Chapter I

Introduction to Retail Management:

1.1 Important Terms in the Area of Retailing:
Retailing: According to Philip Kotler Retailing includes all the
activities involved in selling goods or services to the final consumers for
personal, non business use. A retailer or retail store is any business
enterprise whose sale volume comes primarily from retailing.
Department Stores: Retailers that carry a broad variety and deep
assortment, offer considerably good customer service, and are organized
into separate departments for displaying merchandise.
Kiosk: The term kiosk, as related to retailing, refers to a small standalone structure used as a point of purchase. This can be either a computer
or display screen used to disseminate information to customers; or a free
standing, full-service retail location. Kiosks are often found in malls and
other high-traffic locations.
Inventory: Inventory is the merchandise a retail store has on hand. The
term also refers to the act of counting, itemizing and recording in-stock
merchandise or supplies.
Inventory Turnover: The number of times during a given period that the
average inventory on hand is sold and replaced
Category management is an important tool required in your retail
business to maximise the sales and profit margins of a category or group
of categories. A category is an assortment of SKUs (stock keeping units
that the customer sees as reasonable substitutes for each other.
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Gondola: Primary merchandising fixture consisting of a base, freestanding vertical wall, and a number of four of sections of shelving.
First In, First Out: A method of stock rotation in which goods that are
received first are sold first. Newly received product is stocked behind the
older merchandise.
LIFO: Last In, First Out - A method used in rotating inventory. This is
where an item that is last received is sold first.
Markup: A percentage added to the cost to get the retail selling price.
Markdown: A planned reduction in the selling price of an item, usually
to take effect either within a certain number of days after seasonal
merchandise is received or on a specific date.
Key Performance Indicators (KPIs) enable you as a retailer to
understand what is happening within your categories and business each
day. It is very important to have information collected and summarized
across a range of KPIs by category. Examples are Gross margin,
Shrinkage, Break-even Sales, Markdowns, Inventory turnover, etc.
Point-of-purchase Display: Point-of-purchase displays, or POP displays,
are marketing materials or advertising placed next to the merchandise it is
promoting. These items are generally located at the checkout area or other
location where the purchase decision is made. For example, the checkout
counters of many convenience stores are cluttered with cigarette and
candy POP displays.
Point of Sale (POS): Point of sale (POS) refers to the area of a store
where customers can pay for their purchases. The term is normally used
to describe systems that record financial transactions such as electric cash
2

registers or an integrated computer system that records the data that

comprises a business transaction for the sale of goods or services.
Private Label: Products that are generally manufactured or provided by
one company under another company's brand.
1.2 Theories of Retailing:
1. Wheel of Retailing:
1. Under this theory retailers enter the business as fairly low
status, low price and low cost operators
2. This will help them compete with existing players as they
are able to offer better prices and attract customers.
3. Once they are successful they try to expand by adding space
and more sophisticated facilities
4. They become high cost, high price retailers and as such
attract fresh competition

2. Retail Accordion Theory:

The retail accordion theory states that retail outlets will move from
outlets with smaller number of items to outlets with larger number of
items, before going back to an outlet with smaller number of items.

1. As per retail accordion theory at play: the mom n pop

shopwhich is the in the neighbourhood and serving small
section of the people with merchandise that primarily suit
the consumers around its location. As the business grows it
gets converted into the neighborhood supermarket, then they
put up a few more stores around the city with much wider
merchandise.
2. However, according to this theory the business starts getting
hit because consumers dont want to go to an all-in-one
store, they now like the specialized stores to get what they
are looking for instead of wasting a day going to a mega
mart.
3. This results in the business starts breaking up into foods,
stationary, clothes stores etc., it goes back to the smaller
format as seen in the beginning, serving a restricted number
of items to a smaller market segment.

3. Natural Selection Theory:

According to this theory, a firm or retail institution should be flexible
enough to adapt to the changing environment and should adapts its
behaviour (to changes in

the environment) to survive in the market.

1. The retail institution that is flexible enough to adapt to

changes in the economy will be the most successful.
2. If the store or the retail institution is not willing to change, it
would stagnate and may even be forced to exit the market.
3. Thus, according to the natural selection theory, a retail
institution will survive in a competitive market only if it is
willing to change its product line, price, location
4

and promotional strategies according to changes taking place

in the retail environment.
4. These changes can be social, economic, political, legal or
technological in nature.
4. 'Melting pot theory
Another theory explaining the changes that take place in the retail
institutions is the Dialectic process or melting pot theory. According
to this theory, two institutional forms with different advantages modify
their formats till they develop a format that combines the advantages of
both formats.
Melting Pot Theory
Discount Store
Low Margin
High Turnover
Low Price
Self Service
Low Rent Location

Department Store:
High Margin
Low Turnover
High Price
Full Service
Downtown Location
Plush Facilities

Discount Department Store

Average margin
Average Turnover
Modest Price
Suburban Location
Model Facilities

1.3 Managerial Decision-Making:

Decision-making is similar for all types of businesses. Small and midsize
independent retailers implementing high impact marketing campaigns to
increase cash flow and customer footfalls have to be careful in identifying
the fundamental requirements of a successful business, which are
highlighted below:
1. Finance - adequate funding is the key to operate successfully. Like any
business retailing also needs health liquidity position that is availability of
cash in order to manage the retailing operations. In retailing cash is
generated through sales, and there are no credit sales in organised
retailing and all transactions with customers are done on cash basis.
However, the problem is the matching cash-in-flows and cash-out-flows.
Finance is required to buy merchandise, pay salaries, rent and electricity,
taxes, store maintenance, and facilities management, to name a few.
Majority of finance is taken away by inventory or merchandise.
Huge volumes of products are offered to customers and as such needs
huge finance. Though credit purchase is common in retailing but with a
time limit. The point is whether the business is able to turn the
merchandise into cash enough to honor the commitments. Otherwise the
retailer has to arrange funds internally (Capital) or externally
(Barrowings). The managerial decision making rests in deciding the
combination of internal and external funds.
2. Operations Store operations are a major draw for customers. It
includes inventory management, man management and customer
management. Space management, interior and exterior ambience and
design, parking and lighting etc., all have to be properly managed. Most
importantly arrangement of merchandise and managing different

categories is vital so that the items are always available for the customers,
which shall ensure repeat visits and good volume of sales. Added to
which is the employee management-HRM. A good manager spends
enough time in taking appropriate decisions regard to HR policies that
boost the morale of the staff, which shall contribute for the successful
retail business.
3. Marketing - Systems have to be in place to not only acquire new
customers, but also keep previous customers coming back to buy time
and time again. Individual service, green retailing and target marketing
are some areas to be considered that shall immensely help boost the
footfalls/customer traffic. Effective use of Information technology shall
enable implementation of successful CRMCustomer Relationship
Management strategies. All the four Ps of marketingProduct, Price,
Place and promotion to be carefully decided and forms part of important
decision-making area of a retail manager.
4. Merchandising The breadth and depth of inventory is very essential
feature of retail success. Planning the right quantity and type of
merchandise is essential. The sizes, patterns, varieties of products are all
required to suit the needs of wide range of customers taste and
preferences. It is also important to display this merchandise; that is visual
arrangement of merchandise is key to the success of retail trade.
Customers should be attracted and induced to buy the products. Placing
the products at appropriate place within the store is another area to be
decided with high prominence.
5. Salesmanship: Effective salesmanship is an important element of
service marketing. The employees have to be knowledgeable and
courteous to the customers. Visiting customers express several doubts and

need clarification, guidance and many times motivation to buy. Helpful

employees are an asset to the retail business in the sense the information
provided by them may result in increased sales.

