

- Space Plan- Sales & Profit plan

- Promotions & Markdown Plan

- Collaborative Plan

Planning is a systematic approach, aimed at maximizing return oninvestment, through organizing business activities.


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Retailing Strategy

Merchandise Planning

Helps determine:

What to Buy ?

What to Sell ?

Planning

Based on:

Past Experience

Previous Sales History

Current / Seasonal Market Trends

Retailers sales goals and location

Right Product, at the Right Place, at the Right Time


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Space Availability

Return on space (Sales in Rs./Sq.ft.)

Creation of 3 Dimensional walk-through models

Preview the look of a store

Planning

Space Planning

Range PlanningThe Range plan is based on the range of items (the width and the depth of

merchandise) the store plans to sell

Assortment PlanningThe Assortment Plan is based on the combination of

different varieties of merchandise to match consumer

needs

Distribution Planning

Distribution planning systems help in planning safety stock levels for items and their

locations, plan replenishment frequency, schedule shipments and transportation planning


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PLAN MOVEBUY SELL

Retail Operational ProcessesBUY

- Vendor management

- Open-To-Buy

- Consolidation

- Purchasing

- Replenishment

- Pricing

Major

Buy Processes


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Buying

There are five major areas to consider:

Who buys?

What to buy?

How much to buy?

From whom to buy?

Great locations, great looking stores and great sales staff arent

worth much if the merchandise isnt right


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Who Buys?:

One Individual Specialists

Versus

What to Buy?:

Current trend External Sources

Sales History

Buying


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Purchase Terms in Buying

Net

Ex Works

F.O.B. (Free On Board)

C.I.F. (Cost, Insurance and Freight) C.O.D. (Cash On Delivery)

D.D.P. (Delivered Duty Paid)

Purchase Terms


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Discount Pricing

Discount is a reduction in price given to retailers by their suppliers

Trade discounts

Quantity discounts

Seasonal discount

Invoice Discount

Cash discount

Clearance Pricing

Promotional Pricing

Competitive Pricing

Pricing


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PLAN BUYMAKE MOVE SELL

Retail Operational ProcessesMOVE

- Receiving (Vendor Receipts & Returns)

- Repacking

- Shipping & Transportation

- Cross-Docking

- Physical Inventory Check

- MIS

Major Move

Processes


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R

E

C

EI

V

I

N

G

D

E

L

IV

E

R

Y

CARRIER

STORE

GUEST

VENDOR

Returns

Storage Racks

Storage Racks

Flow Item(Cross Docking)

Pull Item

Pull Item

Layout of a Warehouse


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Warehouse Management

Receiving-

Unloading and inspection of the material received from vendor with corresponding

documentation.

Storing-

Placing the material at right place

Updating inventory accounts

Re-packing and shipping-

Unpacking the material from original cartons

Packaging and re-packing as per the order list/allocation of individual store

Loading on respective trucks.

Typical Warehouse Operations


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An operational technique for receiving, allocating, sorting anddespatching product, while it remains on the dock of a Distribution Centre (DC)

and therefore does not rely upon withdrawing stock from storage.It is a receipt-through-to process through-to-operation and would be undertaken

over a single shift.

I

N

B

O

U

N

D

O

U

T

B

OU

N

D

Distribution Centre

Retail OutletsSuppliers

A

B

C

A

B

CCross

Dock

A

B

C

A

B

C

Cross Docking


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Distribution Center Processing


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Flow Lines


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Shipping WingInterior View

Exterior View


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Commonly Used Terminologies.

Pallet

Flow-Thru Merchandise

High Velocity Merchandise

Reserve Merchandise

RF based tracking

Advance Shipment Notification

On-Hand

On-Withdrawal

On-Order

SCAC

Sorter

UCC-128

Letter of Credit (LOC)

Slotting or Profiling

Cycle Count

Lights-Out Warehouse

Honeycombing

Shipping Manifest

il i l


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PLAN MOVE SELL

Retail Operational ProcessesSELL

Store Operations

Visual Merchandising

Point-Of-Sale (POS)

Sales Polling

Inventory Updates Customer Relationship Management

Major SELL

Processes

BUYMAKE

OIN O SAL


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POINT OF SALE

P i f S l O i


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MerchandiseLook-Up

Clientele /

CRM

MerchandiseReturns /

Exchanges

Credit

Authorization

MerchandiseSale / Billing

CustomerLoyalty

Programs

Discounts /Coupons

GenerateReceipts

Point of Sale Operations


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Vi l M h di i


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Display to be built around fast selling items

Display should be simple. No oversell

VM should be timely

VM should be built around a theme

Proper lighting sells the display

Change the displays regularly

Visual Merchandising

M h di Di l & Si i


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Merchandise Display & Signing

The Merchandise Presentation Department works with marketing,

merchandise planning and the fixturing departments to create

unique, safe and profitable PLANOGRAMS for the stores.

