Strategic Retail Management Downloaded / Adapted

Strategic Retail Management
This book is a part of the course by Jaipur National University, Jaipur.

This book contains the course content for Strategic Retail Management.
JNU, Jaipur
First Edition 2013
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JNU makes reasonable endeavours to ensure content is current and accurate. JNU reserves the right to alter the
content whenever the need arises, and to vary it at any time without prior notice.
Index
I. Content....................................................................... II
II. List of Figures........................................................VIII
III. List of Tables...........................................................IX
IV. Abbreviations........................................................... X
V. Case Study.............................................................. 162
VI. Bibliography.......................................................... 175
VII. Self Assessment Answers................................... 178
Book at a Glance
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Contents
Chapter I........................................................................................................................................................ 1
Retail Strategy............................................................................................................................................... 1
Aim................................................................................................................................................................. 1
Objectives....................................................................................................................................................... 1
Learning outcome........................................................................................................................................... 1
1.1 Introduction to Retailing........................................................................................................................... 2
1.2 Key Concepts Related to Retailing........................................................................................................... 2
1.3 The Importance of Retailing..................................................................................................................... 3
1.4 Types of Retail Operations . ..................................................................................................................... 4
1.5 Difference between Retailing and Wholesaling........................................................................................ 6
1.6 Parameters of Retailing............................................................................................................................. 6
1.7 Theories of Retail Evolution .................................................................................................................... 6
1.7.1 Environmental Theory.............................................................................................................. 8
1.7.2 Cyclical Theory......................................................................................................................... 8
1.7.3 Conflict Theory......................................................................................................................... 9
1.8 Retail Life Cycle....................................................................................................................................... 9
1.8.1 Innovation................................................................................................................................. 9
1.8.2 Accelerated Growth................................................................................................................ 10
1.8.3 Maturity.................................................................................................................................. 10
1.8.4 Decline.................................................................................................................................... 10
1.9 Retail Pricing ..........................................................................................................................................11
1.10 Food Retail Industry..............................................................................................................................11
1.10.1 Conventional Supermarkets . ............................................................................................... 12
1.10.2 Superstores............................................................................................................................ 12
1.10.3 Large Retail Formats............................................................................................................ 12
1.10.4 Convenience Stores............................................................................................................... 13
1.10.5 Hard Discounters.................................................................................................................. 13
1.10.6 Warehouse Clubs.................................................................................................................. 14
1.10.7 Non-Store Formats in Food Retailing................................................................................... 14
1.11 Future of Retailing................................................................................................................................ 15
Summary...................................................................................................................................................... 16
References.................................................................................................................................................... 16
Recommended Reading.............................................................................................................................. 17
Self Assessment............................................................................................................................................ 18
Chapter II ................................................................................................................................................... 20
Strategic Planning in Retailing.................................................................................................................. 20
Aim............................................................................................................................................................... 20
Objectives .................................................................................................................................................... 20
Learning outcome......................................................................................................................................... 20
2.1 Introduction............................................................................................................................................. 21
2.1.1 What is a Retail Strategy?....................................................................................................... 21
2.1.2 Definition of Retail Market Strategy...................................................................................... 21
2.1.3 Importance of Developing and Applying a Retail Strategy . ................................................. 21
2.2 Steps of Strategic Retail Planning Process............................................................................................. 22
2.2.1 Define Business Mission........................................................................................................ 22
2.2.2 Conduct a Situation Audit....................................................................................................... 23
2.3 Importance of Cost Effective Delivery of Planning .............................................................................. 27
2.4 Areas of Influence Determining Strategic Planning............................................................................... 27
2.5 Strategic Planning in Real World............................................................................................................ 31
Summary...................................................................................................................................................... 32
References.................................................................................................................................................... 33
Self Assessment............................................................................................................................................ 34
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Chapter III................................................................................................................................................... 36
e-Retailing: Indian and Global Environment........................................................................................... 36
Aim............................................................................................................................................................... 36
Objectives..................................................................................................................................................... 36
3.1 Introduction............................................................................................................................................. 37
3.2 Transition from Traditional Markets to e-Marketing.............................................................................. 37
3.3 Advantages and Disadvantages of e-Marketing...................................................................................... 38
3.4 E-Commerce and ICT............................................................................................................................. 39
3.5 Objectives of e-Marketing ..................................................................................................................... 40
3.6 The Effects of e-Mode of Marketing...................................................................................................... 40
3.7 E-Retailing: The Application Domain.................................................................................................... 41
3.8 Online Store Management...................................................................................................................... 42
3.9 Online Brand Management..................................................................................................................... 46
3.10 E-Tailing and Multi Channel Retailing................................................................................................. 48
3.11 E-Retailing: Across the Globe............................................................................................................... 54
3.11.1 Western European Retail Environment................................................................................. 55
3.11.2 Latin American Retail Environment..................................................................................... 56
Summary...................................................................................................................................................... 58
References.................................................................................................................................................... 59
Self Assessment............................................................................................................................................ 60
Chapter IV................................................................................................................................................... 62
Store Location............................................................................................................................................. 62
Aim............................................................................................................................................................... 62
Objectives..................................................................................................................................................... 62
4.1 Introduction............................................................................................................................................. 63
4.2 Importance of Location Decision in Retailing........................................................................................ 63
4.3 Assessing the Market Potential............................................................................................................... 64
4.3.1 Trade Area Analysis................................................................................................................ 64
4.3.2 Trading Area Overlap.............................................................................................................. 65
4.4 Site Identification and Selection............................................................................................................. 66
4.4.1 Traffic...................................................................................................................................... 66
4.4.2 Competition............................................................................................................................ 66
4.4.3 Buying / Leasing..................................................................................................................... 66
4.4.4 Product Mix............................................................................................................................ 66
4.4.5 Anticipated Profits ................................................................................................................. 66
4.4.6 Site Evaluation Check List..................................................................................................... 67
4.4.7 Different Types of Location Sites........................................................................................... 68
4.5 Retail Site Selection Process................................................................................................................... 69
4.5.1 Create a Target Customer Profile............................................................................................ 69
4.5.2 Create a Target Site Profile..................................................................................................... 70
4.5.3 Locate Target Customers and Market Keys............................................................................ 70
4.5.4 Identify Potential Sites within the Primary Trade Area.......................................................... 70
4.5.5 Rank the Potential Sites.......................................................................................................... 70
4.5.6 Analyse the Financial Data..................................................................................................... 71
4.5.7 Select the Best Site................................................................................................................. 71
4.6 Nature of Consumer Goods and Location Decision Area....................................................................... 71
4.6.1 Proximity Retailing................................................................................................................. 72
4.6.2 Destination Retailing.............................................................................................................. 72
4.6.3 Location Decision in Retailing- Issues .................................................................................. 72
4.7 Types of Retail Location......................................................................................................................... 73
4.7.1 Isolated Store.......................................................................................................................... 73
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4.7.2 Neighbourhood Stores............................................................................................................ 74
4.7.3 Shopping Centre..................................................................................................................... 75
4.7.4 Periodic Market....................................................................................................................... 76
4.8 Techniques for Location Assessment . ................................................................................................... 76
4.8.1 Judgemental Technique........................................................................................................... 76
4.8.2 Systematic Screening Technique............................................................................................ 76
4.8.3 Analogue Technique................................................................................................................ 77
4.8.4 Retail Saturation Coefficient.................................................................................................. 77
4.9 Retail Location Theories......................................................................................................................... 78
4.9.1 Quality and Distance Theory.................................................................................................. 78
4.9.2 Land Value Theory.................................................................................................................. 78
4.10 Retail Market Identification.................................................................................................................. 78
4.10.1 Spatial Interaction Model...................................................................................................... 78
4.10.2 Geo- demographic Marketing Approach.............................................................................. 79
Summary...................................................................................................................................................... 80
References.................................................................................................................................................... 81
Self Assessment............................................................................................................................................ 82
Chapter V ................................................................................................................................................... 84
Store Design and Layout............................................................................................................................ 84
Aim............................................................................................................................................................... 84
Objectives..................................................................................................................................................... 84
5.1 Designing................................................................................................................................................ 85
5.1.1 Store Design............................................................................................................................ 85
5.1.2 Store Front Design.................................................................................................................. 85
5.1.3 Interior Design........................................................................................................................ 85
5.1.4 Retail Identity......................................................................................................................... 86
5.1.5 Objectives of Good Floor Design........................................................................................... 86
5.2 Types of Design...................................................................................................................................... 86
5.2.1 Grid......................................................................................................................................... 86
5.2.2 Racetrack................................................................................................................................ 87
5.2.3 Free Form................................................................................................................................ 87
5.2.4 Herringbone Circulation......................................................................................................... 87
5.2.5 Size.......................................................................................................................................... 87
5.2.6 Construction and External Appearance................................................................................... 87
5.2.7 Entrances................................................................................................................................. 88
5.2.8 Balance and Symmetry........................................................................................................... 88
5.2.9 Signs........................................................................................................................................ 88
5.2.10 Interiors................................................................................................................................. 88
5.2.11 Building................................................................................................................................. 88
5.2.12 Displays................................................................................................................................ 89
5.3 Store Layout............................................................................................................................................ 89
5.4 Types of Store Layout............................................................................................................................. 89
5.4.1 Straight Floor Plan.................................................................................................................. 90
5.4.2 Diagonal Floor Plan................................................................................................................ 90
5.4.3 Angular Floor Plan.................................................................................................................. 90
5.4.4 Geometric Floor Plan.............................................................................................................. 91
5.4.5 Mixed Floor Plan.................................................................................................................... 91
5.5 Retail Lighting Layout............................................................................................................................ 92
5.5.1 Lighting Layouts..................................................................................................................... 92
5.5.2 Retail Lighting ....................................................................................................................... 93
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Summary...................................................................................................................................................... 95
References.................................................................................................................................................... 96
Self Assessment............................................................................................................................................ 97
Chapter VI................................................................................................................................................... 99
Pricing in Retailing..................................................................................................................................... 99
Aim............................................................................................................................................................... 99
Objectives..................................................................................................................................................... 99
6.1 Introduction........................................................................................................................................... 100
6.2 Retail Pricing Objectives...................................................................................................................... 101
6.3 Retail Pricing Approaches..................................................................................................................... 102
6.3.1 Discount Orientation............................................................................................................. 102
6.3.2 At-the-Market Orientation.................................................................................................... 102
6.3.3 Upscale Orientation.............................................................................................................. 102
6.4 Retail Pricing Strategies........................................................................................................................ 103
6.4.1 Every Day Low Pricing (EDLP) . ........................................................................................ 103
6.4.2 High Low Pricing.................................................................................................................. 103
6.4.3 Leader Pricing . .................................................................................................................... 104
6.4.4 Skimming Pricing ................................................................................................................ 104
6.4.5 Penetration Pricing . ............................................................................................................. 104
6.4.6 Price Lining ......................................................................................................................... 104
6.4.7 Psychological Pricing .......................................................................................................... 104
6.4.8 Multiple Unit Pricing ........................................................................................................... 105
6.4.9 Bundle Pricing ..................................................................................................................... 105
6.4.10 Pre-emptive Pricing ........................................................................................................... 105
6.4.11 Extinction Pricing .............................................................................................................. 105
6.4.12 Perceived-Value Pricing . ................................................................................................... 105
6.4.13 Demand-Oriented Pricing .................................................................................................. 106
6.4.14 Fixed and Variable Pricing . ............................................................................................... 106
6.4.15 Competitive Pricing ........................................................................................................... 106
6.4.16 Full Price Pricing................................................................................................................ 106
6.5 External Influences on Retail Pricing Strategies.................................................................................. 107
6.5.1 Customers ............................................................................................................................ 107
6.5.2 Suppliers .............................................................................................................................. 108
6.5.3 Competitors . ........................................................................................................................ 108
6.5.4 Government ......................................................................................................................... 109
6.6 Tactics for Fine Tuning of Base Price....................................................................................................110
6.6.1 Coupons ................................................................................................................................110
6.6.2 Rebates . ................................................................................................................................110
6.7 Setting Retail Prices...............................................................................................................................111
6.7.1 Mark Up . ..............................................................................................................................111
6.7.2 Markup and Margin ..............................................................................................................112
6.8 Methods for Setting Retail Prices..........................................................................................................113
6.8.1 Cost Based Method . .............................................................................................................113
6.8.2 Competition Based Method ..................................................................................................113
6.8.3 Demand Oriented Pricing .....................................................................................................113
6.9 Role of Price Elasticity and Sensitivity Consumer Responsiveness to Prices.......................................113
6.9.1 Price Elasticity ......................................................................................................................113
6.9.2 Price Sensitivity ....................................................................................................................113
Summary.....................................................................................................................................................115
References...................................................................................................................................................116
Recommended Reading.............................................................................................................................116
Self Assessment...........................................................................................................................................117
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Chapter VII ...............................................................................................................................................119
Information Technology in Retailing.......................................................................................................119
Aim..............................................................................................................................................................119
Objectives....................................................................................................................................................119
Learning outcome........................................................................................................................................119
7.1 Introduction........................................................................................................................................... 120
7.2 Involvement of IT in Retail Operations................................................................................................ 120
7.3 Application of IT in Retailing............................................................................................................... 121
7.3.1 Sourcing................................................................................................................................ 121
7.3.2 Stocking/Warehousing.......................................................................................................... 121
7.3.3 Limitations............................................................................................................................ 122
7.4 Factors Influencing Selection of Technology....................................................................................... 123
7.4.1 Need for Adoption of Technology........................................................................................ 123
7.4.2 Volume of Business ............................................................................................................. 123
7.4.3 Nature of Products Dealt With . ........................................................................................... 123
7.4.4 Availability of Financial Resources ..................................................................................... 123
7.5 Latest Trends in Technology for Retailing............................................................................................ 123
7.5.1 Electronic Retailing.............................................................................................................. 123
7.5.2 Interactive Projection Displays . .......................................................................................... 123
7.5.3 Attention Seeking Display Units ......................................................................................... 123
7.5.4 Vending Machines ............................................................................................................... 124
7.5.5 Handheld Computer Devices ............................................................................................... 124
7.5.6 Data Capture by POS............................................................................................................ 124
7.5.7 Coding Systems.................................................................................................................... 124
7.5.8 Database Marketing ............................................................................................................. 125
7.5.9 Business Data Communications .......................................................................................... 125
7.5.10 Retail Data Transaction Files . ........................................................................................... 126
7.5.11 Electronic Data Exchange (EDE) and E-Commerce ......................................................... 126
7.5.12 Radio Frequency Identification (RFID).............................................................................. 126
7.5.13 Retail Solutions . ................................................................................................................ 126
7.6 Precautions while Handling Technology in Retail................................................................................ 127
7.7 Future Trends in IT for Retailing.......................................................................................................... 127
Summary.................................................................................................................................................... 128
References.................................................................................................................................................. 129
Recommended Reading............................................................................................................................ 129
Self Assessment.......................................................................................................................................... 130
Chapter VIII . ........................................................................................................................................... 132

Mall Management..................................................................................................................................... 132
Aim............................................................................................................................................................. 132
Objectives................................................................................................................................................... 132
Learning outcome....................................................................................................................................... 132
8.1 Introduction........................................................................................................................................... 133
8.2 New Mall Breed.................................................................................................................................... 135
8.3 Key Success Factors for Malls.............................................................................................................. 136
8.3.1 Design .................................................................................................................................. 136
8.3.2 Tenant Mix............................................................................................................................ 137
8.3.3 Asset Management . ............................................................................................................. 137
8.4 Mall Design Process............................................................................................................................. 137
8.5 Design Issues for Shopping Centres..................................................................................................... 139
8.5.1 The Design Process . ............................................................................................................ 139
8.5.2 Feasibility Study................................................................................................................... 143
8.5.3 Architects.............................................................................................................................. 144
8.6 Shopping Mall Management................................................................................................................. 145
8.6.1 House Keeping Services....................................................................................................... 147
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8.6.2 Security Services................................................................................................................... 150
8.6.3 Fire Management.................................................................................................................. 153
8.6.4 Parking Management............................................................................................................ 155
8.6.5 HR Policies........................................................................................................................... 156
Summary.................................................................................................................................................... 158
References.................................................................................................................................................. 159
Recommended Reading............................................................................................................................ 159
Self Assessment.......................................................................................................................................... 160
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List of Figures
Fig. 1.1 Components of supply chain............................................................................................................. 3
Fig. 1.2 Types of retail operations................................................................................................................... 5
Fig. 1.3 Theories of retail................................................................................................................................ 7
Fig. 1.4 Cyclical theory................................................................................................................................... 9
Fig. 1.5 Retail life cycle.................................................................................................................................11
Fig. 2.1 Stages in the strategic planning process.......................................................................................... 22
Fig. 2.2 Elements in a situation audit............................................................................................................ 23
Fig. 2.3 Summary illustrating the diagnostic model..................................................................................... 30
Fig. 3.1 Online ordering procedure web-image............................................................................................ 44
Fig. 3.2 E-Retailing solutions....................................................................................................................... 46
Fig. 4.1 Types of trading areas...................................................................................................................... 65
Fig. 4.2 Overlapping of trade area................................................................................................................ 65
Fig. 5.1 Straight floor plan............................................................................................................................ 90
Fig. 5.2 Diagonal floor plan.......................................................................................................................... 90
Fig. 5.3 Angular floor plan............................................................................................................................ 91
Fig. 5.4 Geometric floor plan........................................................................................................................ 91
Fig. 5.5 Mixed floor plan.............................................................................................................................. 92
Fig. 6.1 Factors affecting retail price strategy............................................................................................ 109
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List of Tables
Table 2.1 Growth opportunities.................................................................................................................... 24
Table 2.2 Redefinition of the concerned mission.......................................................................................... 26
Table 2.3 Evaluating strategic opportunities................................................................................................. 26
Table 2.4 Basic description of the levels of organisational analysis............................................................. 29
Table 3.1 Advantages and disadvantages of e-retailing................................................................................ 38
Table 3.2 e-retailer and customer benefits.................................................................................................... 39
Table 3.3 The most shopped categories (genderwise).................................................................................. 44
Table 3.4 Advantages and disadvantages of e-tailing................................................................................... 51
Table 3.5 Multi-channel retailing - challenges and responses...................................................................... 53
Table 4.1 Comparison of various types of shopping centers........................................................................ 76
Table 6.1 Pricing approaches along with their complimentary retail mix strategies.................................. 103
Table 6.2 Pricing issues and store policies.................................................................................................. 107
Table 7.1 The 13 digit code by national association................................................................................... 124
Table 8.1 History of malls........................................................................................................................... 133
Table 8.2 Security deliverables................................................................................................................... 152
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Abbreviations
ASO - Automatic Security Operator
B2C - Business-to-Consumer
BKC - Bandra-Kurla Complex
BMS - Burner Management System
C2B - Customer to Business
C2C - Customer to Customer
CBD - Central Business District
CCTV - Closed Circuit Television
COGS - Cost of Goods Sold
CRI - Color Rendering Index
CRM - Customer Relationship Management
c-stores - Convenience Stores
EDE - Electronic Data Exchange
EDI - Electronic Data Interchange
EDLP - Every Day Low Price Strategy
EFTPOS - Electronic Funds Transfer At Point Of Sale
EPOS - Electronic Point-Of-Sale
ESELS - Electronic Shelf Edge Labels
F&B - Food and Beverage
GIS - Geographic Information System
HiLo - High Low pricing strategy
HO - Head Office
HVAC - Heating, Ventilation, and Air Conditioning
ICT - Information and Communication Technology
ISPs - Internet Service Providers
ITAA - Information Technology Association of America
KPI’s - Key Performance Indicators
MRP - Maximum Retail Price
MRTP - Monopolies and Restrictive Trade Practices
NGOs - Non-Government Organisations
P2P - Person 2 Person
PLC - Product Life Cycle
RFID - Radio Frequency Identification Technology
ROI - Rate of Interest
ROI - Return On Investment
SBDs - Secondary Business Districtls
SKUs - Store Keeping Units
SLA’s - Service Level Agreement
SWOT - Strengths, Weaknesses/Limitations, Opportunities, and Threats
WTO - World Trade Organisation
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Chapter I
Retail Strategy
Aim
The aim of this chapter is to:
• define the term ‘retail’
• highlight the importance of retailing
• identify various types of retail operations
Objectives
The objectives of this chapter are to:
• discuss the scope of ‘retail’
• explain the retail life cycle
• enlist the formats in food retailing
Learning outcome
At the end of this chapter, you will be able to:
• understand the meaning of ‘retail’
• differentiate between retailing and wholesaling
• identify the parameters of retailing
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1.1 Introduction to Retailing

The word ‘retail’ is derived from the French word ‘retailer’, meaning ‘to cut a piece off’ or ‘ to break bulk’. In
simple terms, it implies a first-hand transaction with the customer. Retailing can be defined as the buying and selling
of goods and services.
Retail involves the sale of goods from a single point (malls, markets, department stores etc) directly to the consumer
in small quantities for his end use. In a layman’s language, retailing is nothing but transaction of goods between
the seller and the end user as a single unit (piece) or in small quantities to satisfy the needs of the individual and
for his direct consumption.
Let us understand the concept with the help of an example.