1.3.1 The Five Principles of Retailing:

One: The customer is the most important person in your business
The customer holds the key to every successful retail operation. It
is fundamental that every business is customer-focused, and retailing is
no exception to this basic rule. All the operations of retail are to be
designed to suit the requirements of a customer; merchandise panning,
pricing, promotions and effective salesmanship among employees shall
immensely contribute for the success of retail business.
Two: Retail is detail
One of the most famous principles in retailing is, of course, retail is
detail this is where the challenge lies: understanding retail is to
understand the customer well. Certain basics of retailing like, store
location and ambience, provision of facilities like parking, fresh rooms,
enough shopping space, creating a pleasant shopping experience are all
part of understanding the retail.
Three: Understand the four Ps
Marketing is the starting point of any business. Understanding the four Ps
of marketing is the key for success in retail business also. The 4 Ps:
Product, Price, Place, Promotion.

Product: Selection of Products that the customers want to buy and

a product range that will satisfy customers needs and desires is an
8

area in which much of the retail manager's time is spent. It is called

the product knowledge. Identifying right product with different
qualitiesas different quality parameters shall offer different price
ranges to suit all classes of people and arranging them in a
convenient manner for the customers to pick is the essence of a
retail management decision-making. Most importantly there should
be no case NISNot In Stock; no item should be out of stock,
which needs proper inventory management system in place that
ensures continuous availability of all items.

Price: Price must be consistent across the marketing mix and meet
all requirements of various customers. One has to price the product
range at the correct level for the customers to be able to buy the
products, and for them to gain value from the products. Again
pricing strategies should be set in such a way that they not only
generate sales volume and satisfy majority of the target customers
but also should leave a healthy profit margins for the business to
survive.

Place: Modern Retailing is done through several channels.

Choosing right channel or a mix of channels is important factor in
retail decision-making; be that a physical store, a catalogue or an
e-commerce website;

Promotion: Once the decisions regard to a product at the right

price, in a place where the customer can access it are decided, the
promotion strategy has to be designed. This helps the customers to
identify the store location and pay a visit.

Four: Location, location, location

The most important retail principle is Location. History has dictated that
this is one of the most important factors in the success of a physical store,
and still to this day it will have a major impact on business success. The
best location of a store will be decided by brand and product strategies.
For example, a supermarket operation needs a car park and a high fashion
store needs to be in a high fashion area that attracts the right customers
for the store. However, that location has less effect now than previously,
due to two main factors: the first being the flexibility of the customers;
now they often travel more, and the second being the internet. Still a good
location is always a winning strategy and contributes for the successful
business.
Five: Adapt to Change:
Finally any business has to adapt to change in the environment. The
internet has changed the shopping habits and will continue to do so. Ecommerce websites have opened up the world of non-geographic retail
a retail world without the need to visit the physical store. The
emergence of e-tail from retail has been the biggest change over the
past 20 years.
The journey from retail to e-tail has been quick, and we need to
embrace the world of e-tail and ensure we understand its effects on our
customers. The e-tail world is growing significantly and with new
technologies, such as i-Pads and mobile commerce, it will continue to
change the opportunities in the world of retail. The challenge for the retail
business is to make the shopping more attractive to the customer to
withstand the competition of e-tail. It is also not a bad idea to start one's

10

own e-tail website, which shall motivate a customer to visit the store and
feel the shopping experience.

1.4 Role of Store Manager:

A successful retail manager requires analytical and creative skills. There
are two methods for the study and practice of retailing:
Analytical method
Retail manager is a finder and investigator
Systematic decision making
Standardized set of procedures, success formulas and guidelines
Creative Method
The creative retail manager is an idea person
The manager must respond to the unforeseen events in the
environment
Imaginative, proactive and anticipate the problems and solves them
or keeps the solutions ready.
Applying a retail strategy: Any retail manager should apply these 6
steps:
1. Define the type of business in terms of the
goods

or

s e r v i c e category and the companys specific

orientation
2. Set long-run and short-run objectives for sales
& p r o f i t , m a r k e t share, image
3. Determine the customer market to which to
a p p e a l o n t h e basis of its characteristics and needs
4. Devise an overall, long-run plan that gives
g e n e r a l d i r e c t i o n t o a firm and its employees

11

5. Implement
combines

an
such

integrated

strategy

that

f a c t o r s as store location, product

assortment, pricing, and advertising and displays to achieve the

objectives
6. R e g u l a r l y

evaluate

performance

&

correct

w e a k n e s s e s o r problems as they are observed

Review Questions:
1. What is retailing and explain the wheel of retailing?
2. Compare and analyze the retailing accordion theory and natural
selection theory
3. Draw a picture showing the melting pot theory of retailing
4. Managerial decision-making has some key areas to understandwhat are they?
5. Discuss in detail the five principles of retailing that help effective
retail planning process
6. Applying retail strategy needs a store manager to follow some
important steps? List

12

Chapter II
Management of Retail Environment:
2020what are the major socio-demographic, technological and
business trends that will likely impact retailing?
In todays retail environment it is critical that retailers face the facts and
start managing their business into the future with a particular focus on
retail financial disciplines.
Retailing is a fast changing industry in which one must be able to
quantify important financial information. Both today and in the future this
will help to build a sustainable winning product offer for the customer.
The resultbusiness growth and the freedom to pursue new directions
and innovations as per customers expectations that will help to counter
new competition entering the market.

2.1 Strategic Planning of New Trends:

A business firm cannot travel in an unplanned way. To encounter the
business challenges in a highly competitive environment and to find out a
sustainable growth road map Retailers need to realize the importance of
strategic planning. Strategic planning can be viewed as a stream of
decisions and activities which lead to effective business strategies/plans,
which help the organization to fulfill its objectives.
The business environment of retailing can be divided as below:
Marketing Mix Factors (controllable): Product,
Price, Promotion and PlaceDistribution

13

 Environmental

Factors

(uncontrollable)-PESTEL

FrameworkPolitical, Economical, Socio-cultural,

Technical, Environmental, and Legal

a) Retail landscape is changing rapidly and in this changing economic

environment Retailers need to find out the right strategy, which
will help them to cope up with the environment and empowers
them to take right decisions for the future. Adopting correct
strategy will help the Retailers to optimize their resources and also
it will give an edge over its competitors.
b) Retail business needs to formulate the suitable strategy after
considering its strengths and weaknesses. Hence SWOT analysis
will be an effective tool in determining the correct strategy for the
particular category of retail business.
2.2 SWOT of Modern Retailing:
Some of the strengths and weaknesses of the Retail industry are outlined
below.
Strengths:
These are the areas on which success stories have been built and therefore
retailers need to capitalize on that.
i) Supremacy of Discount store
ii) Advancement in the area of Information Technology
iii) New sales channels like E-commerce and direct marketing
iv) Availability of consumer credit
Weakness:
i) Slow performance of Chain Stores
ii) Advent of Category Killers: These are big discount stores that offer a
narrow but deep assortment of merchandise. These retailers are basically