To drive impactful presentation of merchandise on the Selling floor,

maximizing sales and differentiating the retailer from competitors.

C l U d T i l i


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Commonly Used Terminologies.

Register / Terminal

CRT

Scanner

Card Reader

Cash Drawer

Store Back-office

Tags Social, Ink, Liquor

Front Lanes

Shelf Labels

Food Avenue

Adjacency

Butt Brush

Decompression Zone

Strike Zone

Guest Pick-up

Raincheck

UPC / SKU / Barcode

Sales Transaction

R t il M h di & I f ti Fl


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CUSTOMER

VENDOR

BUYER

Store

PhysicalInventory

(Merchandise)

POS systemProduct

Scanners

ERP

Distribution System

Transportation

Warehousing

Distribution Center

Advertising

& Promotion

Merchandise

Plan

Sales

Promotion

Price

Distribution

P

l

a

ns

Orders

Initial Orders &

Replenishments

Customer InfoSales Info

Product Info

Information

Flow

Merchandise

Flow

Retail Merchandise & Information Flow


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EST Model for Retailing

Cheap-EST

Consistently Lowest prices on Products

Either you are cheapest or you are not

Cheap should not mean bad Value

Value for money

Purchasable below going Price or Real Value or charging a lower Price. You can not be cheapest if cost of running the business is

higher than competitors Buying smart

Shipping inexpensively (Wal-mart)

inventory control (e-bay)

low cost store (Subhiksha)


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Have the Largest Assortment of product in a specific Merchandise Category

Not about store size

Sweet Spot-Between too much & too little Merchandise (Incredible Store)

Biggest should be Problem Solver & time saver (Home Solutions)

An Increasing competition from E-commerce

Great functionality

search engine

easy to use

info rich

Mass customization-take care of customer interest

Bigg-EST


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Having the right products just as customers begin to buy them in Volume

Continually demonstrating that you are the place for latest fashion or newest Product

Rarely caught with yesterdays style

Regular change the look & layout to keep store fresh (ZARA in Spain)

Hott-EST

Easy-EST

Solution oriented Service (Ex ICICI Bank)

Takes care of employees (Sarvana Bhavan)


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The Wal*Mart Way


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The Wal Mart Way


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The Wal*Mart Way

Worlds largest retailer, Turnover

$378 billion

Wal-Mart is the largest private

employer in the U.S. Wal-Mart operates more than

6,500 stores in 15 countries.

Wal-Mart serve more than 25

million customers around the

globe every day.

Wal-Mart is the greatest retailer that ever was & we have to compete withthem on regular basis. There has been no one that competes & thrives. Veryfew to compete & survive.

Target CEO


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The Wal*Mart Way

84 % Americans visit Wal-mart at leastonce in a year

Wal-Mart saves an average Americanhousehold around $200 every year.

Wal-Mart employs 1.8 millionassociates worldwide, including 1.3million in the United States.

More than 240,000 of these aresenior citizens, who are 55 years orolder in age.

Accounts for 20-25% revenue of majorUS manufacturing companies

EDLP (Every day low prices)


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Sams Retail Success Mantras

Commit to your business-sheerpassion, love your work

Share profit with all associates

Motivate your partners-encouragecompetition

Communicate everything possible to

your partner Appreciate associates

Celebrate success-find humor infailure

Listen to everyone in your company

Exceed customer expectation

Control expenses

Swim upstream

S ff i S l h i


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Super effective Supply chain

People think we got big by putting big stores in small towns. Really, we got big by replacing inventory with information.Sam Walton

Within 15 min of sale of an item,notification is sent to supplier

Minute parameters like weatheralso considered for forecasting &replenishment

Office in Unassuming town alongwith partners

Negotiation for customer

Cost sheet of Vendor

1 $ Vs 0.90 $

Private Labels

-Better margins-Negotiation tool


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Is Wal-Mart loved in US??

No !!!!

Wal-mart destroys small businesses Dis-approval of companys foreign

product sourcing

Every day low cost- Closure of

domestics industry

Lack of union representation

Sexual discrimination

Wal*Mart the inside story


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Wal*Martthe inside story


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Types of Private Label

Generic very promotional,very low margin

Fast Value Fashion knock-

off brands

Zara and H &M

Premium Store Brands

Retailers own brand offerssame or better quality atbetter price. The mostprofitable strategy in privatelabel


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Why Private Labels

Astitva

Consolidation of retailers

Brands sell to same retailersand become a commodity

Retailers need differentiationand better margin

Declining retail prices(womens apparel pricesdropped 2.4% 2007 vs. 06)