Tim wanted to purchase a mobile handset. He went to the nearby store and purchased one for himself.
In the above case, Tim is the buyer who went to a fixed location (in this case the nearby store). He purchased a
mobile handset (Quantity - One) to be used by him.
The store from where Tim purchased the handset must have shown him several options for him to select one
according to his budget and need. From where do you think the store owner (also called the retailer) purchased all
the handsets? Here the manufacturers and the wholesalers come into the picture.
The retailers purchase goods in bulk quantities (huge numbers) to be sold to the end-users either directly from the
manufacturers or through a wholesaler.
Retailing is one of the world’s largest industries. It is in a permanent state of change, and the pace of this change
has been accelerating over the last decade. From the marketing perspective, retailers are, by definition, closer to
the consumer than manufacturing companies (Reynolds 2004b, p. 3). Retailers represent the culmination of the
marketing process and the contact point between consumers and manufactured products. While retailing has long
set buying decisions as its highest priority and was very focussed on the product assortment, it now follows a more
holistic approach to management and marketing and is seizing the opportunity to be consumer oriented, engaging
in the personal contact with customers, gathering information on consumer behaviour and exploiting insights into
consumer behaviour and preferences. What was once a simple way of doing business is transforming into a highly
sophisticated form of management and marketing.
Retail marketing consistently features more efficient, more meaningful and more profitable marketing practices
(Mulhern 1997, p. 103). Let us first go through few terminologies before understanding the concept of retail.
• Market: Any system or place where parties are engaged in exchange of either goods or services is called as
market. The parties are often called as buyers and sellers. The seller offers his goods or services to the buyer
who in return purchases it in exchange of money.
• Goods: Tangible (things which can be seen and touched) physical products which are transferred from a seller
to the buyer (consumer) to fulfil the latter’s need are called as goods.
1.2 Key Concepts Related to Retailing

Due to globalisation and a competitive environment, retailing has emerged as a specialised area of study. New
ways of managing require an understanding of the entire chain by participants at every level-retailer, distributor,
manufacturer, and service provider. This has led to key terms. One of them is supply chain management.
The supply chain

Demonstrating the link between markets, products, and product strategies in supply chain, Retail Supply Chain
Management provides the knowledge and skills required to thrive in this environment. It demonstrates the connection
between the processes involved in manufacturing, distribution, warehousing, and transportation, and how to use
these connections to their best advantage. Some of the major participants within supply chain management are as
follows:
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End User
Manufacturer Wholesalers Retailers
(Customer)
Fig. 1.1 Components of supply chain
Components of supply chain

• Manufacturers: Manufacturers are the ones who are involved in production of goods with the help of machines,
labour and raw materials.
• Wholesaler: The wholesaler is the one who purchases the goods from the manufacturers and sells to the retailers
in large numbers but at a lower price. A wholesaler never sells goods directly to the end users.
• Retailer: A retailer comes at the end of the supply chain who sells the products in small quantities to the end
users as per their requirement and need.
• End user (Customer): The person who actually uses a product, whether or not they are the one who purchased
the product. The end user may/may not go to the retailer to buy the goods (products) in small quantities to satisfy
his needs and demands. The complete process is also called as Shopping.
Shopping: The process of purchasing products by the consumer is called shopping. However, there are
certain cases where shopping does not always end in buying of products. Sometimes individuals do go for
shopping but return home empty handed. Such a shopping is merely for fun and is called window shopping.
In window shopping, individuals generally go to the market, check out various options and their prices but
do not buy anything. This kind of shopping helps to break the monotony.
1.3 The Importance of Retailing

As a final link between consumers and manufacturers, retailers are a vital part of the business world. Retailers add
value to products by making it easier for manufactures to sell and consumers to buy. It would be very costly and
time consuming for you to locate, contact and make a purchase from the manufacturer every time you wanted to buy
a candy bar, a sweater or a bar of soap. Similarly, it would be very costly for the manufactures of these products to
locate and distribute them to consumers individually. By bringing multitudes of manufacturers and consumers together
at a single point, retailers make it possible for products to be sold, and, consequently, business to be done.
Retailers also provide services that make it less risky and more fun to buy products. They have salespeople on hand
who can answer questions, may offer credit, and display products so that consumers know what is available and
can see it before buying. In addition, retailers may provide many extra services, from personal shopping to gift
wrapping to delivery, that increase the value of products and services to consumers.
The growing importance of Retailing can be easily understood on the basis of the following points:
• Organised retailing in India was estimated at Rs.18,000 crores in 2001-2003 and has grown at about 40% over
the last 3 years (Source KSA Retail Outlook)
• Retailing has a tremendous impact on the economy. It involves high annual sales and employment. As a major
source of employment retailing offers a wide range of career opportunities including store management,
merchandising and owning a retail business.
• Consumers benefit from retailing in that. Retailers perform marketing functions that makes it possible for customers to have
access to a broad variety of products and services. Retaining also helps to create place, time and possession utilities. A
retailer’s service also helps to enhance a products image.
• Retailers participate in the sorting process by collecting an assortment of goods and services from a wised
variety of suppliers and offering them for sale. The width and depth of assortment depend upon the individual
retailer’s strategy.
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• They provide information to consumers through advertising, displays and signs and sales personnel. Marketing
research support is given to other channels, members.
• They store merchandise, mark prices on it, place items on the selling floor and otherwise handle products;
usually they pay suppliers for items before selling them to final consumers. They complete transactions by using
appropriate locations, and tunings, credit policies, and other services e.g., delivery
• Retailing in a way, is the final stage in marketing channels for consumer products. Retailers provide the vital
link between producers and ultimate consumers
Retail industry
Retail industry has brought in phenomenal changes in the whole process of production, distribution and consumption
of consumer goods all over the world. In the present world most of the developed economies are using the retail
industry as their vital growth instrument. At present, among all the industries of USA the retail industry holds the
second place in terms of employment generation. In fact, the strength of the retail industry lies in its ability to
generate large volume of employment.
Not only US but also the other developed countries like UK, Canada, France, Germany are experiencing tremendous
growth in their retail sectors. This boom in the global retail industry was in many ways accelerated by the liberalisation
of retail sector.
Observing this global upward trend of retail industry, now the developing countries like India are also planning to
tap the enormous potential of the retail sector. Wal-Mart, the world’s largest retailer has been invited to India. Other
popular brands like Pantaloons, Big Bazaar, Archie’s are rapidly increasing their market share in the retail sector.
According to a survey, within 5 years, the Indian retail industry is expected to generate 10 to 15 million jobs by
direct and indirect effects. This huge employment generation can be possible because being dependent on the retail
sector shares a lot of forward and backward linkages.
Emergence of a strong retail sector can contribute immensely to the economic development of any country. With a
dominant retail sector, the farmers and other suppliers can sell their produce directly to the major retail companies
and can ensure stable profit. On the other hand, to ensure steady supply of goods, the retail companies can inject
cash into the production system. This whole process can result into a more efficient production and distribution
system for the economy as a whole.
1.4 Types of Retail Operations

Retail operations enable a store to function smoothly without any hindrances. The significant types of retail operations
consist of:
• Department store
• Specialty store
• Discount/Mass merchandisers
• Warehouse/Wholesale clubs
• Factory outlet
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Department
Store
Factory Speciality
Outlet Store
Types of Retail
Operations
Warehouse/
Discount/Mass
Wholesale
merchandisers
clubs
Fig. 1.2 Types of retail operations
Retail management system

Retail management system targets small and midsize retailers seeking to automate their stores. The package runs
on personal computers to manage a range of store operations and customer marketing tasks, including:
• point of sale
• operations
• inventory control and tracking
• pricing
• sales and promotions
• customer management and marketing
• employee management
• customised reports
• information security
As explained above, retailing consists of the sale of goods or merchandise from a fixed location, such as a department
store or kiosk, or by post, in small or individual lots for direct consumption by the purchaser. Retailing may include
subordinated services, such as delivery. Purchasers may be individuals or businesses.
In commerce, a retailer buys goods or products in large quantities from manufacturers or importers, either directly
or through a wholesaler, and then sells smaller quantities to the end-user. Retail establishments are often called
shops or stores. Retailers are at the end of the supply chain. Manufacturing marketers see the process of retailing
as a necessary part of their overall distribution strategy.
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Shops may be on residential streets, shopping streets with few or no houses, or in a shopping centre or mall, but are
mostly found in the central business district. Shopping streets may be for pedestrians only. Sometimes a shopping
street has a partial or full roof to protect customers from precipitation. Retailers often provided boardwalks in front
of their stores to protect customers from the mud. Online retailing, also known as e-commerce is the latest form of
non-shop retailing (cf. mail order).
Shopping generally refers to the act of buying products. Sometimes this is done to obtain necessities such as food
and clothing; sometimes it is done as a recreational activity. Recreational shopping often involves window shopping
(gust looking, not buying) and browsing and does not always result in a purchase. Most retailers have employees
learn facing, a hyper real tool used to create the look of a perfectly-stocked store even when it is not.
1.5 Difference between Retailing and Wholesaling

Two main characteristics distinguish retailing from wholesaling are:
• Unlike wholesaling, retailing is aimed at the actual or ultimate consumer.
• Second, unlike wholesaling, retailing involves selling for personal consumption.
A wholesaler does not sell to the ultimate consumers; or for the personal consumption of the buyer. Those who buy
from a wholesaler are either retailers or institutional buyers; and neither buys for personal consumption; instead,
they do so for their business — the retailers for reselling and the institutional buyers for the consumption of their
institutions.
1.6 Parameters of Retailing

Success in retail operations is governed largely by two parameters: margin and turnover. To be successful, a retailing
operation must be strung in at least one of these parameters. Different positions on the margin turnover grid correspond
to different levels of success. How far a retail enterprise can reach in margin and turnover depends basically on the
type of the business (product lines) and the style and size of the operations.
Of course, as regards turnover, how far it can reach may additionally depend on the competence of the enterprise.
Put in different words, whether a retail enterprise will be a low margin one, or a high margin one, or a low turnover
one, or a high turnover one, depends in a basic sense on the nature of the products / items handled. At the same time,
it is also a matter of choice / strategy of the enterprise.
In a given business, two retail enterprises may opt for two different margin levels. Interestingly, both can succeed
here, provided the strategy and management style are appropriate. Retail enterprises select their profit target and
choose a relevant margin-turnover position that would help achieve the profit target.
Retail strategy
Using margin and turnover as the two parameters, Ronald Gist has provided an easy to follow conceptual framework
of retail structure which can be used in understanding retail structure and in formulating retail strategy. Margin is
defined as the percentage mark-up at which the inventory in the store is sold and turnover is defined as the number
of times the average inventory is sold in a year.
The position of any retailing operation will fall in one or the other of the four parameters a low position on both
margin and turn over; a high margin but low turnover position , low margin and high turnover and high margin
high turnover.
1.7 Theories of Retail Evolution

In America, as the needs the consumers grew and changed, one saw the emergence of commodity specialised mass
merchandisers in the 1970s. The seventies were also witness to the use of technology entering retail sector with the
introduction of the barcode. Specialty chains developed in the 80s as did the large shopping malls.
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Specialty stores, malls and other formats
Shopping malls, a late 20th century development were created to provide for the consumer’s need in single, self
contained shopping area. Although they were first created for the convenience of suburban populations, they are now
found in many main city thoroughfares. A large branch of a well known retail chain usually serves as a mall’s retail
flagship, which is the primary attraction for customers. In Asian countries, many malls house swimming pools, arcades
and amusement parks. Hong Kong’s City Plaza shopping mall includes one of the territory’s two ice rinks.
The rise of the web

The world of retail changed yet again, when in 1995, Amazon.com opened its doors to a worldwide market on the
web. With the growth of the worldwide web, both retailers and consumers can find suppliers and products from
anywhere in the world.
Thus, the evolution of retail formats worldwide has been largely influenced by a constantly hanging social and
economic landscape. One of the main reasons for new formats emerging is the consumer himself. Today’s consumer
when compared to the consumer of the earliest generation is definitely more demanding and is focused on what he
wants. Consumer demand is the prime reason for the emergence of various formats.
The retailer on the other hand, has been influenced by factors like the availability of real estate and the increase in
its prices. He is faced with the challenge of adding on new services and the need for differentiation. This has led to
specialisation and the emergence of specialists. Supply chain complexities and the increasing pressure on margins
have also forced retailers to look at new formats.
Retail development can be looked at from the theoretical perspective. No single theory can be universally applicable
or acceptable. The application of each theory varies from market to market, depending on the level of maturity and
the socio-economic conditions in that market.
The theories developed to explain the process of retail development revolve around the importance of competitive
pressure, the investments in organisational capabilities and the creation of a sustainable competitive advantage .this
requires the implementation of strategic planning by retail organisations. Growth in retail is a result of understanding
market signals and responding to the opportunities that arise in a dynamic manner. Theories of retail development
can broadly be classified as:
Environmental Cyclical
Conflictual
Fig. 1.3 Theories of retail
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• Environmental: where a change in retail is attributed to the change in the environment in which the retailers
operate.
• Cyclical: where change follows a pattern ad phases can have definite identifiable attributes associated with
them.
• Conflictual: the competition or conflict between two opposite type of retailers leads to a new format being
developed.
1.7.1 Environmental Theory

Darwin’s theory of natural selection has been popularised by the phrase survival of the fittest. Retail institutions are
economic entities and retailers confront an environment, which is made up of customers, competitors and changing
technology. This environment can alter the profitability of a single retail store as well as of clusters and centres. The
environment that a retailer competes in is sufficiently robust to squash any retail form that does not adjust.
Thus, the birth, success or decline of different forms of retail enterprise is many a time attributed to the business
environment. For example, the decline of department stores in the western markets is attributed to the general inability
of those retailers to react quickly and positively to environmental change. Those retail institutions which are keenly
aware of their operating environment and which react without delay, again from the changes.
Thus, following the Darwinian approach of survival of the fittest, those retailers that successfully adapt technological,
economic, demographic and legal changes are the ones that are most likely to grow and prosper. The ability to adapt
to change, successfully, is at the core of this theory.
1.7.2 Cyclical Theory

The cyclical theory is also known as a wheel of retailing (McNair1931). It is a well established framework for
explaining developments in retail institutions. The theory suggests that retail institution go through cycles as shown
in the figure below. The rationale is that, as low end retailers upgrade their strategies to increase sales and profit
margins, new forms of low price (discount) retailers take their place in the market. The wheel of retailing consists
of three stages (McNair/May 1978; Berman/Evans2007, pp.129-131):
• Entry phase: According to the wheel theory, retail innovators often appear as low price operators. Thus, the
cycle begins with retail institutions starting off with low prices and low service levels.
• Trading-Up phase: The second phase is called “trading up”. Retailers wishing to expand their Business and
attract more customers, enhance the quantity and quality of Merchandise handled, provide more services, and
open outlets in more convenient locations. This leads to an increase in operating costs and prices and thus offers
opportunities for new competitors to enter the market with low price strategies.
• Vulnerability phase: The third phase is characterised by an increase in competition in services of all kinds and
by a convergence in terms of the marketing mix of retailers as they mature. They become vulnerable to new
competitors that enter the market with low prices.
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Mature Retailer Innovation Retailer
• Top Heaviness • Low Status
Vulnerability Entry Phase
• Conservatism • Low Price
Phase
• Declining ROI • Minimal Service
• Poor facilities
• Limited Product Offering
Trading-Up Phase
Traditional Retailer
• elaborate facilities
• expectation of both essential and exotic services
• higher-rent locations
• fashion-orientation
• higher prices
• Extended Product Offerings
Fig. 1.4 Cyclical theory

(Source: Adapted from Brown1988)
1.7.3 Conflict Theory

Conflict always exists between operators of similar formats or within braid retail categories. It is believed that retail
innovation does not necessarily reduce the number of formats available to the consumer, but leads to the development
of more formats. Retailing thus evolves through a dialectic process, that is, the blending of two opposites to create
a new format. This can be applied to developments in retailing as follows:
• Thesis: Individual retailers as corner shops across the country.
• Antithesis: A position opposed to the thesis develops over a period of time. These are the department stores.
The antithesis is a “challenge” to the thesis.
• Synthesis: There is a blending of the thesis and antithesis. The result is a position between the thesis and antithesis.
Supermarkets and hypermarkets thrive. This synthesis becomes the thesis for the next round of evolution.
1.8 Retail Life Cycle