14

discount specialty stores. Most category specialists use a self-service

approach, but some specialists in consumer durables offer assistance to
customers. For, example, office depot stores have a warehouse
atmosphere, with cartons of copying paper stacked on pallets plus
equipment in boxes on shelves. By offering a complete assortment in a
category at low prices, category specialists can kill a category of
merchandise for other retailers and thus are frequently called category
killers.
Opportunities:
i) Brick and click: A combination of traditional store retailing along with
non store retailing like Internet and E-commerce.
ii) Premium Priced Store: Premium priced stores are targeting the high
income group customers and earning healthy profits. Tiffany and Co is an
example of such premium priced store.
iii) Entertainment in Retail: Entertainment Industry and Retail Industry
are working hand in hand to attract larger section of consumers. Sony
Corporation has opened some huge entertainment complexes in USA and
so many retail outlets are also housed in the same building. These two
outlets complement each other and hence both are doing are doing well.
Threats:
i) Demise of Independent small stores
ii) Demographic Changes

2.3 Strategy to Match the Changes in Environment:

2.3.1 Green retailing
Arguably the single most important issue for retailers today is the
environment. Green retailing has moved from nice to have to must

15

have as both customer and regulatory demands tighten for the industry.
And some of the biggest players are leading the charge to more
environmentally aware practices.
Tesco famously declared their intention of becoming a leader in helping
to create a low-carbon economy. To do so, Tesco will transform its
business model so that reduction of our carbon footprint becomes a
central business lever, according to CEO Terry Leahy. One of many
green steps the company has taken:
Examples:
1. Tesco is bringing emission-free delivery vans to London and other
locations. The battery-powered vehicles save 21 tons of CO2 per
year, the equivalent of driving 51,000 miles in a car. The
supermarket chain has currently bought 15 of the vehicles, though
this is set to rise drastically in the next twelve months.
2. Coop, one of the worlds largest grocery chains, is basing its
product ranges on green propositions. In fact, the company is
working with Bio Suisse, the umbrella association of more than 30
organic farming organizations and about 6300 farms engaging in
organic production in Switzerland With the likes of Tesco, Coop as
well as Sainsbury,
3. Home Depot, Marks & Spencer, Starbucks, Zara and Wal-Mart
leading the way, not having a distinct environmental plan built into
retail strategies has become the exception, where only a few years
ago it was the rule. What to expect then in 2020? Premium
payments

for

enviro-friendly

products,

more

low-energy

production, and the creation of newhigherstandards for ethical

trading.

16

2.3.2 Individualized service

Service and in-store experience continue to break out of the one-sizefits-all offering. Both are becoming more individualized and specialized
for specific target groups. Todays shoppers are, of course, a highly
differentiated demographic that promise to become even more so in the
future.

Working women, singles, teenagers and even children want

products, services and shopping experiences that are as separate and

suitable to them as they are.
1. Leading retailers aim to satisfy these requirements by diversifying.
Hence the trend to niche stores, like those for tweens (9-12
year olds) has emerged;
2. Footlockers partnership with Nike, its biggest supplier, to launch
a network of specialty, House of Hoops basketball stores across
the US.
3. The US office supplies retailer, Staples, carefully analyzes its
customers purchases, conducts continuous surveys to monitor
trends and then uses this data to develop distinctive strategies that
target big, frequent shoppers.
4. Similarly, the high-performance UK-based retail grocer, Tesco,
uses the data generated by its loyalty Clubcard to identify and
keep track of the personal preferences of 13 million individual
shoppers.
5. In quarterly mailings to these individuals, Tesco includes vouchers
that buy products at no additional cost to the shopper, but which
benefit Tesco by boosting sales volumes and getting customers to
try new products in new departments where they may continue to
shop in the future.

17

In the future, service will become an even more finely-calibrated

proposition between retailer and customer. The service components will
evolve increasingly from reactive to predictive as retailers battle to win
the loyalty of an ever-elusiveand more fragmented customer base.

Dixons, the largest electronics chain in the United Kingdom, has

developed a pricing solution that is designed to predict consumer
behavior. So if, for example, Dixons buys 50,000 laptop computers that
have an average shelf life of 12 weeks, that gives the electronics retailer
12 weeks to sell those units. Using the markdown clearance capability,
Dixons can re-examine the number of units unsold at different intervals
during the 12-week time frame.
If Dixons decides at any point that there are too many still unsold,
the company can consider ways to stimulate demandby further
lowering pricing, increasing advertising or offering incentives to
computersso that it can sell the quantity it has at the most profitable
price.

2.3.3 Implementation of Information Technology:

In todays high tech world there is no excuse for not having up to date
information on business performance. Inventory is the biggest asset;
however not to understand best sellers, worst sellers, and importantly the
future purchase orders will result in reactive management rather than
proactive management. Information technology shall immensely help sort
these problems on inventory front. Also the other areas that shall get the
required help are the, accounts management and HR, both important
decision-making areas. The IT field is ever dynamic and changing. Many
software programmes are available and will be available for the retailer.
18

Even though it is costly affair, it is important to have a dedicated team of

IT professionals so as to make right decisions regard to IT management
acquire and manage the systems.

2.3.4 Going for growth

Another hallmark for the future of successful retailers: growth in terms of
the multiplicity of geographic, online and format offerings. Tesco again
as a leader of the future for retail has an incredibly aggressive growth
agenda. Tescos plans include expansion into the usual suspects of
under-penetrated markets like Eastern Europe and China with
supermarket formats. The company is also opening convenience store
formats in the United States. In November 2007, Tesco opened 100
Fresh & Easy Neighborhood Market stores in the Phoenix, Los Angeles,
San Diego and Las Vegas metropolitan areas.

Meticulous research and the ability to understand customers at a

local level, then tailor offerings accordingly. For the Fresh & Easy
concept, a team of executives and researchers spent two weeks living in
the homes of 60 American families so that the company could fine-tune
the new stores and innovate according to a deep understanding of the
target segment.

Woolworths Australia, like Tesco, has a multi-pronged growth

strategy. The retailer is expanding its existing chains, making
acquisitions, boosting its presence in New Zealand and establishing a
consumer electronics joint venture in India not counting its push into
the liquor store business.

19

Best Buy is another retailer driving a relentless growth agenda that

includes the acquisition in 2006 of Five Star, the third largest appliance
and consumer electronic retailer in China. Like Tesco, the expansion is
being undertaken with the customer at heart, and the company is testing
different operating models aimed at improving customer experience and
ensuring a local touch from an international player.
The company has also developed a strong online presence that is
tightly integrated with their bricks and mortar operations. Best Buy notes
on their corporate website that they invested in the required technology
to allow our customers to define how they did business with us-not the
other way around. This customer-centric approach has steered the
development of a robust multi-channel interface, with purchasing
available in store, online or through call centers.
The environment and the increasingly individualized store
experience, growth and diversification of formats. Clearly these are all
areas that will impact retailing through the next decade and beyond.
Contemplating this increasingly complex, hyper-competitive world, it is
somewhat comforting to note that one thing will never change in retail:
Companies that can react swiftly to market trends and respond relevantly
to new customer behaviors will achieve high performance and growth
despite marketplace conditions.
Review Questions:
1. What is strategic planning and how it helps retailing in adjusting to
future challenges?
2. Define retailing environment and how you prepare SWOT?
3. What is green retailing? Discuss with examples
4. Information technology plays a key role in future retailing? Explain
5. Service of customers is the new challenge that remains to be
handled with creative minds? Elaborate with examples.