Globalization of Production

M t f L PL P i


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Mystery of Low PL Prices

Imitate designer brands toreduce R&D costs

Source direct with factories to

eliminate middlemen cost

Buy in larger volume toreceive lower cost

Source from low cost, dutyand/or quota free countries:China, India, Bangladesh,

Vietnam, Pakistan, South &Central America, Africa


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Private Label Trends


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Combined effort, a win-win strategyAmerican Living, Simply Vera, Isaac Mizrahi

One time exclusive deal

H & M, Target Blending in with Premium brandsINC, Arizona Marriage with a celebrity name

Sach,

DreamLine,Sarah Jessica Parker,

Hilary Duff

National Brand Counter Strategies


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g

Develop unique products and stayahead as a trend leader

Create own stores

Develop a compelling marketingstrategy

Increase brand loyalty Combine effort by offering exclusive

lines. I.e, Simply Vera, AmericanLiving, Liz & Co

Create one shot exclusive deliveriesand SKUS

Evaluate sourcing strategy andproduction cost

Maintain net price (minimalpromotions & discounts)

Improve forecasting and turn around

time

Future of Private Labels


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Future of Private Labels

Becoming national premiumlifestyle brands: INC, Alfani, Arizona

Branching out to create specialtychain business: George apparelstores, Wal-Mart, UK

Increasing depth of multidimensional merchandising productmix (Tony Hawk mens, boys,footwear and etc)

Spin off PL brands (Aeropostale)

Cannibalize weaker PL brands

Private Label Pros & Cons


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PROS

Exclusivity & differentiation

Bring customer loyalty

Better margin

Better control in deliveries

Brand equity

Freedom in pricing strategy

Increase bargaining powerwith both national brands

and PL factories

CONS

Inventory risk

Higher R&D expense

Higher marketing expense

No markdown or returnallowance from brandedsuppliers

If product fails, will createnegative image

Quality control, complexproduction & import issues

What This Means for Brands


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II. National brands should:

Change mind set and realizethat Private Labels arecompeting brands Innovate and stay as marketleaders to beat PL Stay focused on targetaudience Increase and market brandimagery to gain and maintaincustomer loyalty Partner with retailers toproduce exclusive brands,

SKUS, one-time offers or lines Price competitively andstreamline expenses

Classification of Retail Stores

Category Management


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g y g

Categories are managed strategically

through category plans and strategic

roles

Each category is run like a "mini

business" (Business Unit) in its own right

Its own set of turnover and/or

profitability targets and strategies

Asset Returns measure performance

and establish priorities

Shift in relationship between retailer

and supplier

Instead of the traditional adversarial

relationship, the relationship moves to

one of collaboration, Exchange of

information and data and joint business

Category Management


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g y g

Category Management is a process that involves managing product categoriesas business units and customising them [on a store by store basis] to satisfy

customer needs. (Nielsen)

The strategic management of product groups through trade partnerships whichaims to maximise sales and profit by satisfying consumer and shopper needs(Institute of Grocery Distribution)

Marketing strategy in which a full line of products (instead of the individualproducts or brands) is managed as a strategic business unit (SBU). (Business

Dictionary)

Why Category Management?


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Why Category Management?

Consumer Trends

Consumer demographics

Typical Consumer taste & preferences

Competitive Pressure

New store formats

New product introductions

Economic Considerations

Slow growth economy

Companies pressured to improve financialperformance

Industry Capability

Shared business goals -- Focus onConsumer---Shifting from internaloptimization to maximizing consumer value

Trading Partner Alliances


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CATEGORY MANAGEMENT PROCESS


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Category Definition

Category Role

Category Assessment

Category Scorecard

Category Strategies

Category Tactical Plans

Implementation Plan

CategoryRe

view

CATEGORY MANAGEMENT PROCESS

Category Management Framework


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Category Management Framework

When are theprogressreviews? What are theaction plans asa result of thereviews?

CATEGORYREVIEW

What is your Business Unit?

How can it be structured?

How important is your category?

What is your categorys main purpose and role?

How will you increase category sales and margin?

Who are your consumers? What do they need? Who are your competitors? What are they doing in the market?

How is your category performing today?

What do you want to create and achieve? Your sales & margin targets? What and how will this be reviewed?

What is your Demand & Supply strategy? What is the sourcing strategy for the Category?

What support do you need to achieve targets?

How do you plan your product variety? Good, Better, BestHow do you introduce new categories?

What is the assortment plan? How do you improve sales and margins? How will you price?

What promotions and markdowns do you need? How will the product be presented in the store? How will you ensure availability of stock?

How do we make this happen?

CATEGORYDEFINITION

CATEGORYROLE

CATEGORYASSESSMENT

CATEGORY

GOAL SETTING

CATEGORYSTRATEGY

CATEGORY

TACTICS

PLAN

RetailManagement Notes

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