The concept of product life cycle is also applicable to retail organisations. This is because retail organisations pass
through identifiable stages of innovation, development, maturity and decline. This is what is commonly termed as the
retail life cycle. Attributes and strategies change as institutions mature. The ‘Retail Life Cycle’ is a theory about the
change through time of the retailing outlets. It is claimed that the retail institutions show an s-shaped development
through their economic life. The s-shaped development curve has been classified into four main phases, namely,
innovation, accelerated growth, maturity and decline.
1.8.1 Innovation
A new organisation is born; it improves the convenience or creates other advantages to the final customers that
differ sharply from those offered by other retailers. This is the stage of innovation, where the organisation has a few
competitors. Since it is a new concept, the rate of growth is fairly rapid and the management fine tunes its strategy
through experimentation. Levels of profitability are moderate and this stage can last up to five years depending on
the organisation.
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1.8.2 Accelerated Growth

The retail organisation faces rapid increases in sales. As the organisation moves to stage two of growth, which is
the stage of development, a few competitors emerge. Since the company has been in the market for a while, it is
now in a position to pre-empt the market by establishing a position of leadership. Since growth is imperative, the
investment level is also high, as is the profitability. Investment is largely in systems and processes. This stage can
last from five to eight years. However, towards the end of this phase, cost pressures tend to appear.
1.8.3 Maturity
The organisation still grows but competitive pressures are felt acutely from newer forms of retailing that tend to arise.
Thus, the growth rate tends to decrease. Gradually as markets, become more competitive and direct competition
increases, the rate of growth slows down and profits also start declining. This is the time when the retail organisation
needs to rethink its strategy and reposition itself in the market. A change may occur not only in the format but also
in the merchandise mix offered.
1.8.4 Decline
The retail organisation looses its competitive edge and there is a decline. In this stage, the organisation needs to
decide if it is still going to continue in the market. The rate of growth is negative, profitability declines further and
overheads are high.
The retail business in India has only recently seen the emergence of organised, corporate activity. Traditionally, most
of the retail business in India has been small owner managed business. It is difficult to put down a retail organisation,
which has passed through all the four stages of the retail life cycle. In the private sector, till a few years ago, most
cities in India had a few independent retailers. For example, Mumbai had stores like Akbar ally’s., Premsons,
Amarsons and Benzer. Then Shopper’s Stop opened its first outlet in Mumbai in 1991.The store initially offered
apparel, imitation jewellery cosmetics and perfumes and home fashions. It also had a customer loyalty program in
place, which many stores at that time did not offer.
The store enjoyed an enviable position for a while. However, with the change in customer expectations and increased
competition in the form of other department stores like Globus, Eastside, Lifestyle, etc and the rise of specialty stores,
the company has been forced to rethink its product offering. It now not only stocks apparel, jewellery, cosmetics
etc that it earlier stocked but has also acquired the book store chain – Crosswords.
Crosswords counters have been added to many of the existing stores. The store in Andheri (Mumbai) also houses
Planet M, music retail chain and a small coffee shop. In May 2008, the company embarked upon a major exercise
in terms of repositioning of the store, which involved among other things, a change in the logo. It is necessary to
keep in mind that a retailer need not always move from maturity to decline. By reworking the marketing strategy
or by changing the product or service offering, a retailer may succeed in moving back to the growth phase after
reaching a stage of maturity with a certain format and a certain mix of products.
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Superstores/
Hypermarkets
Specialty
Category Traditional Stores
Killers Catalogue Retailing Traditional
Food Supermarkets
Discounters
Department
Shopping Stores
Centre
Convenience
Stores
Sales
Internet
Shops
Mobile
Commerce Profits
Time
Development Introduction Growth Maturity Decline

Sales low/growing rapid acceleration high, levelling off dropping
Profitability negative to break even high yield high/declining low to break even
Positioning concept innovation special needs broad market niche
extensive/ intensive/
Competition none limited
saturation consolidated
Fig. 1.5 Retail life cycle

(Source: Adapted from Berman/Evans 2007, p. 132; Zentes/Schramm Klein/
Neidhart 2005, p. 34. )
1.9 Retail Pricing

The pricing technique used by most retailers is cost-plus pricing. This involves adding a mark-up amount (or
percentage) to the retailers cost. Another common technique is suggested retail pricing. This simply involves charging
the amount suggested by the manufacturer and usually printed on the product by the manufacturer.
In Western countries, retail prices are often so-called psychological prices or odd prices: a little less than a round
number, e.g. $6.95. In Chinese societies, prices are generally either a round number or sometimes a lucky number.
This creates price points.
• Often prices are fixed and displayed on signs or labels. Alternatively, there can be price discrimination for a
variety of reasons, where the retailer charges higher prices to some customers and lower prices to others. For
example, a customer may have to pay more if the seller determines that he or she is willing to. The retailer
may conclude this due to the customer’s wealth, carelessness, lack of knowledge, or eagerness to buy. Another
example is the practice of discounting for youths or students. Price discrimination can lead to a bargaining
situation often called haggling, in which the parties negotiate about the price. Economists see this as determining
how the transaction’s total surplus will be divided into consumer and producer surplus. Neither party has a clear
advantage, because of the threat of no sale, in which case the surplus vanishes for both.
• Retailers who are overstocked, or need to raise cash to renew stocks may resort to ‘Sales’, where prices are
‘marked down’, often by advertised percentages - ‘50% off’ for example. ‘Sales’ are often held at fixed times
of the year, for example January sales, or end-of-season sales, or Blue Cross Sale.
1.10 Food Retail Industry

Over the last few decades, food retailing has undergone substantial changes. New non-food competitors have entered
the market by expanding their assortment and selling food. But traditional food retailers (in most cases) also carry
merchandise outside their traditional lines, i.e. non food items, and offer other kinds of services. These developments
indicate that it is difficult to clearly allocate retail institutions precisely to either food or non food formats. In this
section of the book, conventional supermarkets, superstores, combination stores, hypermarkets and supercentres,
convenience stores, food discounters, warehouse clubs and several nonstore formats are presented. It provides an
overview of the characteristics of the most important retail formats.
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1.10.1 Conventional Supermarkets

Conventional supermarkets are self service stores that carry a wide range of food items (mainly groceries, meat
and produce) and related items. The share of non-food items offered in this retail format is limited to between
10 % and 25 %. The format covers, for example, health and beauty aids and products (Berman/Evans 2007, p.
139; Ogden/Ogden 2005, p. 102). Supermarkets are usually located in city or neighbourhood locations with sizes
between approximately 400 m² to 800 m² and 1,000 m². Important players that utilise supermarkets in Europe are,
for example, Sainsbury’s, Edeka, Rewe, Ahold’s supermarket “ah” or Intermarché as well as Kroger and Albert
son’s in the USA. This retail format has been the main format for grocery shopping and accounted for the majority
of sales in food retailing for several decades. Yet, it currently faces intense competition from new formats that offer,
for example, more convenient shopping facilities, more product lines, and more variety in the assortment, or lower
prices as a result of lower operating costs (Weitz/Whitfield 2006).
Companies like Edeka, for example, try to reposition their supermarkets and thus to improve their competitive
position emphasising freshness and high quality in the assortment, introducing medium to higher level store brands
and improving store atmosphere and thus providing a better in store shopping experience.
1.10.2 Superstores
Superstores Food based superstores are larger and more diversified than conventional supermarkets. Their size varies
between 1,000m² or 1,500m² and 5,000m² with expanded service deli, bakery, seafood and non-food sections (Berman/
Evans2007, pp.139,140).They are “true” food stores with a share of non-food items ranging from approximately
20% to 40%, but offer expanded one stop shopping possibilities to consumers. A similar store concept that tends to
be larger than superstores (up to 9,500m²) and offers a higher share of non-food items (from 25% to 50% of sales)
is some times referred to as combination stores. They combine food and non-food items, thus offering a higher level
of one stop shopping for consumers than superstores (Berman/Evans2007,pp.140-141).
This combination of food and non food items in superstores and combination-stores yields operating efficiencies
and cost savings. The main reason for this is that non food items tend to have higher margins. Superstores and
combination stores usually follow either a high low pricing strategy (HiLo), which means that they are very
promotion oriented (e.g., intensive advertising or distribution of flyers), or an every day low price strategy (EDLP),
using very few promotions and selling their merchandise permanently at the same – low price. Superstores and
combination stores can be located in city or neighbourhood locations, but also on isolated sites or in shopping centres
oriented towards customers who drive to the store by car. Important players that operate superstores or combination
stores are, for example, Metro with its extra format, Intermarché, Rewe, Tesco or Albertson’s.
1.10.3 Large Retail Formats

Over the past few decades, large retail formats have gained market share in grocery retailing. These larger scale
retail formats are also referred to as “big box retailers” (Levy/Weitz 2007, p. 43).
Whereas the trend towards such large retail formats has developed more or less similarly in the international context,
specific types of formats have nonetheless been developed in the various different countries. Of these, hypermarkets,
which originated in France, are the largest. Their size ranges from 9,000 m² to 30,000 m² (e.g. Carrefour and
Auchan). The German “SB Warenhäuser” (e.g. Metro’s format real, or Kaufland) tend to be smaller with sizes
from 5,000 m². Whereas these European formats have a larger share of food items ranging from 60 % to 70 %, in
the USA, the “supercenters” format (e.g. Wal Mart, Kmart, Target) ranging from 14,000 m² to 21,000 m² carries
a broader assortment of general merchandise. Thus, the share of non food items is higher, ranging between 60 %
and 70 % (Levy/Weitz 2007, pp. 43 44).
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These large retail formats usually follow an aggressive, promotion oriented low price strategy. The stores are generally
located at isolated sites or integrated in or close to shopping centres. The architecture is usually cost oriented with
a very simple store design and a functional oriented store atmosphere. As these large retail formats offer a broad
assortment of food and general merchandise and thus provide one stop shopping opportunities, customers usually
shop bigger shopping baskets. These store formats have a greater market area than the smaller store formats (e.g.,
supermarkets), i.e., customers are willing to drive longer distances to visit these types of retail outlets. These stores
therefore offer substantial parking facilities. Because of their low operating costs and the combination of food with
higher margin non food merchandise which allow for an often aggressive pricing strategy and shopping convenience
(e.g., in terms of the broad and deep assortment), during the past few decades, large retail formats have gained
market share mainly at the expense of conventional supermarkets.
1.10.4 Convenience Stores

Convenience stores (“c-stores”) are usually situated in locations that are easy to access, such as in heavily frequented
areas or in urban neighbourhood locations. They open long hours (up to 24 hours, depending on local or national
legislation). The stores are small and facilities are limited, with an average atmosphere and average service level.
Convenience stores can be operated as stand alone units (e.g. Tesco Express, Seven Eleven, Auchan, Coop Pronto),
but are often associated with petrol stations (e.g. Shell Shops, BP or Aral Stores, Esso Shops).
The very limited assortment of these stores is food oriented. A high proportion of sales consist of impulse purchases,
with most in areas such as snack foods, soft drinks, beer and wine, tobacco products or newspapers and magazines.
The average transaction in convenience stores is small and the prices are usually above average.
Convenience stores focus on ease of shopping. They offer fast shopping, thus enabling customers to purchase quickly,
picking merchandise in a short time without having to search through a large store or wait in long check out lines.
They also offer “mental convenience”, as the assortment is limited, which enables customers to make their choice
fast (Berry/Seiders/Grewal 2002).
1.10.5 Hard Discounters

Food hard discounters usually follow a very aggressive every day low price strategy with prices up to 20 % to 30 %
below those of conventional supermarkets. They offer a small selection of items and therefore are also referred to as
“limited line stores” or “limited assortment stores” (e.g. Ogden/Ogden 2005, p. 106). The basic assortment consists
of food items with a high rate of turnover and few sizes and brands are offered per product category. Prominent
examples of internationally successful hard discounters are the German Aldior Lidl chains (see case study Aldiin
Chapter 5) and Carrefour’s Dia.
The stores are characterised by a “no frills” setting, which means that, for example, there are almost no services
available (no helpdesk, no sales staff in attendance, etc.) and store design and atmosphere are very simple and cost
oriented. Often, products are sold out of boxes (“box stores”) or cut cases and are presented on pallets. Food hard
discounters often carry only a limited range of manufacturer brands and rely heavily on low price store brands.
Thus, prices are less comparable between different retailers. Food based hard discounters often complement their
assortment by a weekly or semi weekly changing selection of non food items which are sold at very low prices and
heavily promoted by newspaper advertising or the distribution of flyers to households. These items come from a
variety of product categories (ranging from personal computers and furniture to home accessories) and often do
not have any association with the regular merchandise carried by the retailer. Such items are offered in order to
increase store traffic, and these non food items that, in some cases, are produced exclusively for this purpose, usually
have a higher margin than food items. Hard discounters are usually located in easily accessible traffic oriented and
cost oriented locations with a focus on low occupancy costs, e.g., neighbourhood locations or periphery sites with
adequate parking facilities. Because of their aggressive pricing strategy, the convenience dimensions (e.g. “mental
convenience” because of the limited assortment and quick shopping due to the small store size) and location strategy,
hard discounters have grown consistently over the past decades. They often play an important role in proximity
retailing.
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1.10.6 Warehouse Clubs

Warehouse clubs are a food retail format which is specific to the USA and not prevalent worldwide. Warehouse
clubs sell their products both to end users and to small to medium sized companies. Business members typically
represent less than 30 % of the customer base, but account for approximately 70 % of sales (Weitz/Whitfield 2006,
p. 66). Membership is required and customers are charged an annual fee. The largest warehouse clubs in the USA
are Costco and Sam’s Club (Wal-Mart).
This type of store is characterised by low prices for a limited assortment comprising half food and half general
merchandise. The stores are very large (9,000 m² or larger) and are located in secondary sites, i.e. in low rent districts.
Store architecture and design are very simple and cost oriented, characterised by a simple interior, concrete floors,
and wide aisles (Ogden/Ogden 2005, p. 104).
Items are usually presented on pallets. In this type of store, fast moving, high turnover merchandise is offered, thus,
minimising holding costs. Warehouse clubs concentrate on special purchases from popular brands. Products are
often sold that are available on special promotion from the manufacturers (e.g. overruns, returns, etc.) (Berman/
Evans 2007, p. 141).
The concept of warehouse clubs resembles ‘cash & carry’ wholesalers (e.g. Metro) that also require membership.
Even though membership is restricted to companies and these outlets focus on business to business trade, end users
also frequently purchase at these stores.
1.10.7 Non-Store Formats in Food Retailing

The dominant share of food retailing is generated by store formats. Nonetheless, there are several non store formats
at which groceries and related products can be purchased by consumers. For example, remote ordering channels, such
as traditional catalogues or Internet shops can be used to distribute merchandise. While these formats are generally
gaining importance, the share of groceries offered through mail order channels remains rather limited.
For fresh merchandise, e.g. farm produce, bakery products, meat or fish, the use of market stands or truck and
van sales is a traditional mode of distribution that, for example, small producers use to reach their customers as a
specific form of direct selling. Because of the close and personal contact with their customers, these vendors often
have high retention rates among their customer base, but the costs associated with direct selling are very high and
therefore, so are the prices.
Vending machine retailing constitutes yet another alternative. Merchandise such as snacks and soft drinks are stored
in a machine and dispensed to customers when they deposit cash or use a credit card. Vending machines are usually
placed at convenient locations with high traffic (Levy/Weitz 2007, pp. 56, 57). Developments in the field of vending
machines are quite innovative. For example, new types of kiosk vending machines provide customers with product
displays and information on the merchandise or electronic systems track inventory and cash, thus reducing out of
stocks or malfunctions.
Conclusion and outlook