20

Chapter III
Retail Location
3.1 Retail Location Strategies
The strategy to choose to locate the retail business will have a major
impact on everything the shop does. The difference between selecting the
wrong location and the right site could be the difference between business
failure and success.
Before choosing a retail store location, define the business, both
now and in the future.
1. What the customers look like?
2. How the buildings look?
3. What is to be soldMerchandize variety
4. How to create an image for the store
5. Decision regards to planning the retail space, storage area, or
the size of the office?

Without the answers to these basic questions, it will be hard to find the
perfect location for generating the maximum amount of profit for the
retail store.
It requires extensive decision making due to the number of factors
considered. The factors include the following
1. Population size and traits
2. The competition
3. Transportation access
4. Parking availability
5. The nature of nearby stores
6. Property costs

7. The length of the agreement

21

8. Legal restrictions

Retailers should follow these two steps in choosing a store

location:
1. Evaluate the chance of alternate geographic (trading) areas in
terms of the characteristics of residents (consumers) and existing retailers
(competition)
2. Determine whether to locate as an isolated store, in an
unplanned business district, or in a planned shopping center within
the geographic area.
1. An isolated store is freestanding, not adjacent to other stores. It
has no competition, low rent, flexibility, road visibility, easy parking, and
lower property costs. It also has a lack of traffic, no variety for shoppers,
no shared costs, and zoning restrictions
2. An unplanned business district is a shopping area with two or more
stores located together or nearby. Store composition is not based on
planning. There are four categories: central business district, secondary
business district, neighborhood business district, and string (A string is an
unplanned shopping area comprising a group of retail stores, often with
similar or compatible product lines, located along a street or highway).
An unplanned district generally has these favorable points: variety of
goods, services, and prices; access to public transit; nearness to
commercial and social facilities; and pedestrian traffic. Yet, its
shortcomings have led to the growth of the planned shopping center:
inadequate parking, older facilities, high rents and taxes
3. A planned shopping center is centrally owned or managed and well
balanced. It usually has one or more anchor stores and many smaller
stores. The planned center is popular, due to extensive goods and service
offerings, shared strategic planning and costs, attractive locations,
22

parking facilities. Negative aspects include operations inflexibility,

restrictions on merchandise carried, and anchor store domination. There
are three forms: regional, community, and neighborhood centers

3.2 Trading-Area Analysis

The first step in the choice of a retail location is to describe and evaluate
alternative trading areas and then decide on the most desirable one. A
trading area is a geographic area containing the customers of a particular
firm or group of firms for specific goods and services. A thorough
analysis of trading areas provides the retailer with these benefits:
1. Consumers demographic and socioeconomic characteristics are
uncovered.
2. The focus of promotional activities is ascertained.
3. A retailer learns whether the location of a proposed branch store will
service new customers or take away business from its own existing stores
in a chain or franchise in the nearby areas.
4. Chains anticipate whether competitors want to open nearby stores if
the firm does not expand there itself.
5. The best number of stores that can be operated in future by a chain
retailer in a geographic region can be calculated.
6. Financial institutions, transportation, labor availability, supplier
location, legal restrictions, etc can be examined
7. Size and Shape of Trading Areas: Each trading area consists of three
parts: primary (50 to 80 percent of customers), secondary (15 to 25
percent of customers), and fringe (all remaining customers). The primary
trading area is the area closest to the store and possesses the highest
density of customers. The secondary trading area is located outside the

23

primary area, and customers are more widely dispersed. The fringe area
has the most dispersed customers.
8. The most important criteria should be viewed as knockout factors: If
a location does not meet minimum standards on key measures, it should
be immediately dropped from further consideration.
3.3 Type of Goods of goods sold: Examine what kind of products are to
be made available for sale in the proposed store. The type of goods sold
also decides on the type of store; a convenience store, a specialty shop or
a shopping store?
Convenience goods require easy access, allowing the customer to quickly
make a purchase. A mall would not be a good location for convenience
goods. This product type is lower priced and purchased by a wide range
of customers.
Specialty goods are more unique than most products and customers
generally won't mind travelling out of the way to purchase this type of
product. This type of store may also do well near other shopping stores.
A shopping store usually sells items at a higher price which are bought
infrequently by the customer. Furniture, cars and upscale clothing are
examples of goods found at a shopping store. Because the prices of these
items are higher, this type of customer will want to compare prices before
making a purchase. Therefore, retailers will do well to locate their store
near like-wise stores.
3.4 Accessibility, Visibility and Traffic
A lot of traffic is not a lot of customers. Retailers want to be located
where there are many shoppers but only if that shopper meets the

24

definition of their target market; 1. Similar products are sold so that the
customers can find alternative shops for their purchases. 2. Small retail
stores may benefit from the traffic of nearby larger stores.
The following questions to be answered regard to accessibility of a store:
1. How many people walk or drive past the location.
2. Is the area served by public transportation?
3. Can customers and delivery trucks easily get in and
out of the parking lot?
4. Is there adequate parking?
Depending on the type of business, it would be wise to have somewhere
between 5 to 8 parking spaces per 1,000 square feet of retail space. When
considering visibility, look at the location from the customer's view point.
The store and the signage board have to be clearly visible to the
customers/traffic from a reasonable distance. In many cases, the better
visibility the retail store has, the less advertising needed. A specialty
retail store located six miles out of town in a free standing building will
need more marketing than a shopping store located in a mall.
3.5 Agreement and Planning
Before signing a lease, be sure you understand all the rules, policies and
procedures related to the retail store location. Contact the local city hall
and zoning commission for information on regulations regarding
agreement. Ask about any restrictions that may affect the retail operation
and any future planning that could change traffic, such as highway
construction, etc.
3.6 Competition and Neighbours

25

Other area businesses in the proposed location can actually help or hurt
the retail shop. Determine if the types of businesses nearby are
compatible to the business of the proposed store. For example, a high-end
fashion boutique may not be successful next door to a discount variety
store. Place it next to a nail or hair salon and it may do much more
business.
3.7 Location Costs
Besides the base rent, consider all costs involved when choosing a retail
store location.
1. Expenses such as lawn care, building maintenance, utilities and
security and repairs and maintenance of common facilities.
2. If the location is remote, how much additional marketing costs are
needed to communicate to the public
3. The amount of property taxes
It is difficult to estimate sales on a new business, but one way to get help
in determining how much rent you can pay is to find out what sales
similar retail businesses are making and how much rent they're paying.
3.8 Special Considerations
Make a list of any unique characteristic of your business that may need to
be addressed.
a) Will the store require special lighting, fixtures or other hardware
installed?
b) Are restrooms for staff and customers available?
c) Is there adequate fire and police protection for the area?
d) Does the parking lot and building exterior have adequate lighting?
e) Does the building have a canopy that provides shelter if raining?
26

f) What is the crime rate in the area?