The food retailing landscape has changed dramatically over the past few decades. Competition has increased
because of, various factors including, mergers and acquisitions and the internationalisation of retail companies (Fox/
Sethuraman 2006; Dawson 2006). In addition the main retail formats in this sector have also changed as a result
of these developments, technological progress and responses to changes in customer behaviour (Weitz/Whitfield
2006)
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1.11 Future of Retailing
Advances in technology, like the Internet, have helped make retailing an even more challenging and exciting field in
recent years. The nature of the business and the way retailing is done are currently undergoing fundamental changes.
However, retailing in some form will always be necessary. For example, even though the Internet is beginning to
make it possible for manufacturers to sell directly to consumers, the very vastness of cyberspace will still make it
very difficult for a consumer to purchase every product he or she uses directly. On-line retailers, like Amazon.com,
bring together assortments of products for consumers to buy in the same way that bricks-and-mortar retailers do.
In addition, traditional retailers with physical stores will continue to be necessary. Of course, retailers who offer
personal services, like hair styling, will need to have face-to-face interaction with the consumer. But even with
products, consumers often want to see, touch and try them before they buy. Or, they may want products immediately
and won’t want to wait for them to be shipped. Also, and perhaps most importantly, in many cases the experience
of visiting the retailer is an important part of the purchase. Everything that the retailer can do to make the shopping
experience pleasurable and fun can help ensure that customers come back.
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Summary
• Retailing is nothing but transaction of goods between the seller and the end user as a single unit (piece) or in
small quantities to satisfy the needs of the individual and for his direct consumption.
• Any system or place where parties are engaged in exchange of either goods or services is called a market.
• Tangible (things which can be seen and touched) physical products which are transferred from a seller to the
buyer (consumer) to fulfil the latter’s need are called goods.
• Manufacturers are the ones who are involved in production of goods with the help of machines, labour and raw
materials.
• The wholesaler is the one who purchases goods from manufacturers and sells them the retailers in large numbers
but at a lower price. A wholesaler never sells goods directly to end users.
• A retailer comes at the end of the supply chain who sells products in small quantities to the end users as per
their requirement and need.
• The process of purchasing products by the consumer is called as shopping.
• Margin and turnover are the two key parameters of retailing
• Theories of retail of retail development can broadly be classified as: Environmental, Cyclical and Conflictual.
• The ‘Retail Life Cycle’ is a theory about the change through time of the retailing outlets
• The s-shaped development (Retail Life Cycle) curve has been classified into four main phases: (a) Innovation
(b) Accelerated Growth (c) Maturity (d) Decline
• Retail pricing involves charging the amount suggested by the manufacturer and usually printed on the product
by the manufacturer..
• There are three major types of retailing: market, shop or store trading and virtual retail
• ‘Pawn’ shops : Public can also sell goods to such shops
• Consignment’ shop is a place where a person can place an item in a store, and if it sells the person gives the
shop owner a percentage of the sale price.
• Conventional supermarkets are self service stores that carry a wide range of food items (mainly groceries, meat
and produce) and related items
• Superstore is food based store that is larger and more diversified than conventional supermarkets.
• Combination stores tend to be larger than superstores (up to 9,500m²) and offer a higher share of non-food
items (from 25% to 50% of sales).
• The larger scale retail formats are also referred to as “big box retailers”
• Convenience stores (“c-stores”): Usually situated in locations those are easy to access, such as in heavily
frequented areas or in urban neighbourhood locations. (open for long hours up to 24 hours)
• Food-hard discounters offer a small selection of items and therefore are also referred to as “limited line stores”
or “limited assortment stores”
• The dominant share of food retailing is generated by store formats.
• Non-store formats are the ones at which groceries and related products can be purchased by consumers. For
example, remote ordering channels, such as traditional catalogues or Internet shops can be used to distribute
merchandise.
References
• Understanding Retail – What is Retail? [Online] Available at: < http://www.managementstudyguide.com/what-
is-retail.htm > [Accessed 5th October 2011].
• Rama Rao, V .S., 2009. Concept of Life Cycle in Retail. [Online] Available at: < http://www.citeman.com/7774-
concept-of-life-cycle-in-retail/ > [Accessed 5th October 2011].
• Zentes, J., Dirk , M. & Klein, H., 2007. Strategic Retail Management : text and international cases., Gabler
Verlag.
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• Sharma, B.M., 2008.Strategic Retail Management., Global Media
• Carver, J.R.,2010. Ch 1 - What is Retailing, and Why is it Important to Study? [Video Online] Available at: < http://
www.youtube.com/watch?v=V2WTzFIuTwE > [Accessed 5 Octoberober 2011].
• Cohen, W., What is the difference between a “wholesale price” and a “retail price”?[Video Online] Available at:
<http://www.videojug.com/expertanswer/small-business-and-pricing/what-is-the-difference-between-
a-wholesale-price-and-a-retail-price > [Accessed 5 Octoberober 2011].
Recommended Reading
• Bhatia, S. C., 2008. Retail Management , Atlantic Publishers & Dist
• Madaan. Fundamentals Of Retailing, Tata McGraw-Hill Education
• Pradhan., 2009. Retailing Management, Tata McGraw-Hill Education
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Self Assessment
1. ____________ is one of the key parameters of retailing.
a. Marketing
b. Transaction
c. Margin
d. Strategy
2. Shops wherein people can actually sell their own goods are called _________ shops.
a. combination
b. pawn
c. conventional
d. consignment
3. When a person places an item in a __________, the shop/store owner is bound to receive a percentage of the
sale price from the concerned person, in case the item sells.
a. consignment shops
b. conventional shops
c. superstore
d. combination stores
4. The ___________ is the one who purchases goods from manufacturers and sells then to retailers in large numbers
but at a lower price.
a. producer
b. middle-man
c. wholesaler
d. consumer
5. Remote ordering channels, such as traditional catalogues or Internet shops are examples of____________.
a. retail formats
b. store formats
c. non-store formats
d. warehouse clubs
6. A __________ comes at the end of the supply chain who sells products in small quantities to the end users as
per their requirement and need.
a. retailer
b. wholesaler
c. manufacturer
d. consumer
7. __________ are usually situated at locations that are easy to access.

a. Convenience stores
b. Combination stores
c. Super stores
d. Consignment shops
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8. __________ involves charging the amount suggested by manufacturer and usually printed on the product by
the manufacturer.
a. Retailing
b. Wholesaling
c. Retail pricing
d. Retail strategy
9. The three major types of retailing are market, shop or store trading and ________.
a. traditional retailing
b. consumer retailing
c. door-to-door retailing
d. virtual retail
10. Which of the following statements is false?

a. As low end retailers upgrade their strategies to increase sales and profit margins, new forms of low price
(discount) retailers take their place in the market.
b. The dominant share of food retailing is generated by store formats.
c. Conventional supermarkets are open for long hours, sometimes up to 24 hours.
d. Retailing can be defined as the buying and selling of goods and services.
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Chapter II
Strategic Planning in Retailing
Aim
• enlist the steps of strategic retail planning process
• define retail market strategy
• discuss the importance of cost effective delivery of planning
Objectives
• identify the areas of influence determining strategic planning
• understand the meaning of retail strategy
• enumerate steps involved in a situation audit
Learning outcome
• specify the steps involved in strategic retail planning process
• identify various factors involved in carrying out a situation audit
• understand the strategic planning process in real world
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2.1 Introduction
Strategic planning is often done in order to solve a specific problem. For example, restaurants that have great night-
time business but no volume during the day would benefit from a strategic plan specifically focused on increasing
daytime business. Small bookstores struggling to compete with neighbourhood giants would benefit from strategic
planning to help attract traffic to their shop.
Strategic planning involves a situation assessment of your business, whether just starting up or already in operation.
In a strategic plan each ingredient (location, merchandise, design, marketing, inventory and technology) is carefully
examined in order to detect room for improvement.
The strategic plan focuses on the overall picture and takes into account that everything you do is marketing and
everything a customer sees and hears sends a message. When we work with retailers to develop plans, they often learn
to transform their operation’s approach from reactive to proactive while maintaining their goals and budgets.
Frequently, retail entrepreneurs, rather than suffering from a lack of ideas, entertain and act upon too many ideas.
Without strategic planning, this spontaneity creates spending that is not connected to budgets, and also a confusing
array of incomplete and unconnected ideas that fail to resonate with customers.
2.1.1 What is a Retail Strategy?

The term strategy is frequently used in retailing. For example, retailers talk about their merchandise strategy,
promotion strategy, location strategy, and private-brand strategy. Retail strategy isn’t just another expression for
retail management.
2.1.2 Definition of Retail Market Strategy

A retail strategy is a statement identifying the retailer’s target market, the format of the retailer plans used to satisfy the
target market’s needs, and the bases upon which the retailer plans to build a sustainable competitive advantage.
• The target market is the market segments(s) toward which the retailer plans to focus its resources and retail
mix.
• A retail format is the retailer’s type of retail mix (nature of merchandise and services offered, pricing policy,
advertising and promotion programs, approach to store design and visual merchandising, and typical location
and customer services).
• A sustainable competitive advantage is an advantage over competition that is not easily copied and thus can be
maintained over a long time.
2.1.3 Importance of Developing and Applying a Retail Strategy

A retail strategy is the overall plan guiding a retail firm. It influences the firm’s business activities and its response
to market forces, such as competition and the economy. Any retailer, regardless of size or type, should utilise these
six steps in strategic planning:
1. Define the type of business in terms of goods or service category and the company’s specific orientation (such
as full service or “no frills”).
2. Set long-run and short-run objectives for sales and profit, market share, image, and so on.
3. Determine the customer market to target on the basis of its characteristics (such as gender and income level)
and needs (such as product and brand preferences).
4. Devise an overall, long-run plan that gives general direction to the firm and its employees.
5. Implement an integrated strategy that combines such factors as store location, product assortment, pricing, and
advertising and displays to achieve objectives.
6. Regularly evaluate performance and correct weaknesses or problems when observed.
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2.2 Steps of Strategic Retail Planning Process

The strategic retail planning process is a set of steps that a retailer goes through to develop a strategic retail plan. It
describes how retailers select target market segments, determine the appropriate retail format, and build sustainable
competitive advantages. The planning process can be used to formulate strategic plans at different levels within a
retail corporation.
1. Define the Business Mission
2. Conduct a situation Audit

Market attractive analysis
Competitive Analysis
Self- Analysis
3. Identify strategic opportunities
4. Evaluate strategic opportunities
5. Establish specific objectives and allocate resources
6. Develop a retail mix to implement strategy
7. Evaluate performance and make adjustments
Fig. 2.1 Stages in the strategic planning process
2.2.1 Define Business Mission

The first step in strategic retail planning process is to define the business mission. The mission statement is a broad
description of a retailer objectives and the scope of activities it plans to undertake. Whereas, the objective of a
publicly held firm is to maximise its stockholders wealth by increasing the value of its stock and paying dividends,
owners of small, privately held firms frequently have other objectives, such as achieving a specific level of income
and avoiding risks rather than maximising income.
The mission statement defines nature of the target segments and retail formats on which the firm will focus. For example,
the mission statement of an office supply category specialist, “Serve the customer, build value for shareholders, and
create opportunities for associates,” is too broad. It fails to provide a sense of strategic direction.
In developing the mission statement, managers need to answer five questions: (1) What business are we in? (2)
What should be our business in the future? (3) Who are our customers? (4) What are our capabilities? (5) What do
we want to accomplish?
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For example: IBM’s mission statement is to develop effective tools and techniques for enabling a wide variety of
knowledge discovery and data mining based applications and solutions. On the other hand, Microsoft India’s mission
is “realising India’s Potential” and innovating from, for and with India.
2.2.2 Conduct a Situation Audit

Steps of Strategic Retail Planning Process
After developing a mission statement and setting objectives, the next step in strategic planning process is to conduct a
situation audit, an analysis of the opportunities and threats in the retail environment and the strengths and weaknesses
of the retail business relative to its competitors. The elements in the situation analysis are shown in fig. 2.2.
MARKET COMPETITIVE ENVIRONMENTAL ANALYSIS OF

FACTORS FACTORS FACTORS STRENGTHS
Size Barriers to entry Technology AND WEAKNESSES
Growth Bargaining power Economic Management capabilities
Seasonality of vendors Regulatory Financial resources
Business cycles Competitive rivalry Social Locations
Operations
Merchandise
Store management
Customer loyalty
Fig. 2.2 Elements in a situation audit
Market factors
Some critical factors related to consumers and their buying patterns are the target market size and growth, sales
cyclicity, and seasonality. Market size, typically measured in retail sales dollars, is important because it indicates a
retailer’s opportunity to generate revenues to cover its investment. Large markets are attractive to large retail firms,
but they are also attractive to small entrepreneurs because they offer opportunities to focus on a market segment.
Some retailers however prefer to concentrate on smaller markets (e.g., Lakhani footwear, Sibaca toothpaste etc;).
Growing markets are typically more attractive than mature or declining markets. For example, retail markets for
limited assortment, extreme value retailers are growing faster than those for department stores. Typically, the return
on investment is higher in growing markets because competition is less intense than in mature markets. Because
new customers are just beginning to patronise stores in growing markets, they may not have developed strong store
loyalties and thus might be easier to attract to new outlets.
Firms are often interested in minimising the business cycle’s impact on their sales. Thus, those retail markets for
merchandise affected by economic conditions (such as cars and major appliances) are less attractive than retail
markets unaffected by economic conditions (such as food).
In general, markets with highly seasonal sales are unattractive because a lot of resources are needed to accommodate
the peak season, but then resources are underutilised the rest of the year. To minimise problems due to seasonality,
ski resorts promote summer vacations to generate sales during all three seasons.
Example: To conduct an analysis of the market factors for a certain product, the concerned owner went on the internet
to get information about the size, growth, and cyclical and seasonal nature of his/her product and more specifically,
its sale/demand in the his/her city. On the basis of his analysis, he concluded that market factors were attractive; the
market for more expensive products was large, growing, and not vulnerable to business cycles. The only negative
aspect was the dearth in its sale/demand during certain days of the year (like the festive season and holidays).
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Competitive factors
The nature of the competition in retail markets is affected by barriers to entry, the bargaining power of vendors, and
competitive rivalry. Retail markets are more attractive when competitive entry is costly. Barriers to entry institute
conditions in a retail market that make it difficult for other firms to enter their market, such as scale economies,
customer loyalty, and the availability of great locations.
Scale economies are cost advantages due to a retailer’s size. Markets dominated by large competitors with scale
economies are typically attractive. For example, a small entrepreneur might avoid becoming an office supply category
specialist because the market is an oligopoly dominated by some other large office stationary players. These firms
have a considerable cost advantage over the entrepreneur because they can buy merchandise cheaper and operate
more efficiently by investing in the latest technology and spreading their overhead across more stores.
Existing New
Market Penetration Market Expansion
Diversification
Format Development
(unrelated/related)
Table 2.1 Growth opportunities
Retail markets dominated by a well-established retailer that has developed a loyal group of customers also are
unattractive. For example, Reliance’s high customer loyalty in Gujarat makes it hard for any other competing rival
company to enter the Gujarat market.
Finally, the availability of locations may impede competitive entry.

Entry barriers are a double edged sword. A retail market with high entry barriers is very attractive for retailers
presently competing in that market, because those barriers limit competition. However, markets with high entry
barriers are unattractive for retailers not already in the market. For example, the lack of good retail locations in
Hong-Kong makes this market attractive for retailers already in the region but less attractive for retailers desiring
to enter the market.
Another competitive factor is the bargaining power of vendors. Markets are less attractive when only a few vendors
control the merchandise sold in it. In these situations, vendors have the opportunity to dictate prices and other terms
(like delivery dates), reducing the retailer’s profits. For example, the market for retailing fashionable cosmetics is
less attractive because of two suppliers. Eslee Lauder and L’Oreal provide very desirable premium brands. Because
department stores need these brands to support a fashionable image, the suppliers have the power to sell their
products to retailers at high prices.
The final industry factor is the level of competitive rivalry in the retail market. Competitive rivalry defines the
frequency and intensity of reactions to actions undertaken by competitors. When rivalry is high, price erupts,
employee raids occur, advertising and promotions expenses increase, and profit potential falls. Conditions that may
lead to intense rivalry include (1) a large number of competitors that are all about the same size, (2) slow growth,
(3) high fixed costs, and (4) a lack of perceived differences between competing retailers.
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For example: - When a certain gifts shop owner started to analyse the competitive factors of his products, he realised
that identifying his competitors wasn’t easy. While there were no git stores carrying similar merchandise and price
points in his home city, there were a number of retailers from which a customer could buy gifts. He thus identified
that his competitors primarily included department stores, craft galleries, catalogues, and Internet retailers. He felt
there were some scale economies in developing customer databases to support gift retailing. The lack of large scale
suppliers meant that a vendor bargaining power wasn’t a problem, and competitive rivalry was minimal because
the gift business was not a critical part of the department store’s overall business. In addition, merchandise carried
by the various retailers offered considerable differentiation opportunities.
Environmental factors
Environmental factors that can affect market attractiveness; cover technological, economic, regulatory and social
changes. When a retail market is going through significant changes in technology, existing competitors are vulnerable
to new entrants that are skilled at using the new technology.
Some retailers may be more affected by economic conditions than others. High-end department stores employ well-
paid salespeople to provide customer service. When unemployment is low, their costs may increase significantly, as
sales of people’s wages rise due to the difficulty of hiring qualified people. But retailers like Wal-Mart that provide little
service and have much lower labour costs as a percentage of sales may be less affected by low unemployment.
Government regulations can reduce the attractiveness of a retail market. For example, it is difficult for large retailers
to open new stores in France due to size restrictions placed on new stores. Also, many local governments within the
United States have tried to stop Wal-Mart from entering their markets on an attempt to protect locally owner retailers.
Following large scale protests from the unorganised retailers, the state government ordered the closure of Reliance
Fresh stores in Varanasi and Lucknow. Reliance had to put a stop on its proposed RS.9000 crore investment plan
for U.P. The company also shut down its 20 fresh outlets in Ghaziabad and Noida. Reliance has decided to slow
down its expansion plans in the states like U.P., Jharkhand, Bihar, Orissa, M.P., Kerala, and West Bengal, where
the ruling parties are hostile to the growth of organised retail, or where local retailers and activists are opposed to
the entry of big firms in retail business.
Finally, trends in demographics, lifestyles, attitudes, and personal values affect markets attractiveness. Brook bothers,
for example, has been struggling with several trends simultaneously. Known for its traditional suits and button-down
shirts, the company has not learned how to appeal to younger customers and business people who prefer to dress
casually without alienating its traditional customer base.
Retailers need to answer three questions about each environmental factor:

• What new developments or changes might occur such as new technologies and regulations or different social
factors and economic conditions?
• What is the likelihood that these environmental changes will occur? What key factors affect whether changes
will occur?
• How will these changes impact each retail market, the firm, and its competitors?
Considering, the example of the Gifts shop owner again, his primary concern when he did an environmental
analysis was the potential growth of Internet gift retailers. Gifts seem ideal for an electronic channel, because
customers can order the item over the Internet and have it shipped directly to the gift recipient. The concerned
owner also recognised that the electronic channel could effectively collect information about customers and
then target promotions and suggestions to them when future gift-giving occasions arose.
Strengths and weakness analysis

The most critical aspect of the situation audit is for a retailer to determine its unique capabilities in terms of its
strengths and weaknesses relative to the competition. A strength and weaknesses analysis indicates how well the
business can seize opportunities and avoid harm from threats in the environment. In performing a self-analysis, the
retailer considers the potential areas for developing a competitive advantage listed below and answers the following
questions:
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• At what is our company good?

• In which of these areas is our company better than our competitors?
• In which of these areas do our company’s unique capabilities provide a sustainable competitive advantage or
a basis for developing one?
Identify strategic opportunities

After completing the situation audit, the next step is to identify opportunities for increasing retail sales. The strategic
alternatives for the same are defined in terms of growth opportunities in the following table. Note that some of these
growth strategies involve a redefinition of the concerned mission.
1. Increase size of present stores and amount of merchandise in store.

Market Penetration
2. Open additional stores.
1. Open stores outside the concerned area(new geographic segment)
Market Expansion 2. Sell lower-priced products in present stores or open new stores selling
low-priced products(new benefit segment).
1. Sell other products to the same customers in same or new stores
Format Development
2. Sell similar products to the same market segment using the Internet.
1. Manufacture special improvised products.
Diversification 2. Open stores targeted towards a special age-group(e.g.teenagers)
3. Open a category specialist selling low-priced products.
Table 2.2 Redefinition of the concerned mission
Evaluate strategic opportunities

The fourth step in the strategic planning progress is to evaluate opportunities that have been identified in the situation
audit. The evaluation determines the retailer’s potential to establish a sustainable competitive advantage and reap
long-term profits from the opportunities being evaluated. Thus, a retailer must focus on opportunities that utilise its
strength and its competitive advantage.
Both the market attractiveness and the strengths and weaknesses of the retailer need to be considered in evaluating
strategic opportunities. The greatest investments should be made in market opportunities where the retailer has a
strong competitive position. Let us consider an informal analysis of the same as mentioned below:
Market Competitive
Growth Opportunity
Attractiveness Position
Increase size of present stores and amount of merchandise in stores.
Low High
Open additional stores in the same area Medium Medium

Open stores outside the concerned area(new geographic segment) Medium Low
Sell lower-priced products in present stores or open new stores
Medium Low
selling low-priced products(new benefit segment)
Sell other products to the same customers in same or new stores High Medium
Sell similar merchandise to same market segment using the internet High Low
Open stores targeted at a specific age-group(e.g. teenagers) High Low
Open a category specialist selling low-priced products High Low
Table 2.3 Evaluating strategic opportunities
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Establish specific objectives and allocate resources
After evaluating the strategic investment opportunities, the next step in strategic planning process is to establish
a specific objective for each opportunity. The retailer’s overall objective is included in the mission statement; the
specific objectives are goals against which progress toward the overall objective can be measured. Thus, these
specific objectives have three components:
• the performance sought, including a numerical index against which progress may be measured
• a time frame within which the goal is achieved
• the level of investment needed to achieve the objective. Typically, the performance levels are financial criteria
such as return on investment, sales, or profits.
Develop a retail mix to implement strategy

The sixth step in the planning process is to develop a retail mix for each opportunity in which an investment will
be made and control and evaluate performance.
Evaluate performance and make adjustments

The final step in the planning process is to evaluate results of the strategy and implementation program. If the
retailer is meeting or exceeding its objectives, reanalysis is required. Typically, this reanalysis starts with reviewing
the implementation programs, but it may indicate that the strategy (or even the mission statement) needs to be
reconsidered. This conclusion would result in starting a new planning process, including a new situation audit. In
cases of abrupt changes in the environment, revaluating the strategy or targeting a new market segment, and tailoring
the offering to meet the needs of the new segment, does tend to work out sometimes.
2.3 Importance of Cost Effective Delivery of Planning

As you would agree that small to medium size companies need same planning processes as do their larger competitors.
Often, the need for planning is even greater in smaller company, where the risk of being able to effectively respond
to an ever-changing marketplace is limited by internal capabilities.
The problem comes down to the cost effectiveness of delivering this planning expertise to a company already limited
by financial and people resources. To evaluate the level of resources needed to move the planning process forward,
a self-evaluation needs to be undertaken to determine what level of internal knowledge about the planning process
already exists.
If an organisation is serious about developing its ability to create its own future, there must be a way to develop a
critical mass of competent people in the required knowledge areas. This requires an organisational awareness of its
level of learning and the development of a learning plan to move forward. Part of the learning plan is the identification
of available internal training resources and acquiring outside resources when needed.
2.4 Areas of Influence Determining Strategic Planning

The strategic plan as you would agree and support impacts many as we all realise, both outside as well as inside the
organisation to varying degrees .These must be consumer recognised during various planning phases, including the
relationships communication of the plan. Some of the possible stake holders are:
• end consumers
• key customer groups, if not direct to end consumer
• distributors
• product transporters intermedian, other service providers
• employees
• internal sale
• other support personnel for outside relationships
• contractors (not really employees, but still impacted)
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• board of directors
• financial community
• lenders (long & short term)
• interest groups
• community (local residents)
• environmentalists, social advocates
• industry trade groups
• public organisations
• governmental (specify)
• media, non-profit (local, regional, national, world)
Strategic diagnostic model

This is a simple diagnostic approach to diagnose the level at which problems causes exist. For example: a declining
sales, market share and stymied growth can be caused by fundamental issues with the target domain of the company
(markets and products) down to a firm’s inability to implement operational plans, or anywhere in between.
The model is a basic description of the levels of organisational analysis needed to be done which has been illustrated
using the following flow chart:
Level Questions Basis of Decision Partial List of Tools

• Profit Tools • Stakeholder
• Sales Tools • Interests
Goals
• Market Share Tools • Balance of Power among
• Growth Tools stakeholder
• SWOT Analysis
• Market Research
• Techniques
Who are customers and what • Opportunities • Demographics
Mission (Domain)
function(s) do we perform • Core Competencies • Trends
• Economic
• Forecasts
• Political Analysis
On What basis do we com-
pete?
• Basis of customer
Competitive(Business • Price product and decision Market Research
Level) Strategy • Quality making Techniques
• Service • Competitive Advantage
• Time/Availability
Functional Strategies
How do we communicate our • Reputation building
strengths to the customer? • Advertising
Marketing Strategy How do we identify customer
requirements and changes in • Promotion
customer requirements? • Pricing
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• Behavioural
Diagnosis
• Motivational
Diagnostic
• Models
How do we recruit, train,
• Compensation
develop, compensation, and Employee Ability and
Human Resource Training &
place employees so that Skill Level and sources of Development
Strategy
behaviour is directed towards employees
• Recruitment &
our competitive level strategy Selection
• Leadership Style &
Culture
• Job Redesign
• Empowerment
How do we secure financial
Financial Strategy resources necessary to carry
our competitive strategy?
How do we design our processes
to produce products and/or
Operations Strategy service that meets customer
requirements as specified in
our strategy?
How do we provide decision
makers, at all levels, with
Infromation Strategy information necessary to make
decisions consistent with
strategy?
How do we develop products
Technology(R&D) and services consistent with
Strategy customer requirements as
specified in strategy?
Table 2.4 Basic description of the levels of organisational analysis
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Costs Develop cost

Are costs cutting
Profit Problem Yes
(fixed/variable) (efficiency)
too high strategies
Sales
Is sales volume sufficient to generate Yes
required ROI?
Mission
Is the “(target customers, function per- Revise
Yes Yes
formed) sufficient to generate required Mission
sales volume?
Competitive Strategy
Revise
Is the basis of competition consistent with
Yes Yes Competitive
the customer demands and internal core
Strategy
competencies?
Y
e
s
Functional Strategies Marketing Strategy
Fig. 2.3 Summary illustrating the diagnostic model
Mission (Domain): Who are customers and what function(s) do we perform Opportunities Core Competencies
SWOT Analysis Market Research Techniques Demographic Trends Economic Forecasts Political Analysis
Competitive (Business Level) Strategy: On What basis do we compete? Price Quality, Service, Time/Availability,
Basis of customer product, decision making Competitive Advantage Market Research Techniques.
Functional strategies
Marketing strategy: How do we communicate our strengths to the customer? How do we identify customer
requirements and changes in customer requirements? Reputation building advertising promotion pricing.
Human resource strategy: How do we recruit, train, develop, compensation, and place employees so that behaviour
is directed toward our competitive level strategy? Employee ability and skill levels motivation level and sources of
employees. Behavioural diagnosis motivational diagnostic models compensation training & development recruitment
& selection leadership style & culture job redesign empowerment.
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Financial strategy: How do we secure financial resources necessary to carry our competitive strategy?
Operations strategy: How do we design our processes to produce products and/or service that meet customer
requirements as specified in our strategy?
Information strategy: How do we provide decision makers, at all levels, with information necessary to make
decisions consistent with strategy?
Technology (R&D) strategy: How do we develop products and services consistent with customer requirements
as specified in strategy?
2.5 Strategic Planning in Real World

The planning process in table 2.1 suggests that strategic decisions are made in a sequential manner. After the
business mission is defined, the situation audit is performed, strategic opportunities are identified, alternatives are
evaluated, objectives are set, resources are allocated, the implementation plan is developed, and finally, performance
is evaluated and adjustments are made. But actual planning processes have interactions among the steps. For
example, the situation audit may uncover a logical alternative for the firm to consider, even though this alternative
isn’t included in the mission statement. Thus, the mission statement may need to be reformulated. The development
of the implementation plan might reveal that the resources allocated to a particular opportunity are insufficient to
achieve the objective. In that case, the objective would need to be changed, the resources would need to be increased,
or the retailer might consider not investing in the opportunity at all.
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Summary
• Strategic planning involves a situation assessment of your business, whether just starting up or already in
operation.
• A retail strategy is a statement identifying the retailer’s target market, the format of retailer plans used to
satisfy the target market’s needs, and the bases upon which the retailer plans to build a sustainable competitive
advantage.
• The target market is a market segments(s) toward which the retailer plans to focus its resources and retail
mix.
• A retail format is the retailer’s type of retail mix
• Retail mix comprises the nature of merchandise and services offered, pricing policy, advertising and promotion
programs, approach to store design and visual merchandising, and typical location and customer services.
• A sustainable competitive advantage is an advantage over competition that is not easily copied and thus can be
maintained over a long time.
• A retail strategy is the overall plan guiding a retail firm.
• The strategic retail planning process is a set of steps that a retailer goes through to develop a strategic retail
plan.
• The strategic retail planning process describes how retailers select target market segments, determine the
appropriate retail format, and build sustainable competitive advantages.
• The mission statement is a broad description of a retailer objectives and the scope of activities it plans to
undertake.
• The mission statement defines nature of the target segments and retail formats on which the firm will focus.
• A situation audit is an analysis of the opportunities and threats in the retail environment and the strengths and
weaknesses of the retail business relative to its competitors.
• The elements in the situation analysis include market factors, competitive factors, environmental factors and
strength & weakness analysis
• Market factors indicate a retailer’s opportunity to generate revenues to cover its investment.
• Scale economies are cost advantages due to a retailer’s size.
• Environmental factors can affect market attractiveness; cover technological, economic, regulatory and social
changes.
• A strength and weaknesses analysis indicates how well the business can seize opportunities and avoid harm
from threats in the environment
• The retailer’s overall objective is included in the mission statement whereas the specific objectives are goals
against which progress toward overall objective can be measured.
• The specific objectives have three components, viz; the performance sought, including a numerical index against
which progress may be measured; a time frame within which the goal is achieved; and the level of investment
needed to achieve the objective.
• The performance levels are financial criteria such as return on investment, sales, or profits.
• Strategic Diagnostic Model is a simple diagnostic approach to diagnose the level at which problems causes
exist.
• Functional strategies includes marketing strategy, human resource strategy, financial strategy, information
strategy and technology (R&D) strategy.
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References
• Strategic Retail Planning [pdf] Available at: <www.egyankosh.ac.in/bitstream/123456789/35461/1/Unit-6.pdf >.
[Accessed 5 Octoberober 2011].
• Retail Market Strategy [pdf] Available at: <http://warrington.ufl.edu/mkt/retailcenter/docs/TeachRetail_
ChapterTeachingNote.pdf >. [Accessed 5 Octoberober 2011].
• Sharma, B.M., 2008.Strategic Retail Management Sharma., Global Media
• Levy., Retailing Management 6E (Sie) [Online] Available at: < http://books.google.co.in/books?id=jc_CtvOGhr
8C&pg=PA172&dq=steps+of+strategic+planning+process+in+retail&hl=en&ei=5yyETpzqFcfhrAeisenSDA&
sa=X&oi=book_result&ct=book-preview-link&resnum=2&ved=0CDwQuwUwAQ#v=onepage&q=steps%20
of%20strategic%20planning%20process%20in%20retail&f=false > . [Accessed 5 Octoberober 2011].
• The Strategic Retail Planning Process ., 2008. [Video Online] Available at: < h t t p : / / w w w. y o u t u b e . c o m /
watch?v=U3te3O_O9Qw > [Accessed 5 Octoberober 2011].
• Mir, J. A., 2009.Strategic Planning. [Video Online] Available at: < http://www.youtube.com/watch?v=g7q3Ey
gFNB8&feature=related > [Accessed 5 Octoberober 2011].
Recommended Reading
• Madaan. Fundamentals Of Retailing, Tata McGraw-Hill Education.
• Bhatia, S. C., 2008. Retail Management , Atlantic Publishers & Dist.
• Pradhan, 2009. Retailing Management, Tata Mc-Graw Hill Education.
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Self Assessment
1. A ______________ is the overall plan guiding a retail firm.
a. strategic planning
b. retail strategy
c. retail format
d. retail marketing
2. _____________ involves a situation assessment of your business, whether just starting up or already in
operation.
a. Strategic planning
b. Retail strategy
c. Retail format
d. Retail marketing
3. The _____________ is a broad description of a retailer objectives and the scope of activities it plans to
undertake.
a. Strategic Retail Planning Process
b. scale economy
c. retail format
d. mission statement
4. __________ comprises the nature of merchandise and customer services offered, pricing policy, advertising
and promotion programs, approach to store design and visual merchandising.
a. Retail format
b. Retail marketing
c. Retail mix
d. Retail strategy
5. A ____________ is an analysis of the opportunities and threats in the retail environment and the strengths and
weaknesses of the retail business relative to its competitors.
a. strength and weakness analysis
b. situation audit
c. strategic Retail Planning
d. environmental factors
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6. Match the following:
1. Market Factors A. Bargaining power of vendors
B. Indicates how well the business can seize
2. Environmental Factors opportunities and avoid harm from threats
in the environment
C. Indicate a retailer’s opportunity to generate
3. Strength And Weaknesses Analysis
revenues to cover its investment
D. C an affect market attractiveness; cover
4. Competitive Factor technological, economic, regulatory and
social changes.
a. 1-A,2-C,3-D,4-B
b. 1-B,2-D,3-A,4-C
c. 1-C, 2-D,3-B,4-A
d. 1-B,2-C,3-D,4-A
7. Which of the following statements is true?

a. The retail formatting is the set of steps that a retailer goes through to develop a strategic retail plan.
b. The retailer’s specific objective is included in the mission statement
c. The overall objectives are goals against which progress towards the specific objective can be measured.
d. The mission statement defines nature of the target segments and retail formats on which the firm will
focus.

a. Strategic Diagnostic Model is a simple diagnostic approach to diagnose the level at which problems causes
exist.
b. The performance levels are financial criteria such as return on investment, sales, or profits.
c. Technology (R&D) Strategy is included as a part of the elements in the situation analysis or while conducting
a situation audit.
d. A retail format is the retailer’s type of retail mix.
9. ________ are cost advantages due to a retailer’s size.

a. Scale Profits
b. Profit Levels
c. Strategic Retail planning
d. Scale Economies

a. A sustainable competitive advantage is an advantage over competition that is not easily copied and thus can
be maintained over a long time.
b. A retail strategy identifies the retailer’s target market
c. Retail markets are more attractive when competitive entry is costly.
d. Markets are more attractive when only a few vendors control the merchandise sold in it.
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Chapter III
e-Retailing: Indian and Global Environment
Aim
• explain the concept of e-retailing
• ennumerate the features, benefits and shortcomings of e-retailing
• discuss e-retailing around the globe
Objectives
The objectives of this chapter are:
• discuss the meaning and objectives of e-marketing
• define e-tailing and multi-channel retailing
• identify the barriers to growth in e-tailing
Learning outcome
• understand the meaning of e-retailing
• differentiate between e-tailing and multi-channel retailing
• identify the elements required to establish a successful online-store front
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3.1 Introduction
E-retailing refers to retailing over the internet. Thus, an e-retailing is a B2C (Business-to-Customer) business model
that executes a transaction between businessman and the final consumer. E-retailers can be pure play businesses
like Amazon.com or businesses that have evolved from a legacy business such as: Tesco.com. The e-retailing is a
subset of e-commerce. Thus, e-Commerce is the master domain defining the e-retailing operation.
E-Retailing stores sell online promotion, only for goods that can be sold easily online, for example, Amazon did for
Books and CDs and so on. The online retailing require lots of displays and specification of products to make the
viewers have a personal feel of the product and its quality as he gets while physically present in a shop. The website
is a base of electronic retailing, thus it is required to be sufficiently attractive to magnetise the visitors of the site, and
to keep them continued. It makes the design of website to be adequately carved with aesthetic views and ideas.
The e-retailing began to work for some major corporations and smaller entrepreneurs as early as 1997 when Dell
Computer reported multimillion dollar orders taken at its Web site. The success of Amazon.com hastened the arrival
of Barnes and Noble’s e-retail site. 1997 was also the year in which Auto-by-Tel reported that they had sold their
millionth car over the Web and CommerceNet Nielsen Media reported that 10 million people had made purchases
on the Web. The e-retailing has resulted in the development of e-tailware - the software tools for creating online
catalogues and managing the business connected with implementing the e-retailing.
Since the electronic commerce and online retailing are experiencing dynamic and dramatic growth, thus to succeed
online, retailers must develop a quality brand name with scalable, defensible business models, and act early to
leverage the particular advantages of the Internet to create a unique and inviting shopping experience. Moreover,
they must evolve strategies to ensure that they can capture the value created.
3.2 Transition from Traditional Markets to e-Marketing

Marketing has pretty much been around forever in one form or another. Since the day when human first started
trading whatever it was that they first traded, it was the inception of marketing. The initial marketing was based on
the barter system where marketing was carried on the basis of exchange of goods or services in lieu of certain goods.
Humans have come a long way since then (well, we like to think we have) and marketing has too.
The methods of marketing have changed and improved, and we’ve become a lot more efficient at telling our stories
and getting our marketing messages out there. The mode of marketing has greater impact of change in our systems
and technology. Thus, we have always revised our ways of marketing adopting the modern means to make it more
dynamic and profit gearing with time. The new flavour of marketing in the new era is: e-Marketing which is the
product of the tie between modern communication technologies and the age-old marketing principles that human
have always applied. The e-marketing or e-retailing is the part of its principal, i.e., e-commerce.
Different aspects related to e-marketing like its meaning, benefits and how it differs from traditional marketing
methods, are discussed below.
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3.3 Advantages and Disadvantages of e-Marketing
Advantages Disadvantages
The aesthetics of the website must provide soothing

look and feel and clarity of objects or scripts It has no theatrical ambience which can be felt
to the visitor along with sufficient ergonomic by the customer. It lacks an emotional shopping
considerations, so that the visitor does not feel tired experience that the customer can get in a personal
at the earliest. The careful placement of buttons and shopping store.
links provides ease in handling it.
Considering “reach” to the customer, the nature
of the internet means businesses now have a truly
It being container of intangible merchandise (i.e.,
global reach. While traditional media costs limit this
virtual display of merchandise) does not provide
kind of reach to huge multinationals, e-Marketing
sensory support to the customer, thus the customer
opens up new avenues for smaller businesses, on a
cannot hold, smell, feel or try the product.
much smaller budget, to access potential consumers
from all over the world.
In view of “interactivity”, the e-marketing facilitates
conversations between companies” and consumers
whereas traditional marketing is largely about
Online customers are reluctant to part with their
getting a brand’s message out there. On establishing
Credit Card details on the net, fearing they may be
a two-way communication channel, companies can
misused. It raises Security issues. The customers are
feed off the responses of their consumers making
not yet convinced about the foolproof status of this
them more dynamic and adaptive. The need of
method, especially in Indian environment.
consumers can be assessed and even the feeble
chances of dissatisfaction of drop outs can be
managed within an appropriate time frame.
So far the “immediacy” is concerned, the Internet

marketing is able to, in ways never before imagined,
provide an immediate impact.
Imagine you are reading your favourite magazine.