Review Questions:
1. List the factors to consider in deciding a store location?
2. What is an isolated store, unplanned district and planned shopping
centre? List the benefits and problems of each choice.
3. What is a trading area analysis and how you analyse the trading
area for a super market?
4. The type of goods sold also decides the location of a retailer?
Discuss
5. Do you think visibility and accessibility are important for a
retailer? Explain

27

Slide 1

___________________________________
___________________________________

Trading-Area
Analysis

___________________________________

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1

___________________________________
___________________________________
___________________________________
___________________________________

Slide 2

___________________________________

9-2

Chap te r Ob je ctive s
___________________________________
To

de m ons trate the im portanc e of s tore loc ation for

a re taile r and to outline the proc e s s of c hoos ing a
s tore loc ation

To

dis c us s the c onc e pt of a trading -are a and its

re late d c om pone nts
s how how trading -are as m ay be de line ate d for
e xis ting and ne w s tore s

___________________________________
___________________________________

To

e xam ine thre e m ajor fac tors : population

c harac te ris tic s, e c onom ic bas e c harac te ris tic s, and
c om pe tition/ le ve l of s aturation

___________________________________

To

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2

___________________________________
Slide 3

___________________________________
9-3

Location, Location, Location

Crite ria to c ons ide r inc lude

population s ize and traits

c om pe tition
trans portation ac c e s s
park ing availability
nature of ne arby s tore s
prope rty c os ts
le ng th of ag re e m e nt
le g al re s tric tions
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___________________________________
___________________________________
___________________________________
___________________________________
3

___________________________________

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Slide 4

___________________________________

9-4

Choosing a Store Location

___________________________________
Step 1: Evaluate alternate geographic (trading)
areas in terms of residents and existing retailers

___________________________________

Step 2: Determine whether to locate as an

isolated store or in a planned shopping center

___________________________________

Step 3: Select the location type

___________________________________

Step 4: Analyze alternate sites contained in the

specific retail location type

___________________________________
___________________________________

Slide 5

9-5

___________________________________

Trad ing -Are a Analysis

___________________________________
A trading -are a is a ge og raphic are a
c ontaining the c us tom e rs of a

___________________________________

partic ular firm or g roup of firm s for

s pe c ific goods or s e rvic e s.

___________________________________
___________________________________

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___________________________________

Slide 6

9-6

___________________________________

Be ne fits of Trading -Are a Analys is

Dis c ove ry

of
c ons um e r
de m og raphic s and
s oc ioe c onom ic
c harac te ris tic s

Opportunity

to
de te rm ine foc us of
prom otional ac tivitie s

Opportunity

to vie w
m e dia c ove rage
patte rns

___________________________________

As s e s s m e nt of

e ffe c ts of
trading are a ove rlap

As c e rtain

whe the r
c hains c om pe titors will
ope n ne arby

___________________________________

Dis c ove ry

___________________________________

Re vie w

___________________________________

of ide al
num be r of outle ts,
ge og raphic we akne s s e s
of othe r is s ue s
(e.g. trans portation)

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___________________________________

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Slide 7

+ De s tination Ve rs us Paras ite

Store s
De stination

store s
have a be tte r
as s ortm e nt,
prom otion, and
im ag e .

ge ne rate
trading -are as m uc h
larg e r than
c om pe titors.
Its worth the trip !

store s do not
c re ate the ir own
traffic and have no
re al trading -are a of
the ir own.

___________________________________

The s e

s tore s de pe nd
on pe ople who are
drawn to are a for
othe r re as ons .

Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

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___________________________________

Parasite

The y

Dunkin Donuts :

9-7

___________________________________
___________________________________
___________________________________

___________________________________
Slide 8

9-8

Trading Are as and Store Type s

Largest

___________________________________
___________________________________

Department stores

___________________________________

Supermarkets
TRADING
AREAS

___________________________________

Apparel stores

Gift stores
Smallest

___________________________________

Convenience stores

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___________________________________

Slide 9

___________________________________

9-9

The Trading -Are a of a Ne w Store

___________________________________
Diffe re nt tools must b e use d whe n an are a is
evaluate d in te rms of op p ortunitie s rathe r
than curre nt p atronage and traffic p atte rns: ___________________________________
Tre nd analysis
Consume r surveys
___________________________________
Comp ute rize d trad ing -are a analysis mod e ls

___________________________________
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Slide 10

___________________________________

9-10

Com pute rize d Trading -Are a

Analys is Mode ls

___________________________________

Analog Model

___________________________________

Regression Model

___________________________________
___________________________________

Gravity Model

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___________________________________
Slide 11

+ Chie f Factors to Consid e r in Evaluating Re tail

9-11

Trad ing -Are as

___________________________________

Population Size and Characteristics

Total
Ag e

s ize and de ns ity

Total

dis pos able

inc om e

dis tribution

Ave rag e

e duc ational

Pe r-c apita

Pe rc e ntag e

of
re s ide nts owning
hom e s

___________________________________

dis pos able

inc om e

le ve l

___________________________________

___________________________________

Oc c upation

dis tribution

___________________________________

Tre nds

___________________________________
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___________________________________
Slide 12

9-12

Chief Factors to Consider in Evaluating

Retail Trading-Areas

___________________________________
___________________________________
___________________________________

Availability of Labor
Managem ent

___________________________________

Managem ent trainees

___________________________________

Clerical

___________________________________

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31

Slide 13

___________________________________

9-13

Chie f Factors to Consid e r in Evaluating

Re tail Trad ing -Are as

___________________________________

Closeness to Sources of Supply

De live ry

c os ts

___________________________________

Num be r of

whole s ale rs

Tim e line s s

Availability

Num be r of

___________________________________

of produc t

line s

m anufac ture rs

Re liability

___________________________________

of produc t

line s

___________________________________
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___________________________________
Slide 14

9-14

Chief Factors to Consider in Evaluating

Retail Trading-Areas

___________________________________
___________________________________
___________________________________

Economic Base
Dom inant industry

from
econom ic and
seasonal fluctuations

Extent of

diversification
Growth

___________________________________

Freedom

___________________________________

Availability

of credit
and financial
facilities

projections

___________________________________
___________________________________

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14

9-15

Chief Factors to Consider in Evaluating

Retail Trading -Areas

___________________________________
___________________________________

Competitive Situation
Num ber and

size of
existing com petition

Evaluation

of
com petitor strengths
and weaknesses

Short- and

long -run

___________________________________

outlook
Level

___________________________________

of saturation

___________________________________
___________________________________

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___________________________________

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Slide 16

9-16

Chie f Factors to Consid e r in Evaluating

Re tail Trad ing -Are as

___________________________________

Availability of Store Locations

Num be r

and type of
s tore loc ations

Owning

Ac c e s s

Zoning

to
trans portation

___________________________________

___________________________________

ve rs us
le as ing opportunitie s

___________________________________

re s tric tions

Cos ts

___________________________________
___________________________________

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16

___________________________________
Slide 17

___________________________________

9-17

Chie f Factors to Consid e r in Evaluating

Re tail Trad ing -Are as
Regulations
Taxe s

Minim um

Lic e ns ing

Zoning

___________________________________
___________________________________

wage s

___________________________________

Ope rations

___________________________________
___________________________________
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___________________________________
Slide 18

___________________________________
9-18

Ele m e nts in Trading -Are a

Se le c tion

___________________________________
___________________________________

Population
Characteristics

Economic Base
Characteristics

Nature and Saturation

of Competition

___________________________________
___________________________________
___________________________________

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___________________________________

33

Chapter IV
Retail Marketing Mix
4.1Retail Product:
Whether company manufactures or buys products wholesale, it has to
have a product marketing strategy to get its products into consumers'
hands. Most product marketing strategies begin with an idea or concept,
then move into various stages of development that can include market
testing, setting pricing, training a sales force and executing promotion.
The product marketing strategy is the job of every department in a
corporation from engineering and design to distribution and sales.
However, if a business is to be classed as a retailer, its core
activity, which accounts for almost all of its total revenue has to come
from selling finished products or providing personal services to the final
consumer. Most retailers do not engage in any other primary business
activity, and so the collection of products that they offer to their
customers determines the nature of the business and influences all other
aspects of their business strategy.
4.1.1 Designing a Product Strategy:
1. Target Market: One of the key components of a product marketing
strategy is selecting a target market. The target market is usually a
specific demographic group that can be defined by a certain age range,
socioeconomic status or income. For example, the target market for
fashion products is teen age boys and girls. One has to see the number of
consumers of each category that are visiting the stores and decide on the
product strategy.