You see a double-page advertisement for some
new product or service, maybe Tata’s latest luxury It provides, to a larger extent, impersonal services
car or HP’s latest iPod offering. With this kind of which the Indian customers are not exposed to; they
traditional media, it’s not that easy for you , the are rather used to the tangible personalised services
consumer, to take the step from hearing about a which they miss in online retailing services.
product to actual acquisition.
With e-marketing, it’s easy to make that step as

simple as possible, meaning that within a few short
clicks you could have booked a test drive or ordered
the iPod.
By closing the gap between providing information It is lacking in family shopping experience which
and eliciting a consumer reaction, the consumer’s the Indian customers enjoy at the weekends, and
buying cycle is speeded up and advertising span can particularly during festive seasons and marriage
go much further in creating immediate leads marketing.
Table 3.1 Advantages and disadvantages of e-retailing
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The advantages of e-retailing outweighs its drawbacks, thus it is showing a positive growth rate across the boundary.
While considering both the e-Retailer and customer side, the advantages of e-Retailing over traditional marketing
can be enumerated in the table below:
e- Retailer’s Benefits Customer’s Benefits

Niche marketing Low Price
Value-added services Faster access
Targeted marketing Easy buying
Better customer services Time and Effort saving
Customisation of services Detail information of product/services
Faster and assured transaction of costs Easy transaction of payments
Global coverage Easy market enquiry and price comparison
Quick accessibility to a list of sellers
Customer database for effective CRM
(Customer Relationship Management)
Table 3.2 e-retailer and customer benefits
3.4 E-Commerce and ICT

E-commerce
Since e-Commerce finds its relevance to be introduced at this stage being the base of e-Marketing activities, thus a
brief of the same is presented hereunder: The uses of digital technologies such as the Internet, Bar Code Scanners,
etc. to enable the buying and selling process based on either semi-automated or automated form, are the constituents
of e-Commerce. It also transacts through various Distribution Channels and e-Retailing process. The electronic
mode of marketing has sufficient qualifications to expedite the process of commercial activities via electronic
means. It not only expedites the customer’s order processing rather it speeds up the process of payment transactions
also. The transaction of payments is made sufficiently secure to avoid failure of the very objectives and processes
of e-Commerce. A multi-layer security is the specialty of e-Commerce. Thus, customer’s authentication, payment
authentication and security of transactions are some of the prominent features of e-Commerce.
Information and Communication Technology (ICT)

Technological innovation is essential for human development. From the printing press to the computerised printing,
a chain of technological innovations have taken shape. The people have devised tools to facilitate learning and
communication along with various automated task performance. Technology is not inherently good or bad, the
outcome depends on how it is used. Information and communications technology (lCT) involves innovations in
microelectronics, computing (hardware and software), telecommunications and electronics - microprocessors,
semiconductors, fibre optics, etc. It is in the root of e-Retailing too. These innovations enable the processing and
storage of enormous amounts of information, along with rapid distribution of information through communication
networks.
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The role of ICT

ICT builds a strong basis for communications and information exchange, and thereby it assumes the following roles
in real world:
• Information and communications technology may be described as the support of the central nervous system of
complex socio-economic societies, processing and transmitting information through the various parts of such
societies.
• It is accepted that telecommunication is a basic infrastructure necessary for economic and social development
of a country.
• This is even becoming stronger than ever as information related to economic activities are growing.
Internet plays a fundamental function in ICT. It provides a support infrastructure to ICT to gain objectives in
disseminating information across societies, irrespective of its geographical boundaries.
Advantages of ICT
Information and Communications Technology (ICT) carries on high promise both in human and economic terms in the
current socio-economic structure of the society throughout the globe. It is a means of intercultural exchange, supporting
the social as well as economic exchanges through cross-country demarcations. Thus, it supports globalisation of
economy. It contributes significantly in the area of science and technology through speeding up dissemination of
scientific results world-wide through scientific knowledge sharing and exchange and by allowing set-up of virtual
labs for communications and remote instrument control. Benefits of ICT span across following fields:
• Education
• Trade and Commerce
• Cultural exchange
• Skill training
• Human Resource Development
• Health care guidance
• Environment management
• Government efficiency (specially through practicing e-Governance)
3.5 Objectives of e-Marketing

The use of Electronic Data and the application for planning and executing the conception, distribution, promotion
and’ pricing of ideas, goods and services to create exchanges that satisfy individual and organisational objectives.
E-Marketing is the promotion of a product, company, service, or web site online. e-Marketing can include a variety
of activities from online advertising, e-mail marketing, search engine optimisation (improving the ranking of web
sites on search engine results) to online networking. Marketers plan marketing mixes (4P’s) to meet the needs of
customer and marketing organisations.
3.6 The Effects of e-Mode of Marketing

When implemented correctly, the return on investment (ROI) from e-Marketing can far exceed that of traditional
marketing strategies. Whether you’re a “bricks and mortal” businessman or a concern operating purely online,
the Internet is a force that cannot be ignored. It can be a means to reach literally millions of people every moment
irrespective of their geographical situations. It’s at the forefront of a redefinition of way businesses interact with
their customers.
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• Increase efficiency in traditional marketing functions.
The e-Retailing is treated as extended services of the traditional marketing. Thus, this extension provides
additional strength to the basic marketing operation. The new business models of e-Retailing add strength to the
traditional business too by enhancing the Customer Value and/or increasing the enterprise’s overall Profitability.
This integral mode of working of electronic concepts along with traditional marketing is also known as “Brick
and Click’ marketing.
• Technology of e-Marketing transforms in many marketing strategies.
Such as - the multi-media used in e-Marketing websites is now also used in physical demos of goods sold
through traditional channels.
• Rapid operations save valuable resources like time and money.
3.7 E-Retailing: The Application Domain

Let us discuss e-retailing as an application domain. The e-retailing is now virtually applied in all spheres of business.
It considers all products that are worthy to be sold through e-retailing process. The good candidates of e-retailing
can be categorised similar to traditional categorisation as:
• Consumer Durables
• Consumer Perishables
• Services
In certain categories of consumer durables, certain human actions like touching, smelling, feeling, etc. are not
necessary. Such goods are the suitable candidates for e-Retailing, for example, books, magazines, CDs, etc.
The consumer perishables are also finding place in e-Retailing due to their quicker local delivery. However, mostly
the consumer perishables are feasible for coverage of local market only, except some of the perishables that are now
taken to remote markets also with proper arrangements, such as - Ice-cream, Cake, Fishes, Vegetables, etc.
Services are the most appropriate candidate for e-Retailing. Such services may be taken as: Travel and tour ticketing,
preparation of certain documental works, liaison with certain agencies on your behalf, or getting your jobs done
by others, etc. Advertisement business is best candidate of e-Retailing. Ad through search engines like Google,
famous websites like Yahoo, or Social group (or, community) sites, such as “Orkut” provides a considerably larger
coverage.
The archetypal e-Retailing application is that of a bookseller such as Amazon. This company is renowned for the
fact that it only sells books over the internet and doesn’t even take telephone orders. It has one of the best organised
websites and is continually referred to by journalists as an e-Commerce success story.
The customers of Amazon those interact with its website Amazon.com carry out a number of functions including:
• browsing readers’ reviews of books
• reading feature articles about books and authors similar to those found in magazines and newspapers
• searching for details of a book based on information such as the author’s name or title of the book
• browsing the books which are the Amazon bestsellers
• ordering books using credit cards or some other similar payment method, and
• tracking the progress of an order
Behind the scenes of the Amazon site it has a number of conventional functions which are found in all retailing
applications, these include
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• Stock management: keeping track of what books are in stock and ordering titles when stocks fall low beyond
certain specified level,
• Payment management: paying suppliers of books for those that have been delivered and making advance
payment along with fresh orders,
• Customer payment management: keeping track of payments made by customers and of payments made by debit
card or credit card companies and banks which correspond to the customer payments,
• Delivery (logistics): the process of shipping books to customers ensuring adequate delivery time
• Market analysis: the process of analysing sales in order to determine what books to order and which to discount
in the future. This analysis occurs at both the customer level and at a temporal level in that customer preferences
are processed and the times and dates when they express these preferences are analysed; for example, in order
to answer questions such as what books sell well at Christmas or at Dipawali?
Most of these functions would be associated with any bookseller, irrespective of whether they use the internet or
not, that is, whether they are e-retailer or traditional businessmen. However, the pace of working vastly changes in
case of e-Retailing due to intervention of information and communication technologies.
e-retailing practice
Internet Retailing covers retailing using a variety of different technologies or media. It may broadly be a combination
of two elements:
• Combining new technologies with elements of traditional stores and direct mail models.
• Using new technologies to replace elements of store or direct mail retail.
Internet retail has some elements in common with direct mail retailing. For example, e-mail messages can replace mail
messages and the telephone, that are used in the direct mail model as means of providing information, communication
and transactions while on-line catalogues can replace printed catalogues. As with direct mail businesses, critical
success factors include:
• use of customer databases
• easy ordering
• quick delivery
Operational elements that the Internet retail model shares with both the retail store and direct mail models
include:
• billing of customers
• relationships with ·suppliers
There are, therefore, many elements that Internet retail and more traditional retail models have in common. Indeed,
many of the most successful Internet retailers have been those that have been able to successfully transfer critical
elements from traditional retailing to the Internet, such as customer service and product displays.
3.8 Online Store Management

Many shoppers are found strolling around the web pages or sites for quite a long; they have a hard time finding just
the right product. These shoppers, also referred to as “browsers”, are just glancing at the products that pass in front
of them. This may go long without making any buying decision, and may even terminate without the same.
Because these shoppers don’t have specific products in mind, they need help visualising how the products before
them can meet their needs. They are supposed to be the casual buyers. Since they do not have preconceived decision
for purchasing in their mind, they can be attracted hitting their attention by presenting the products articulately on
the website. Thus, the way of presentation has the capability to influence views, ideas, perceptions, and even the
decisions of a viewer.
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Successful brick-and-mortar retailers know that product presentation greatly affects how well a product sells, so
they use merchandising techniques to maximise revenue. Many times, merchandising involves displaying groups
of products rather than just individual products to create complete solutions. Retail stores implement merchandising
techniques in their window and in-store displays. Cataloguers apply merchandising by creating groups of products
that convey a lifestyle or usage category.
The days of basic product presentation on e-retailing sites have given way to more sophisticated way of product
merchandising and presentation. However, some high-profile retailers and cataloguers are more effective at this
than others. They exploit this idea more tactfully than others. They are even successful in enhancing their selling
remarkably.
Merchandising includes more than just grouping products by categories. It also includes providing extensive product
information and creating groups of products, being used together.
It is always advisable that, instead of just selling products, it’s better to sell complete solutions. For instance,
combining napkins from the linen department with napkin rings from the kitchen department creates an elegant
accessory combination that completes a place setting. This same merchandising technique is applied in store windows
in local malls. Clothing stores frequently have displays that combination of pants, shirts, and accessories to create
an entire outfit.
One way to move from product selling to product merchandising on a website is to convey lifestyle images that
incorporate several of your products. This presents a holistic view of products along with their combination and
real look while in use.
There are e-shops that use lifestyle photographs in each section of. Its site to create a sense of product enjoyment.
Unfortunately, as you drill down deeper, the site becomes a traditional product-oriented commerce site.
Online storefront

Every e-Retailing site has a store-front with an identity, image and positioning according to its own decorum. The
online store-front has its signature identity with features that triggers off browsing and persuades customers to buy
its product offspring. The browser buttons triggers “navigation” and the “cookies” leads the customer through the
site’s offspring. Next, the “Visual Density” is all about the virtual space utilisation like self-space management in
retail business. Online retailers use visual density very effectively to promote offspring and sell their merchandise.
Visual appeal of a site ensures the longer stay of the browser with the site.
One of the major advantages of online merchandising is that the site can have an unlimited number of SKUs (Store
Keeping Units) on display. This is because virtual space is almost unlimited. The offspring mix can be made, to
appeal to a relatively much wider customer base. The Back-end merchandise analysis can be made for the click
stream taking place and effective sale conversion ratio thereof affected. One can also measure the number of non-
buyers who Visits the site but does not make any purchasing. Offers linked to purchase acts as buying triggers. In
online retailing, there is no obsolescence due to the fact that the merchandise is neither exposed to all nor there is
an inventory carrying cost on the web. Expenses being low, there is potential for high margins in e-Retailing.
The following table shows, gender-wise, the most shopped categories across the world:
Gender Ratio
Product/ Service
Male Female
Groceries 25% 75%
Flowers` 31% 69%
Travel 50% 50%
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Books 57% 43%

Computers 75% 25%
Cd’s 50% 50%
Table 3.3 The most shopped categories (genderwise)
Four Elements of a Successful Online Storefront

An online storefront, just like a brick-and-mortar store, serves two purposes:
(1) Displaying merchandises
(2) Checking out customers
They differ in those two areas as well. The proper online storefront design is to take advantage of easy information
access while minimising the shortcoming of lack of physical presence.
In an online storefront, customers can’t touch merchandises and talk to a sales representative face to face, but they
can easily find the products they want to buy, and collect rich information about the products. They don’t have to
wait for checkout.
Make navigation easy and interesting

Physical stores are designed to be easy to browse. Online stores should be no different. With online stores, you want
to encourage browsing, so customers can see a lot of items quickly, but also have the ability to get more in-depth
information.
Online storefronts should be appealing to the eye. Site design should be colourful, fun and interesting. Pages should
download quickly, unencumbered by superfluous graphics.
Site navigation should be very easy, fast and obvious. If visitors can find the items they want quickly, they’ll buy.
If not, they’ll leave. Customers should have easy access to more detailed information on products, but not on the
initial screen.
Process of e-Retail
New Online Customers:
Order and pay

Choose a product Check the detail
online
E-RETAILER
Print Ship Collect the profits
Fig. 3.1 Online ordering procedure web-image
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Include related items in display
Structure product displays in online storefronts so that related items are grouped together, allowing customers to
easily purchase several related items. “You should be able to buy everything you need right there on the site,” says
Howie Green, principal of Boston-based Howie Green Design.
This is more a question of the visual layout of your store than a function of the software you choose. Some software
packages will enable site owners to enter information that can help suggest related products, but the easiest way
remains to simply present the items together in a related display. The more related products and information you
can give customers, the more likely they are to make a purchase - or perhaps purchase several items.
Include all important information

On the Web, space is not an issue, therefore, it is easier to put more information, about a product online than is
possible in a printed catalogue or brochure. The more information available, the better chante there is that a customer
will make a purchase.
According to Marnie Ann Joyce, Web site producer with Manhattan-based Makeko, many sites omit important
information about their business or products. A site visitor should be able to easily find not only the products offered,
but also all prices, shipping charges and related information.
However, the unnecessary jargons should be avoided. To say, the description should be short and complete in all
the senses. The precaution must also be taken not to drop certain important piece of information for making the
information small.
Another important piece of information to include for online stores: a telephone number. “Having a human being
to talk to is important,” says Joyce. Many .consumers would like to know where the company is located, and what
laws, taxes and regulations they are subject to. “I’m not going to buy from someone if I can’t talk to them. Anybody
can have a Website.”
Make purchasing easy

According to Green, making online purchases as easy as possible is one of the most important elements of a good
commercial site, but unfortunately, “It’s where an awful lot of sites fall apart.”
The complexity of purchase order form must be minimum, as much possible, since it irritates and repels the customer.
The information required should be correctly placed to provide ease of filling the form.
The purchasing operation must be targeted to a semi-literate mass for maximising its effectiveness, and finally the
turnover of the site.
Along with the above important points, the website aesthetics must also be kept in mind while designing the site.
It counts on attraction of general visitors and makes them stick to the site over a considerable period to know what
it is.
A good design with rightly placed store front items, and navigational easiness provides additional advantages to the
purpose of site by increasing the number of visitors and also their subsequent conversion to the customer.
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3.9 Online Brand Management

Online Brand Management is an important aspect of retail management whether it is in the physical retailing or
e-Retailing process. E-Retailing solutions (for instance, Cyberica software) provide helps in following key areas:
Web Store
Front
Business
e-Marketing Intelligence
E-Retailing
solutions
Customer
Supply Chain
Relationship
Management
Management
Purchasing
Fig. 3.2 E-Retailing solutions
Web Store front- online catalogue

Web store front symbolises your path to e-commerce activities of your organisation. Generally people tend to look
it as an online catalogue of product/services offering. Our research indicates a successful ecommerce site catalogue
should make an item accessible within 5-6 clicks. So if your catalogue is just published online as done offline just
listing items, it will make difficult for your customers to find items online reducing your actual ROI (Rate of Interest)
from a web presence.
Optimising the offerings to be listed in the store front based on the customer specific usability metrics. Not only
are the offerings optimised but they also help in creating discovery tools using latest methodologies and product
management techniques, which help the customer and find the right product with right dimension converting lead
into a quality sale.
As every store has different requirements our customised web catalogue product comes with catalogue management
and reporting tools. Using the online catalogue one will be able to manage online product listing pages, categories
and pricing.
Generally, this system comes with powerful search capabilities and helps one manage discounting and pricing
changes. Also by these tools not only one can effectively manage own catalogue but also let other retailers aggregate
up-to-date product specification and inventory availability.
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Thus, a catalogue would not only bring advantage to online web store front but the offline retail operations to remain
updated on product line offerings and help customers make more informed decision leading to increase in sales.
Business intelligence: Analytics

Managing online customer interaction requires understand each step being taken by potential customer and measuring
against various groups identified on the basis of different patterns. As each business is unique so does the pattern
for measuring customer ease of product usability and satisfaction varies.
The software helps the organisation identify those unique patterns to help one measure impact of customer satisfaction
on profitability by:
• Reducing shopping cart abandonment
• Increase checkout completion
• Reduce page departures
• Manage Breadth and Depth of product selection
• Abandonment vs. call to centre
• Manage failed onsite search terms
The idea is to help one increase revenues and customer satisfaction by providing support tools to the business
analysts to analyse data rather than spending time gathering it.
CRM- profit centre management

CRM software can help one to develop custom CRM solution which can work in distributed work environment to
generate input from the business process. Hence generating transparency within organisation and reduce number of
queries received from clients. Additional solutions can be integrated to bring the call centre and customer grievance
points in line but also let web remain the first choice of customer interaction and problem resolving.
With customer care and CRM infrastructure being looked as a cost centre, it’s important the software ensure the
organisation to earn adequate return on investment.
By implementing CRM solutions one can identify various sub-groups among the customers. Based on group you
can create strategies to increase quality of sales which in turn reflect in revenue numbers generated.
Overall software solutions team is staffed with experts comprising many years of experience in front office business.
This expertise, combined with our deep technical knowledge enables the clients to
• Identify the types of businesses and consumers they wish to target
• Create personalised product and service offerings that attract the largest number of the best customers
• Understand the profitability of their customers
• Maximise customer retention
E- Marketing: New media tools