34

2. Strategy Decisions: The product marketing process then typically

moves through a series of decisions that must be made, often with the
help of market research or focus groups. These decisions include profit
goals, pricing, distribution and methods of promotion, such as
advertising, coupons and public relations.
3. Benefits: The benefits of a well-planned product marketing strategy
include greater sales and profits. Companies that target the right
customers and offer products at an acceptable price will usually profit
more than companies that do things unplanned. A company will also be
more successful with its product marketing strategy if it markets using
right advertising and promotions that reach its target market.
4. PLC Stage (Product Life Cycle): Retailers must also account for the
life cycle of the products when developing the product marketing
strategy. A product life cycle includes the introduction, growth, maturity
and decline stages of a product. Sales for a new product, if accepted by
consumers will typically improve the first few years until more
competitors enter the market. Over time, sales will level off and decline.
Retailers while deciding on the product mix have to seriously study the
PLC stages of various products. For example now tablets and smart
phones are more preferred than mobile phones. Hence, while planning the
products, care has to be taken to order those products which are in growth
stage.
5. Branding Retail Products: As a business owner, you may choose to
sell your own retail products rather than the retail products of more
established companies. This strategy requires you to brand your products
to generate interest among consumers. Branding is a retail marketing
strategy that seeks to attach an emotion or perception to the products. For
example, technology company Apple's branding strategy generates the
35

belief that its retail products are the most innovative in the field, creating
a high demand for its products at the product release date. Branding
products requires using multiple marketing outlets, including radio,
television and social media.
6. Co-Pack Retail Strategy: A co-pack retail strategy occurs when one
choose to sell another company's retail products in business. This allows
using another company's already established product brands to help
generate sales. It eliminates the marketing work of generating product
interest since the other company has already done that. Selling another
company's retail products can be useful in the early days of business to
help generate quick revenue and sustain profitability. You can use this
revenue to slowly begin the process of introducing your own retail
products.
7. Introducing New Products: New retail products often have higher
prices than those products already for sale in the market. When the
business decides to introduce a new product, its initial price may affect
consumer perception of and could drive away potential customers for
other product lines. Being sensitive to the demand of higher and lower
priced products can help business generate sales and consumer interest.
Introducing new products at a lower price can encourage consumers using
lower end products to switch to higher end brands. Once consumers are
using higher end products, there's a decreased chance that they will
switch back to lower end merchandise

36

4.2 Product Inventory Management:

The retail industry can be extremely competitive and one of the biggest
challenges is managing a stores retail inventory. Businesses need to have
space to store a wide number of products along with a wide variety. If a
retail store does not carry enough of a product, then they are losing
potential customers who will shop elsewhere. Retail inventory is different
from other forms of inventory because of the quantities needed. Retail
chains need warehouses to keep all of their stock and the means to
transport it to their stores. Keeping up with such large quantities can be
difficult for anyone, even with the help of an automated system. To track
a companys products, information technology based retail inventory
management system needs to be successfully implemented.
Merchandising is any practice which contributes to the sale of products
to a retail consumer. At a retail in-store level, merchandising refers to the
variety of products available for sale and the display of those products in
such a way that it stimulates interest and entices customers to make a
purchase.

4.2.2: Nature of Retail Inventory Management:

Retail inventory management is the process and methods used to keep

track of the stock in a retail business. These methods control everything
from ordering, shipping, receiving, tracking inventory, retail turn-over,
and storage.
1. Retail inventory management can help keep a business profits at a
steady margin as well as reducing theft and loss of inventory.

37

Many retail businesses lose money every year because they do not
have a successful inventory management system in place.
2. The process is aimed to Track and manage the entire inventory for
the business and includes, products, supplies, equipment and
spares.
3. It evaluates the performance for productssales and profitability.
Reports can be generated on the sales of product categories on
weekly, monthly and quarterly basis to compare with other product
categories that will help understand the profitability of each
category.
4. It also allows one retail branch to compare with other branches.
5. The process is aimed to plan the inventory levels and facilitate
ordering systems using several control mechanisms.
6. Managing retail inventory involves several characteristics and
steps. One of the most important steps is to make sure that you
always remove products from the system as soon as they are sold.
The same is true for receiving shipments of new stock. Make sure
you record it as quickly as possible.
7. Physical inspections should be regularly performed to make sure
the computerized system is accurate with what is actually in stock.
A physical inspection involves manually looking over the stock to
see that they numbers match.
8. Review sales reports weekly. You want to do this to see what is
selling and what is not. Products that spend more time on the shelf
should be re-evaluated or discounted to get rid of them.

38

4.2.3 Inventory Management Tools: Most businesses use some form of

computer software to manage their inventory. Unless the retail business is
very small, doing it manually would be very impractical, especially for
large companies that deal in thousands of individual products.

When dealing with retail inventory management, companies will utilize

one of these systems:

Point-of-sale terminals These are check-out points that

automatically update a companys inventory levels.

Job costing and inventory systems Another automatic

system that updates computerized levels of inventory.

Barcodes and readers Every product these days contains a

barcode with the items information. Barcodes makes it easy
and quick track stock.

Electronic Supplier Product catalogs This system can

update inventory levels automatically through either the
internet or media disk.

A distribution center for a set of products is a warehouse or other

specialized building, often with refrigeration or air conditioning, which is
stocked with products to be re-distributed to retailers, to wholesalers or
directly to consumers. It can be a warehouse that Stores goods including
raw materials, components, or finished goods.

39

Cross-docking is a practice of unloading materials from an incoming

truck or rail-car and loading these materials directly into outbound trucks,
with little or no storage in between. This may be done to change type of
conveyance, to sort material intended for different destinations, or to
combine material from different origins into transport vehicles (or
containers) with the same, or similar destination. This practice is
developed by Wal-Mart the world's leading chain stores.
Keeping up with retail inventory management should be delegated to
several individuals or a department. Supermarkets that have both grocery
and non-grocery items have separate departments for each. By delegating
inventory into smaller groups, it allows the individuals in charge of their
group to have a better understanding of what stock is available and how
well it sells.

4.2.4: Managing Theft and Loss

One of the biggest problems in retail inventory is theft and loss of retail
products. Every time this happens, it adds up to the costs of the business.

40

Preventing inventory theft can be difficult. But with the right system, one
can definitely reduce it:

Do not share or hand out the same password for every

cashier. Having separate passwords and log-ins tells who
was manning the register at certain times.

Always check out any transactions that were canceled. This

is a common way for inventory to disappear from a store.

Set up a password-protected security on all computers and

systems. Only when employees absolutely must have access
should it be granted.