In the era of search engine optimisation software help one takes a different approach for the business. It helps one
to build a content strong presence on the internet.
Using the new media marketing remains on top of the vertical. Tools like blogging and conversation management,
the business remains on top of the vertical.
Blogs are frequently updated, journal-style web pages that contain opinion, links and commentary. Software work
with clients to develop proprietary blogging strategies, from creation and marketing to sponsorships and advertising,
geared to increasing relevance among target audiences. Blogging provides a unique and highly effective platform
to connect with key constituents and audiences who are more difficult to reach via traditional marketing and public
relations
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Co branding
Co-branding is used as an important tool for brand marketing and increasing revenues. Using online catalogue
platform, companies can manage co-branded portals from existing catalogue management tools.
Loyalty program management

Loyalty programs are effective tool for to customer retention and up-selling and cross-selling of products. Software
can help one extend the offline loyalty program to online loyalty program helping one integrate the infrastructure
and derive benefits for both the channels. Other e-Marketing tools which can help e-Retailing initiatives are:
• Gift Certificate Program
• Coupon campaigns
• E-mail list collection and management
• Micro sites creation and management for sub-products
Leveraging brand partnerships

A key trend in e-Retailing is creating marketing partnerships among top brands. As e-retailers establish these
relationships with other e-commerce companies, traffic to their sites increases, leading to greater revenue
opportunities.
“FTD has had success in partnership marketing this past year and sees this trend continuing,” said Dan president,
FTD.com. “We launched a co-branded program for jcpennyflowers.com which a mirror of our site with a co-branded
banner. This maintains continuity for the customer throughout their shopping experience. We see FTD’s conversion
rates improve dramatically whenever we engage in this type of co-branding.”
Retailers need to have confidence in knowing that speed of response is going to be fast regardless of whether you
have 100 or 100,000 customers accessing the web site at anyone time. Traditionally, e-retailers have spent millions
of dollars on computer hardware with numerous built-in processors in order to run their e-commerce system. They
use distributed architecture that allows the functionality of the site to be spread across a set of relatively inexpensive,
PC-based servers. Today, e-commerce clients don’t sacrifice performance in exchange for cost savings.
Web technology has provided a good media for widespread online promotion of brand and products. There is an
additional scope of online order booking and sale. The site itself can host a number of links of products and services
offered by other companies for a fee. Banners, Crawlers, Browser buttons, URL links, etc. can also be put on other
noncompeting sites.
There are lots of opportunities to create static customership by constantly communicating with them through
e-mails. Personalised offerings can be made to individual customer based on individual’s shopping characteristics
and need.
3.10 E-Tailing and Multi Channel Retailing

E-tailing or e-retailing refers to the selling of retail goods electronically over the Internet. The term is a short
form for “electronic retailing”, and surfaced in the 1990s for being frequently used over the Internet. The term is
an inevitable addition to other similar terms such as e-business, e-mail, and e-commerce. E-tailing usually refers to
the business-to-consumer (B2C) transactions.
E-tailing is gaining ground. In the year 2003, clothing and apparel segment clocked online revenues to the tune of
$ 3.6 billion. Online retailing is classified into three main categories:
• Click – The businesses that operate only through the online channel fall into this category. Prominent examples
in this category include: Dell, Amazon.com and e-Bay.
• Click and Brick – The businesses that use both the online as well as the offline channel fall into this category.
Common example includes: Barnes and Noble’s.
• Brick and Mortar – This is the conventional mode of retailing. The businesses that do not use the latest retailing
channels and still rely upon the conventional mode belong to this category.
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E-tailing offers the consumers huge amounts of information in the form of web sites with useful links to similar sites
that allows consumers to compare products by looking at individual items. The convenience of online shopping is
unmatched indeed. Shopping out of your home or office reduces the stresses of waiting in lines and dealing with
irritating sales people. However, E-tailing causes problems with fit, since the consumer cannot try the items on.
Return policies may also act as turn offs and items can be difficult to return. The shipping and handling costs may
turn the customers away. e-tailing requires technology savvy customers and this puts a limit on its potential reach.
We can see that E-tailing is emerging as an interesting phenomenon in the retail industry that is on a rise despite
the disadvantages associated with it.
E-tailing has resulted in the development of e-tailware – a term used to refer to the software tools that
are used for creating online catalogues and managing the business undertaking e-tailing. A new trend
was noticed in the form of the various price comparison sites that allowed the users to compare prices
from a number of different e-tailers and link them to their portals for the subsequent online purchase.
The distribution of products across multiple sales channels - often referred to as multi-channel retailing - has
become the norm today. According to a recent survey, multi-channel retailers in the US increased their online
market share from 53 % in the year 1999 to 76 % in the year 2003 - in contrast to Internet-only retailers, who
lost a corresponding market share. For the same reason, some pure Internet retailers are gradually making a
transition to multi-channel retailing. The consumer preference for multi-channel retailing calls for a study of
the underlying reasons behind the user-acceptance and subsequent popularity of the particular business model.
Advantages of e tailing/ multi-channel retailing

E-tailing offers unique advantages to the consumer that no other form of retailing can match. The hypertext nature
of the medium allows for more flexible forms of transactions (growth of C2B and C2C) to flourish. It allows for
easier comparisons across broad product categories with the evolution of shopping bots and similar mechanisms. The
medium also offers flexible/dynamic pricing mechanisms to the consumer. These evolutions reduce any friction in
the online market place and stimulate the use of the web as a retail environment. In the long-run, this will benefit the
marketers as well as the consumers. Further, this will penalise the marketers who thrived in market places that had
entry barriers in the form of a lack of freely available information. Earlier, such a situation restricted the customers
in making informed choices and led to inefficient pricing and localised monopolies.
However, inspite of all these advantages, most of the e-tailing ventures have not been as profitable as they were
expected to be. Lets have a brief look at some of the prime advantages and disadvantages if e-tailing.
Advantages Disadvantages
Minimal investment - e-tailing does not require • Security issues - Security issues hold the
a retailer to invest in warehouses, showrooms or center stage when it comes to consumer
other commercial properties at prime locations. concerns while shopping through the online
They operate through their web sites and thus save media. A lack of trust and privacy concerns
drastically on the real estate costs. The real estate prevents a lot of consumers from making
costs in the metropolitan cities can be prohibitively online purchases. Consumers are also
high. Moreover, maintenance costs of a virtual concerned with the use of their personal data
store are negligible in comparison to a physical provided during the online transactions.
store.
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• Comfortable and easy to use - The Internet • Customer retention - In e-tailing, an

offers easy and comfortable access to all the increase in the customer retention by 5%
required information by a customer. Over the leads to a corresponding increase in profits
Internet, product information is just a few by 25%. Most of the people buying on the
clicks away, easily accessible from the comfort Internet do so out of curiosity and this makes
of a home. Traditional retailing is quite a repeat purchase highly unlikely.
cumbersome in contrast to e-tailing. It involves
frantic search for the required product, running
up and down the retail store, asking the poorly
trained store assistants for help. The process
involves significant wastage of valuable time.
Simply put, shopping on the Internet for fifteen
minutes is equivalent to a two-hour trip to the
mall. Consumers prefer to save their precious
time so that they can better utilise it.
Customer interaction - The greatest benefit of • Unsuitable for certain product categories
online commerce is its ability to interact with - In case of product categories that require
the customers. Such an interaction allows the relatively higher customer involvement,
retailers to reach the individual customers and the e-tailing route is found to be grossly
react appropriately to their responses. Interaction inadequate in providing sufficient information
acts as a vital tool for mass customisation. The to the customers. Examples include retailing
common examples include online marketing of of products like clothes, cosmetics etc. Most
books, flowers, software and education. This has customers are comfortable buying books and
also led to greater satisfaction among the online music on the Internet because the information
buyers. According to a research agency, 81% of required for making a purchase and the
the buyers were found to be highly satisfied with customer involvement is low. However, in
their online purchases. case of a blue Trouser, the customer may
want to know things such as: Which shade of
blue is it? How does it feel on the skin? How
easily does it crease? The traditional retailing
does not suffer from such a problem. In the
non-standard product categories, the Internet
offers limited amounts of crucial information
to the customer. In such cases, only the seller
knows about the true quality of the trouser
and this leads to an ‘information asymmetry’.
Shopping is still a touch-feel-hear experience
- some do not suffer from ‘time-poverty’ and
shopping is still considered to be a family
outing. Hence this type of an environment
creates a problem of customer retention.
• Mass Media - A supermarket is limited in • Complicated medium - Ease of use is a

its area of operation. It caters to a specific problem, as the web design may suffer from
geographical location such as a city and/or high complexity bordering on total chaos in
its suburbs. However, a web site is globally some cases.
accessible leading to a worldwide reach and
an increased potential customer base.
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• Search option - With web search capabilities • Navigation hiccups - E-tail stores do not
(which need further development) it is easier have standardised designs in comparison
to find the particular types of goods required to the physical retail stores and product
by a customer. The consumer decides what he catalogues. Therefore, different user
wants to buy rather than the retailer offering behaviours. (navigation schemes) need to
what he wants to sell. This ultimately translates be learned for each e-tail store. This is a
into consumer empowerment. temporary issue as the evolution of the web
continues.
• User friendly - Customers can execute • Website design flaws - Graphic presentation
transactions via the same medium the and aesthetics may not be as compelling for
information is provided, so there is no a web site as in case of a physical retail store
disconnect between the desire to purchase or a product catalogue. This is a temporary
and the ability to purchase. (Payment schemes issue that may resolve with the evolution of
are still evolving and therefore this advantage the web design.
is likely to become more apparent in the
future.) Limited access to the Internet - Not all customers
have access to the web, as they do to the postal
system. This is a temporary issue as the evolution
of the web continues.
• Effective price discrimination - E-tailers can
use price discrimination in an effective and
efficient manner. E-tailers can use previous
transactions to identify the likelihood of
products being purchased at certain price
points and use this information for price
discrimination.
• Customised product placement - E-tailers

can change the online placement/display of a
product based on the previous transactions so
to increase the visibility of goods that the user
is more likely to buy based on the previous
encounter at the time purchase. This allows
a contextual design of placement to ensure
conversion of a visit/hit to the web site into
a sale.
• Global reach - Customers have a much wider

choice at their fingertips (a variety of e-tail
sites to choose from etc.) In this way, the
web creates a global market place that brings
together multiple consumers and retailers.
Table 3.4 Advantages and disadvantages of e-tailing
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Barriers to growth in e-tailing

The barriers to growth in e-tailing are as follows:
Issues related to customer service, distribution and logistics

E-tailing tends to facilitate the business transactions, but unless the transaction involves a digital product such as
software or music etc., due emphasis should be given on prompt and smooth delivery of the products. Majority
of e-tailers focus on significant marketing efforts to attract customers in order to execute transactions, but tend to
ignore the important aspect of customer satisfaction through a flawless delivery. It is important to follow through and
ensure a smooth delivery to the customer. The companies can also use the web to enhance the customer experience
by allowing the customers to track the status of the transaction. So it is not simply a case of allowing for delivery,
but enhancing the delivery experience with the web.
Once this relationship is formed (via the transaction), the e-tailer can follow up with a solicited marketing program
to keep the customers engaged. Customer service should be considered a high priority as it impacts the long-term
relationship between the customer and the e-tailer. Customer service should be proactive to ensure prompt delivery
leading to satisfaction with the product and subsequently offer a medium of dialog to the customer with the e-tailer.
Recently, more attention has been paid to the delivery aspect of the entire transaction.
Issues related to the mode of payment

In the online medium, credit card transactions are fast becoming the preferred mode of payment. Credit
card providers take a percentage of the transaction, and this may be higher for the web, than for a traditional
retail store. The high transaction cost is perceived as a risk premium because the e-tailer cannot capture
the signature of the purchaser to remove any possibility of credit card misuse in the online environment.
Other emerging payment media include

• Smart Cards: Smart Cards are a more accepted form of payment across Europe, but due to the high penetration
of credit cards in the US, Smart Cards have had a limited global impact .Much discussion has taken place with
regards to the development of “smart cards” to facilitate online transactions. Smart cards allow for smaller
transactions and provide anonymity (ensuring privacy) to the consumer while making the purchase. American
Express is developing a smart card that would include a chip to allow the storage of digital data (transaction
history and monetary values). The use of Smart Cards also requires a “reader” be placed on a consumer’s
machine for accessing the web (whether a PC or a mobile device). This additional need of infrastructure acts
as a barrier in its mass adoption by all the parties involved in the transaction be it the consumer, the e-tailers
or the payment providers.
• PayPal: Paypal is a tool that facilitates person 2 person (P2P) transactions in an online environment such as the
eBay (eBay now owns Paypal). This payment option allows the web sites and individuals who do not accept
credit cards to process online transactions in an effective and efficient manner. Both the transacting parties are
required to have their own Paypal accounts. However, compared to a credit card, Paypal is a much secure online
payment service since credit cards numbers are not transmitted over the internet.
• VeriSign: VeriSign provides secure online payment options to facilitate online commerce. It is purchased via
Cybercash that offers multiple payment solutions to its customers.
For the online retail markets to grow to their full potential, a standard and secure medium of exchange needs to
evolve so as to reduce friction in the virtual global market place. With respect to the web, we need to develop a
medium that becomes a standard to increase the participation rates of e-tailers and consumers. Since credit cards
have taken a lead, they may become the standard. They do not facilitate micro transactions, which clearly would
open up new markets that will be exclusive to the web. This is an area where we not only need to develop a medium
to facilitate exchange, but also determine the likely goods (web content, music etc.) that will become viable for an
online exchange.
Personalisation vs. Privacy Issues – In an online environment, there is a conflict between the need for privacy on the
part of the consumer, and the need to be able to personalise the offering on the part of the e-tailer (aimed at providing
a better experience to the consumer). Finding equilibrium between the two is tricky. E-tailing solutions that can
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simultaneously address both the issues can make a significant impact on the growth of this segment. This also ties in
with new payment systems that are developed, as the payment (transaction) involves an exchange of the critical data.
Issues relating to ownership of that data (after the transaction) and the rules governing the use of that data are important.
Many upcoming companies are offering intermediary services focusing on certification of e-tailers and their use of
the personal data collected from the customer during an online transaction.
Most current personalisation solutions focus on personalisation based on the user experience with the individual
web-site. Systems need to be developed that allows for personalisation across multiple web-sites or the entire web
and the connection between the e-tailer and its physical presence in case the customer visits both.
Other risks associated with e-tailing include the security of the transaction and the integrity of the business with
which the customer transacts. The customer is justified in being concerned with the security of the transaction data
provided in an online transaction. Since the e-tailing environment does not provide the same assurance as the physical
world in terms of the integrity of the business, e-tailers with an unknown brand name need to make extra efforts to
make sure the customer has confidence in the outcome of the transaction and their integrity.
Challenges Response
Inventory and order management systems are not Internally prioritising integrated, multi-channel data
integrated across all channels management strategies
Customer data is not integrated or shared across Bringing in outside expertise to drive internal business
all channels process change
Creating an ROI-based case to gain more resources to
The dominant channel fears sales cannibalisation
integrate business processes
There are budgetary constraints to create integrated Changing the organisational structure to be brand - rather
processes than channel - specific
Channel specific, instead of brand-specific, Changing compensation incentives to be brand - rather
merchandising organisation than channel - specific
Cannot change fast enough to keep up with Outsourcing programming to improve system
customer expectations integration
Table 3.5 Multi-channel retailing - challenges and responses
Issues related to the portal design

Portal design plays a critical role in e-tailing. The overall design of the portal has been an issue as web designers
often fall short of understanding this medium and its capabilities. Amazon has understood the importance of design,
throughout the transaction, and went so far as patenting its “one-click” transaction rule. It is critical to focus on the
transaction process flow.
Presently, the customer is unable to view the entire transaction process without experiencing it first hand. It is
observed that if the flow of the transaction creates a possible disconnect between the customer’s needs to complete
the transaction, the customer will abort. (Approximately 20 - 30% of transactions are aborted by the customers) A
common problem with transaction flow design is the surprise shipping costs that e-tailers often do not calculate until
the transaction is about to be finalised. Shopping cart technology is used to facilitate the online transaction process.
Design also plays an important role in selling goods that require experience. Since the web cannot facilitate experience
for non-digital goods, other means need to be developed to encourage such transactions. For example, liberal return
policies and risk-free return facilities encourage online shoppers to go for non-digital goods.
• Issues related to the Ease of Access
• Issues related to the ease of access
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A majority of consumers still find the medium of internet difficult to access and use. The adoption of broadband
has been slowed down due to the last-mile connectivity issues. This has put a limitation on the ability to design the
right e-tailing environment to encourage online transactions. Once online access extends beyond the PC, and mobile
commerce (m-commerce) gains popularity, e-tailing access may see an exponential growth coupled with capabilities
for contextual transactions developing an entirely new role for the e-tailing domain.
Legal Issues in a global business environment

E-tailing extends beyond the national boundaries and connects a global audience. Rules for commerce, and its legal
framework, have evolved within the geographically limited national and state borders. To facilitate the growth of
e-tailing, a legal framework needs to evolve that makes sense for a global marketplace. This is perhaps the most
challenging aspect to overcome in order to help the growth. Currently there is a moratorium on taxes (sales taxes) for
e-tail transactions with businesses that have no physical presence. This puts the traditional retailers at a disadvantage
and leads to the loss of a major source of revenue for the states and countries where such transactions take place.
Other issues, besides the taxes, that need to be addressed include the legal positions with respect to the use of data
and the rules for conducting business in an online environment. While there are imbalances between these rules,
around the world, it will limit the potential for a truly global market place that the web, as a medium, potentially
develops. The World Trade Organisation (WTO) is working on developing standards in these areas. Legal standards,
across states and countries, are as important as business and technology standards in terms of allowing the online
markets to thrive.
3.11 E-Retailing: Across the Globe