Go over inventory reports every day to make sure sales

figures match with the current quantities.

Make sure the back door has a security alarm system that is
activated

every

time

the

door

is

opened

without

authorization. If employees know the door should not be

opened without permission, they shouldnt open it.

Inspect the garbage every night before it goes out. Use clear
plastic bags so that you can easily see inside the bag and
make sure there is no inventory hidden inside.

Set up security cameras not only in the store but in the back
storage as well. This allows you to keep an eye on items out
on the racks as well as in stock

4.3 Retail Pricing:

There are many outside influences that affect profitability and a retailer's
bottom line. Setting the right price is a crucial step toward achieving that
profit. Retailers are in business to make a profit, but figuring out what
and how to price products may not come easily. Which retail pricing
41

strategy to use in setting the right price, one must know the costs
associated with the products. Two key elements in factoring product cost
is the cost of goods and the amount of operating expense.
a. The cost of goods includes the amount paid for the product, plus
any shipping or handling expenses.
b. The costs of operating the business, or operating expense, include
overhead, payroll, marketing and office supplies.
Regardless of the pricing strategy used, the retail price of the products
should more than cover the cost of obtaining the goods plus the expenses
related to operating the business. A retailer simply cannot succeed in
business if they continue to sell their products below cost.
4.3.1 Retail Pricing Strategies
Once it is understood what the products actually cost, one can look at
how the competition is pricing their products. Retailers will also need to
examine their channels of distribution and research what the market is
willing to pay. Many pricing strategies exist and each is used based on
particular a set of circumstances. Value-based pricing (VBP) is the most
highly recommended pricing technique by consultants and academics.
The basic concept is setting a price to capture the majority of what
customers are willing to pay.
The more popular pricing strategies to consider are listed below:
1. Mark-up Pricing: Markup on cost can be calculated by adding a
pre-set (often industry standard) profit margin, or percentage, to the
cost of the merchandise. Be sure to keep the initial mark-up high
42

enough to cover price reductions, discounts, shrinkage and other

anticipated expenses, and still achieve a satisfactory profit.
Retailers with a varied product selection can use different mark-ups
on each product line.
2. Vendor Pricing: Manufacturer suggested retail price (MSRP)
is a common strategy used by the smaller retail shops to avoid
price wars and still maintain a decent profit. Some suppliers have
minimum advertised prices but also suggest the retail pricing. By
pricing products with the suggested retail prices supplied by the
vendor, the retailer is out of the decision-making process. Another
issue with using pre-set prices is that it doesn't allow a retailer to
have an advantage over the competition as all are expected to sell
at the given price.
3. Competitive Pricing: Consumers have many choices and are
generally willing to shop around to receive the best price. Retailers
considering a competitive pricing strategy will need to provide
outstanding customer service to stand above the competition.
a. Pricing below competition simply means pricing products
lower than the competitor's price. This strategy works well if
the retailer negotiates the best prices, reduces costs and
develops a marketing strategy to focus on price specials.
b. Prestige pricing, or pricing above competition, may be
considered when location, exclusivity or unique customer
service can justify higher prices. Retailers that stock highquality merchandise that is not available at any other

43

location may be quite successful in pricing their products

above competitors.
4. Psychological Pricing: Psychological pricing is used when prices
are set to a certain level where the consumer perceives the price to
be fair. The most common method is odd-pricing using figures that
end in 5, 7 or 9. It is believed that consumers tend to round down a
price of OR 9.95 to 9, rather than OR 10.
5. Other Pricing Strategies
a) Multiple pricing is a method which involves selling more than one
product for one price, such as three items for OR 10.00. Not only is
this strategy great for markdowns or sales events, but retailers have
noticed consumers tend to purchase in larger amounts where the
multiple pricing strategy is used.
b) Discount pricing and price reductions are a natural part of
retailing. Discounting can include coupons, rebates, seasonal prices
and other promotional markdownsmark down is to reduce the
profit margin and pass it to the consumer. The term markdown
does not apply unless the price is dropped below the original
selling price.
c) Merchandise priced below cost is referred to as loss leader
pricing. Although retailers make no profit on these discounted
items, the hope is consumers will purchase other products at higher
margins during their visit to the store.

44

As a retailer develops the best pricing model for the retail business,
understand that the ideal pricing strategy will depend on more than costs.
It is difficult to say which component of pricing is more important than
another. Just keep in mind, the right product price is the price the
consumer is willing to pay, while providing a profit to the retailer.
4.4 Planning a Retail Promotional Strategy
Promotion is one of the marketing mix elements that aim to communicate
and motivate the consumer to buy the product. Retail promotion strategy
is aimed to encourage the consumer to visit the store and buy the
merchandise.
Promotional Objectives: The following are the objectives of promotion:
1. Increase sales
2. Stimulate impulse and reminder buying
3. Raise customer traffic
4. Get leads for sales personnel-market feedback to plan future
orders
5. Reinforce the retailer image
6. Inform customers about goods and services
7. Popularize new stores and Web sites
8. Enhance customer relations
9. Maintain customer loyalty
10.Have consumers pass along positive information to friends
and others
4.4.1 Promotion Mix: The following are various types of promotion
available to retailer in order to achieve the objectives.
1. Publicity: Publicity Any non-personal form of public relations
whereby messages are transmitted through mass media, the time or space

45

provided by the media is not paid for, and there is no identified

commercial sponsor
Advantages
a)

Image can be presented or enhanced

b)

More credible source

c)

No costs for messages time or space

d)

Mass audience addressed

e)

People pay more attention than to clearly identified

advertisements

Disadvantages
a)

Some retailers do not believe in spending on image-related

communication

b)

Little control over publicity message

c)

More suitable for short run

d)

Costs for PR staff, planning activities, and events to be

considered

2. Advertising: It is a Paid, non-personal communication transmitted

through out-of-store mass media by an identified sponsor

Advantages

Attracts a large audience

Gains pass along readership (for print)

Many alternatives available-media, TV, Radio and OutdoorBoards

Control over message content; message can be standardized

Message study and evaluation possible

Disadvantages

Standardized messages lack flexibility

46

Media may require large investments

Geographic flexibility limited

Some media have high throwaway rate

Sometimes media limit the ability to provide detailed

information

3. Personal Selling: Oral communication with one or more prospective

customers for the purpose of making a sale
Advantages

Message can be adapted

Many ways to meet customer needs

High attention span

Less waste

Better response

Immediate feedback

Disadvantages

Limited number of customers handled at one time

High costs

Does not get customer in store-it is done at customer

premises

Negative attitudes toward salespeople (aggressive,

unhelpful)

4. Sales Promotion: Encompasses the paid communication activities

other than advertising, public relations, and personal selling that stimulate
consumer purchases and dealer effectiveness

Advantages

Eye-catching appeal
47

Distinctive themes and tools

Additional value for customer

Draws customer traffic

Maintains customer loyalty

Increases impulse purchases

Disadvantages

Difficult to terminate

Possible damage to retailers image

More stress on frivolous selling points

Short-term effects only

Used as a supplement

Review Questions:

1. What are the required areas to be noted for designing a retail

product strategy?
2. The retail industry can be extremely competitive and one of the
biggest challenges is managing a stores retail inventoryWhat is
the nature of retail inventory
3. Explain in detail the inventory management tools
4. One of the biggest problems in retail inventory is theft and loss of
retail products-Discuss
5. Explain in detail the various types of retail pricing options
available
6. Compare and analyse the advantages and disadvantages of
publicity and advertising as promotion tools
7. What is a sales promotion? What are the advantages and
disadvantages?

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Chapter V
Store Layout & Design
5.1 Store Layout Designs:
A Well-planned retail store layout allows a retailer to maximize the sales
for each square foot of the allocated selling space within the store. Store
layouts generally show the size and location of each department, any
permanent structures, fixture locations and customer traffic patterns.
Each floor plan and store layout will depend on the type of products sold,
the building location and how much the business can afford to put into
the overall store design.
1.

The straight floor plan is an excellent store layout for most any
type of retail store. It makes use of the walls and fixtures to create
small spaces within the retail store. The straight floor plan is one of
the most economical store designs

2.

The diagonal floor plan is a good store layout for self-service

types of retail stores. It offers excellent visibility for cashiers and
customers. The diagonal floor plan invites movement and traffic
flow to the retail store.

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3.

The angular floor plan is best used for high-end specialty stores.
The curves and angles of fixtures and walls makes for a more
expensive store design. However, the soft angles create better
traffic flow throughout the retail store.

4.

The mixed floor plan incorporates the straight, diagonal and

angular floor plans to create the most functional store design. The
layout moves traffic towards the walls and back of the store.

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5.

The geometric floor plan is a suitable store design for clothing

and apparel shops. It uses racks and fixtures to create an interesting
and out-of-the-ordinary type of store design without a high cost.

5.2 Store Atmosphere/Atmospherics: The physical characteristics and

surrounding influence of a retail store that is used to create an image in
order to attract customers

Ten ways the store can attract customers:

1. In this era of technology, there is no excuse for displaying
handwritten signage. It is too simple to print a sign from our
computers or use pre-printed signs. Printed signs simply look more
professional and signs with hard-to-read handwriting can be a
customer turn-off.
2. Consumers like a selection but not if it means sacrificing comfort
while shopping. Be sure your store is designed to allow adequate
space between aisles and keep walkways free of merchandise.
Cramped spaces can ruin a shopping experience and turn off a
customer.
3. Retail store restrooms should always be sparkling clean, whether
they are open for public use or not. Make sure to stock the
bathrooms with plenty of paper products, soap, trash receptacles
and clean it daily.

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4. Keeping the dressing room area free of discarded hangers, tags

and empty packaging goes beyond creating a neat store
appearance, it is also a good step towards loss prevention. Take a
quick look for out of place items after each customer uses the
dressing room.
5. Playing music in a retail store can help create a certain atmosphere
for our shoppers. Music that is too loud, inappropriate or of poor
quality can run a positive shopping experience.
6. Dirty carpet, stained flooring and ugly ceiling tiles can turn off
many shoppers. Sweeping, vacuuming and mopping should be
done on a regular basis. Consider hiring a professional cleaning
crew to polish tile floors. Replace stained portions of carpet and
ceiling tiles where possible
7. Replace any burned out light bulbs as soon as possible. Make sure
all customer areas of the store have ample lighting and take into
consideration shoppers with aging or less than perfect eyesight.
The store should be well illuminated for all customers.
8. Certain odors-perfumes-sprays are understandable and may even
appeal to the customer's sense of smell, avoid bad smell at all
times.
9. POSThis particular area where a customer's financial transaction
is taking place should not show any signs of disorganization
10.Be sure to have an adequate supply of shopping carts or baskets
on hand.

5.3 Store Fixtures & Displays

To attract and keep the attention of shoppers is to create an environment

that is conducive to shopping. One key way to do that is to use
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interchangeable store fixtures and retail display systems to keep the store
interesting and appealing. The following are the features of a good design
of store fixtures:
Win customers by using retail display systems that are customer
friendly: in other words, harness the powerful psychology of
shopping.
In fact, a great number of people consider shopping a relaxing
leisure activity or even their hobby.
Retailers in general have an eager audience that is ready and
willing to buy its products but, they also have significant
competition and so they must win the attention of their potential
customers.
Do not use out of fashion or out of model store fixtures to capture
the attention of today's shoppers
Choose retail displays and fixtures that are uniquely suited to target
market.
Design space using retail display systems that make it easy for
customers to keep shopping.

5.3.1 Creating Attractive Display:

Creating an attractive product display can draw the customer in, promote
a slow-moving item, announce a sale, or welcome a season. If the store
front is having one or more windows, then it is the least expensive forms
of advertising.
Some stores located in a mall or other structure may lack windows;
then look for many places throughout the store to build beautiful displays.

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Take a look at the flow of traffic to the store. Are there any areas that are
a focal point for customers?
Find out from local community, there may be creative individuals
or visual merchandising companies one can hire to dress the windows.

5.3.2 Visual Display Tool Box

Before designing a product display, put together a visual display tool box
to keep on hand. By having all of these items in one location it will save
time in actually preparing the display like Scissors, Stapler, Two-Sided
Tape, and Pins.
Elements of Effective Visual Merchandising
Make sure all materials and location (tables, windows, racks) are
clean.
Choose a slow time of the day or build the display after shopping
hours.
Balance: Balance is important for arranging a display. All items
should be creatively visible to the customer.
Size of Objects: Place the largest object into display first.
Color: Helps set mood and feelings.
Focal Point: Where product and props/signage and background
come together.
Lighting: Should focus on the display at the main point, if
possible.
Simplicity: Less is more so know when to stop and don't add too
many items.
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Successful Store Display Strategy:

1. Once the display is finished, add appropriate signage.
2. Take photos of the display and keep record of the product
sales during the display's existence.
3. Save the information in a file folder for easy reference. By
documenting its success, one can re-create the display next
year or if it flops, one can make sure not to repeat the same
mistakes or modify the display.
4. Like any other aspect of retailing, creating an attractive
display takes a little imagination and lots of trial and error.
5. As store changes, so will opportunities for visual displays
will change.
6. Keep working at designing eye-catching and innovative ways
to make the retail store profitable through visual
merchandising.
Review Questions:
1. What is a store layout and explain any two forms of designing the
layout of the store
2. How to create good store atmospherics?
3. What are the important features of store fixtures?
4. List the points to study to have successful store display

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Slide 1

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Integrating and
Controlling the
Retail Strategy

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RETAIL
MANAGEMENT:
A STRATEGIC
APPROACH
11th Edition
BERMAN

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EVANS

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Slide 2

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Performance Measures
Total sales
Average sales per

store
Sales by goods/

service category
Sales per square foot
Gross margins
Gross margin return
on investment

Operating income
Inventory turnover
Markdown

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percentages
Employee turnover
Financial ratios

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Profitability

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Retail Mgt. 11e (c) 2010 Pearson Education, Inc. publishing as Prentice Hall

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Slide 3

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American Customer Satisfaction Index (ACSI)

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Are customer satisfaction and

evaluation of quality improving or

declining in the United States?

Are these attitudes improving or
declining for particular sectors of
industry and specific companies?

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Slide 4

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Utilizing Gap Analysis

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Slide 5

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Minimizing Gaps

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Customer insight
Customer profiling
Customer life cycle

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Extended business model

Relationship program planning and
design

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Implementation

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Slide 6

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Management Audit Form for Small Retailers

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Slide 7

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Management Audit Form for Small Retailers

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