Around the globe, despite a less-than-robust economic climate in most parts of the world, there continues to be
ample evidence that e-Retailing is alive and well. A rapidly growing Number of consumers are buying online every
day and a number is growing rapidly. Even so, the sentiment surrounding e-Retailing has gone from one of all blue
skies and unlimited possibility to one that may more accurately reflect the business realities of e-Retailing’s future.
E-Retailing has become an accepted mode of retailing - albeit one that will ultimately capture a very small share of
total retail sales- in most of the developed world. The current mode of thinking certainly reflects a more tempered
outlook.
One of the most important lessons of a “post Internet euphoria” world is that technologies afforded by the Internet only
work for good merchants. Furthermore, the outlandish outlays and unrealistic business models of the Internet’s early
years have given way to business plans with more prudent cost controls and rationalised goto-market strategies.
In many ways, the United States has the most developed e-Retailing landscape. That is not to say, however, that it
is mature. The landscape continues to evolve, in large part as a result of the new economic realities epitomising the
industry, as well as because of e-retailers’ desires to differentiate themselves from competitors. So, as the rest of
the world watches the US e-Retailing landscape unfold, US-based retailers wait to see what lessons other countries’
unique paths of development have to offer. In reviewing the current state of e-Retailing across the globe, a number
of themes materialise:
• E-commerce, including e-Retailing, is growing rapidly worldwide. Worldwide e-commerce revenues are
escalating year by year. By 2004, worldwide B2C e-commerce revenues are expected to reach Rs. 428 billion,
up from Rs. 60 billion in 2000.
• Internet-based commerce will not look at the same from country to country, especially in terms of mode of
access. For example, in the U.S. and Canada, it seems that PC-Internet access is likely to be the preferred mode;
in places like Northern Europe, wireless is an important technology; and in some countries such as the UK,
interactive TV may develop into a force to be reckoned with.
• As on land, there is only room for a few retailers online to operate profitably in each merchandise category.
Shakeout is likely to continue to occur among players as each market develops. Already, rationalisation of
e-retailers is occurring around the globe in the form of a spate of acquisitions and business failures.
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• Telecommunications costs are likely to continue to fall as competition increases and governmental consumer
pressures mount. Lower costs of telecommunications will likely improve the level of online penetration and/
or the frequency and length of online visits. Similarly, the development of e-commerce will force countries in
Europe to further deregulate their retail markets. This is already beginning to occur in Germany relative to its
prohibitive promotional regulations.
• Despite growing Internet access, a digital divide remains. In many areas of the world, poverty will prevent a
sizable share of the population from gaining Internet access for the foreseeable future. Computers in workplaces
will allow some people to access the Internet who might not otherwise have the means. Yet, a rift will continue
to exist between the world’s technology-haves versus its technology have-nots. The Internet has not yet become
the great equaliser many touted it would, but another medium used by people with education and money.
• Diversity will grow on the Internet. Countries that are minor global players today will narrow the gap going
forward. The dominance of the English language on the Internet will become less pronounced. For example,
China is one of the world’s fastest growing Internet markets. The number of Internet users in China grew by
73% from June 2001 to June 2002, according to the China Internet Network Information Center. In total, the
country’s Internet users’ number is nearly 46 million. The number of Websites in China grew by 21 % in the
same period, to over 293,000.
• Bricks-and-clicks players and alliances will playa major role in e-commerce. The collapse of the dotcom bubble
in the US has proved what few predicted at the start of the Internet era. E-commerce will remain largely in the
hands of established retailers. Multi-channel players are already well-known entities, creating a higher level
of trust and a lower need for advertising and marketing expenditures, compared to pure-play retailers. A land-
store presence allows customers an additional venue to shop, to pay, and to pick up merchandise. As in the US,
a substantial portion of e-commerce growth worldwide can be attributed to cataloguers actively encouraging
their customers to use the Web, rather than dialling into a call canter or mailing an order form, as an order-entry
mechanism.
• E-retailers will stimulate further development of value-oriented retailing in many regions of the world. Online
retailers are offering bargain-basement prices to build their customer bases’, oft combined with generous shipping
and handling promotions. And, pricing across retailers will become more transparent as consumers can check
prices online quickly and easily. Shopping comparison sites are providing assistance in this area as well.
• The US will provide insight as to how emerging markets may evolve. However, each region’s market forces
will create an idiosyncratic path of development.
• Change comes quickly. High-profile players can vanish overnight Technologies that seem advanced now will
soon be eclipsed by competitors’ new developments. And, there will continue to be tremendous momentum
from consumers.
3.11.1 Western European Retail Environment

Among the countries of e-commerce varies geography. Generally speaking, Western countries of Denmark, Finland,
Central the United Kingdom, among other countries), and the South (Greece, Italy, Spain and Portugal). The countries
in the north are by far the most advanced in terms of Internet development; the countries in the south, the least
developed, with the countries in central Western Europe generally falling somewhere in between in terms of Internet
development and sophistication. Western Europe, Europe can be segmented Norway, and Sweden), development
widely by into three regions: North (the Scandinavian (including France, Germany,
The northern region of Western Europe, Scandinavia, has the highest Internet penetration rates in the world. One
of the contributors to .the area’s high rates of Internet access is the area’s cold climate, which encourages indoor
activity. Furthermore, mobile technologies, including mobile Internet access, are relatively widespread in the region,
given that Finland and Sweden are home to mobile phone giants Nokia and Ericsson, respectively. Finally, much
of the area’s population is fluent in English, the predominant language of today’s Web.
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Overall, the advantages that Western Europe has over other regions of the world is that it has a standard mobile
technology and a common currency that brings better competition, price transparency and improved deals for
consumers. Conversely, the widespread presence of “narrowband” connections discourages consumers from browsing
e-Retailing sites for extended periods of time.
E-Retailing in Western Europe is following much the same developmental path as it did in the US - but with a
time lag that is perhaps 12to 18-months long. Rationalisation is occurring as stronger players consolidate through
mergers and acquisitions and weaker players cease operations altogether, while multichannel retailing is becoming
the preferred go-to-market strategy.
Important trends
Online grocery retailing is one of the largest sectors in British e-Retailing. In fact, UK-based Tesco.com is touted
as the world’s largest online grocer, and a profitable one at that. Tesco fills orders from its stores while chief rival
J. Sainsbury uses a combination of warehouse and store fulfilment. Other players in this space include Iceland,
Asda, and upstart Ocado which is mounting an attack on the London market. Ocado has funding from UK retailer
John Lewis (operator of the Waitrose supermarket chain) and fulfils orders via warehouses. One reason that online
grocery may be experiencing more success in the UK than it did in the US is the UK’s greater population density
which makes home deliveries more time and cost-effective.
• Differences in pricing across pan-European sites are becoming more transparent to online consumers as European
Community members move toward further economic integration. For this reason, pan-European shopping
comparison sites such as ShopSinart.com, PriceRunner.com and Kelkoo.com are increasing in popularity.
• The challenges of opening and operating a substantial base of European stores will prompt more specialty and
department store retailers to reach Europeans in secondary and rural markets via multi-channel approach that
includes a transactional online site.
This strategy will be particularly effective when linked to a “flagship-city” Europeanisation strategy whereby
retailers build awareness with key shopper segments by opening stores in major urban markets, then cost-
effectively reaching non-urban online shoppers who aspire to the same fashion and lifestyle trends via the
Web. For example, with its recently opened www.fcukbuymail.com site, French Connection, the UK apparel
specialist, is testing delivery to continental Europe for the first time.
• Western Europe is attracting ‘ major. e-retail players from all over the world, including the US. Amazon .com,
Buy.colT), eBay, J.C. Penney, Lands’ End, Office Depot, and The Sharper Image are among those retailers that
have developed e-commerce sites specifically to serve markets in Western Europe.
3.11.2 Latin American Retail Environment

Much of Latin America has a long way to go before it can truly embrace the Internet, and especially, eRetailing.
Although Latin America is a large, young, and in many ways, appealing market, the reality is that many of its citizens
remain poor. The gross national product per capita figures for Latin American countries are only fractions of those
in the US and Western Europe. Moreover, parts of Latin America suffer from vast disparities in wealth distribution.
Therefore, the purchase of a computer and the associated costs of Internet access are simply not attainable for a
substantial portion of the region’s residents. This is especially true in Argentina where economic and social turmoil
have conspired to stop the growth of new Internet users. Indeed, America Online Latin America expects its membership
to decline across the region, reflecting the tough local economic conditions. Income is not the only barrier to Internet
usage in Latin America. A less developed telecommunications infrastructure is also a major inhibitor in many parts
of the region - especially away from major urban centres. Compared to the US and Western Europe, the number of
households with a telephone is considerably lower. For example, there are only between 11 and 21 main phone lines
per 100 persons throughout key Latin American countries, versus 68 per 100 persons in the US.
However, telephone penetration is likely to increase somewhat in the near ‘term. Some including Argentina and
Brazil, are deregulating and/or re-regulating their telecommunication These changes are likely to result in more
competition, better service, and more affordable rates.
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In some areas of the region, mobile phones and other wireless devices may emerge as options for accessing the
Internet. Mexico’s wireless phone subscribers outnumbered the country’s fixed telephone lines sometime in 2000.
However, most of the country’s mobile phones use analog technology, ‘not the digital technology optimal for
e-commerce. Furthermore, in many areas of Latin America, mobile phone services are not widely affordable. Future
Internet access may be more likely to come from interactive television, given that television penetration is higher
than that of telephones, cell phones, or PCs, in some areas.
Other strategies for bringing the Internet to new customers are starting to emerge. In Mexico, for example, Internet
service providers (ISPs) are introducing pre-paid access plans that allow customers to get online without committing
to long-term service agreements. Internet kiosks that accept pre-paid access cards are also being placed in stores,
also eliminating the need to own the hardware.
A discussion of Latin America e-retail readiness would not be complete without a note about consumer credit.
Credit cards are not nearly as prevalent in Latin America as they are in other parts of the world. While low credit
card penetration is due in part to low incomes, it is also due to the fact that the region’s history of hyperinflation has
made non-cash transactions impractical.
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Summary
• The e-Retailing (eRetailing or eTailing) is the concept of selling of retail goods using electronic media, in
particular, the Internet.
• E-Retailing refers to retailing over the internet.
• An e-Retailing is a B2C (Business-to-Customer) business model that executes a transaction between businessman
and the final consumer.
• The e-Retailing is a subset of e-commerce. Thus, e-Commerce is the master domain defining the e-Retailing
operation.
• The uses of digital technologies such as the Internet, Bar Code Scanners, etc. to enable the buying and selling
process based on either semi-automated or automated form, are the constituents of e-Commerce.
• Information and communications technology may be described as the support of the central nervous system of
complex socio-economic societies, processing and transmitting information through the various parts of such
societies.
• E-Marketing is the product of the tie between modern communication technologies and the age-old marketing
principles
• e-Marketing or electronic marketing refers to the application’ of marketing principles and techniques via electronic
media and more specifically the Internet.
• E-Marketing is the promotion of a product, company, service, or web site online.
• Integral mode of working of electronic concepts along with traditional marketing is known as “Brick and Click’
marketing.
• The e-Marketing facilitates conversations between companies” and consumers whereas traditional marketing
is largely about getting a brand’s message out there.
• Every e-Retailing site has a store-front with an identity, image and positioning according to its own decorum
• Online retailers use visual density very effectively to promote offspring and sell their merchandize.
• In online merchandising, the site can have an unlimited number of SKUs (Store Keeping Units) on display.
• An online storefront, just like a brick-and-mortar store, serves two purposes of displaying merchandises, and
Checking out customers.
• CRM software can help one to develop custom CRM solution which can work in distributed work environment
to generate input from the business process.
• Co-branding is used as an important tool for brand marketing and increasing revenues.
• Loyalty programs are effective tool for to customer retention and up-selling and cross-selling of products
• E-tailing or e-retailing refers to the selling of retail goods electronically over the Internet.
• The businesses that do not use the latest retailing channels and still rely upon the conventional mode belong to
Brick and Mortar category.
• multi-channel retailing is the distribution of products across multiple sales
• The greatest benefit of online commerce is its ability to interact with the customers.
• Most of the e-tailing ventures have not been as profitable as they were expected to be.
• Smart cards allow for smaller transactions and provide anonymity (ensuring privacy) to the consumer while
making the purchase.
• Paypal is a tool that facilitates person 2 person (P2P) transactions in an online environment such as the eBay
(eBay now owns Paypal).
• VeriSign provides secure online payment options to facilitate online commerce.
• Western Europe comprises a standard mobile technology and a common currency that brings better competition,
price transparency and improved deals for consumers.
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References
• E- retailing in India [Online] Available at: <http://www.economywatch.com/business-and-economy/e-retailing-
india.html> . [Accessed 5th October 2011 ].
• E- tailing and Multi- Channel Retailing [Online] Available at: <http://www.dmsretail.com/etailing.htm>.
[Accessed 5th October 2011 ].
• Zentes, J., Dirk, M. & Klein, H., 2007. Strategic Retail Management: text and international cases, Gabler
Verlag.
• Sharma, D. P., 2009. eRetailing : Principles and Practice., Global Media
• Sharma, B. M., 2008.Strategic Retail Management, Global Media
• Hayden, 2011.What is e-commerce? [Video Online]Available at: < http://www.youtube.com/watch?v=4FyxLuD_
mEM&feature=related >. [Accessed 5 Octoberober 2011].
• What is ecommerce?, 2010. [Video Online] Available at:<http://www.youtube.com/watch?v=V6CjVMNc
dNE&feature=related >. [Accessed 5 Octoberober 2011].
Recommended Reading
• Chakrabarti, 2002. The Asian manager’s handbook of e-commerce., Tata Mcgraw- Hill Education.
• Schniederjans, J. M., 2002. E-Commerce operations management,World Scientific
• Harris, L. & Dennis, C., 2007. Marketing the e-business.,Taylor & Francis .
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Self Assessment
1. __________ is the concept of selling of retail goods using electronic media, in particular, the Internet.
a. Retailing
b. Online marketing
c. e-marketing
d. e-retailing
2. E-retailing is a____________ business model that executes a transaction between businessman and the final
consumer.
a. Person-to-Person(P2P)
b. Customer-to-Business(C2B)
c. Business-to-Business(B2B)
d. Business-to-Customer(B2C)
3. _____________ is the product of the tie between modern communication technologies and the age-old marketing
principles.
a. e-retailing
b. marketing
c. e-Marketing
d. retailing
4. The businesses that do not use the latest retailing channels and still rely upon the conventional mode belong to
_________ category.
a. Brick and Click
b. Brick and Mortar
c. E- commerce
d. e-marketing
5. __________ is a tool that facilitates person 2 person (P2P) transactions in an online environment such as the
eBay.
a. Paypal
b. Smart-cards
c. Veri-Sign
d. E-commerce
6. ___________ allows for smaller transactions and provide anonymity (ensuring privacy) to the consumer while
making the purchase.
a. Paypal
b. Smart-cards
c. Verisign
d. Online marketing
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7. Integral mode of working of electronic concepts along with traditional marketing is known as __________
marketing.
a. Brick and Mortar
b. Online
c. e-retailing
d. Brick and Click’

a. E-Retailing refers to retailing over the internet.
b. Interaction with the customers is not possible with online commerce.
c. Most of the e-tailing ventures have not been as profitable as they were expected to be.
d. In online merchandising, the site can have an unlimited number of SKUs (Store Keeping Units) on
display.

a. Multi -channel retailing is the distribution of products across multiple sales channels.
b. The various merchandises can be displayed on an online storefront
c. The type of customers cannot be checked out on an online storefront
d. VeriSign provides secure online payment options to facilitate online commerce.
10. ______________ comprises a standard mobile technology and a common currency that brings better competition,
price transparency and improved deals for consumers.
a. India
b. Japan
c. Western Europe
d. Latin America
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Chapter IV
Store Location
Aim
• discuss the importance of location decision in retailing
• enlist the types of retail locations
• analyse various trading areas
Objectives
• identify the series of techniques for location assessment
• evaluate different types of location sites
• access the market potential
Learning outcome
• identify various steps involved in retail site selection process
• differentiate between various types of retail locations
• understand site identification and selection process
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4.1 Introduction
The choice of location is the most vital aspect for any business that relies on customers of which retailing is the
classic example. Deciding on location is the most complex of the decisions to be taken by a retailer. Firstly the costs
are very high and once a location has been selected there is very little flexibility.
As you would agree that choosing a wrong location can lead to losses and even closure of the store. This makes the
selection of the appropriate location the most critical aspect of retailing. Location of a store in an area depends on
its type of business and the type of customers it wants to attract.
Choice of location, also commonly referred as a “retail site selection” is not simply a question of what real estate
is available. It’s an analytic challenge that requires an understanding of the customer and the market potential for a
retailer at a location. Whether you are a retailer, shopping centre owner/developer, or real estate broker/developer,
the challenge is the same.
4.2 Importance of Location Decision in Retailing

The importance of location decisions is due to the following factors:
• Location choice is a major cost factor.
• It involves large capital investment (the high cost of land or building if it is being purchased of recurring cost
of rent if it is leased).
• It affects the transportation cost structure (Distance from the manufacturer, distributor etc. affects the total cost
of transportation).
• It has a significant bearing on human resources cost (if the retail store is located away from central locations i.e.
areas where public transport is weak the cost of employees will be higher as employees will have to be provided
with transportation or paid for transport).
• It is dependable on the quantum of customer traffic (depending on the number of consumers who frequent the
area).
• It affects the volume of business (if the number of customers visiting the store are low then the volume of
business done by the retail store is obviously affected).
Thus a location decision, as you would appreciate, is influenced by the flow of vehicular and pedestrian traffic,
which determines the footfalls in a retail store. It is very important to take pedestrian and vehicular traffic count of
the location before choosing the location.
For determining the pedestrian traffic the following aspects are to be considered:
• Age and gender of the pedestrians passing through the area (exclude very young children).
• Count by time of day i.e. number of pedestrians passing through the area during different times of the day.
• Pedestrian interviews i.e. ask random pedestrians their shopping habits etc
• Spot analysis of shopping trips.
Further determining the vehicular traffic count is very important for convenience stores, Stand-alone stores and
areas with limited pedestrian traffic. As you would appreciate that it is possible for a store to have good locational
characteristics and poor site characteristics and to have good site characteristics and not have good location
characteristics. For instance, the store may have a good locational mileage, i.e., in a prime area with good vehicular
and pedestrian traffic, but may have poor site characteristics like not having parking space or the site may have
all the facilities required but the pedestrian and vehicular traffic could be low and not generate enough volume of
business.
Further one needs to appreciate that the location and site should interact in a positive way with a stores merchandise,
operations and customer service. For instance if a convenience store is setup in a residential area with ample on site
facilities and the location is a high traffic area then the store location can be described as a perfect location.
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Example 1: Departmental stores like Lifestyle, Shoppers Stop, Pantaloon choose locations having right mix of
location and site characteristics.
Example 2: Wal-mart, the world’s largest retailer realised the issue of finding distributors for its scattered network
of stores when it started moving into rural communities. To overcome this it setup regional distribution centres
supported by a huge truck fleet to reap advantages of scale.
Example 3: Home-depot, the largest home centre chain is seeking markets with significant aging suburban houses
and apartments as it sees them as prime target for its “do-it-yourself ” proposition.
4.3 Assessing the Market Potential

A market’s potential can be assessed by studying the demographic characteristics of the market (size, sex, education,
rural-urban break-up, etc.). This is further enlarged by studying household income and the distribution of this income.
The competition and compatibility of the retail outlet also counts. The other retail outlets in the area are considered
while deciding the location. The legal factors also must be considered before locating an outlet. The most important
part is to do the trade area analysis.
4.3.1 Trade Area Analysis

Market potential is gauged by analysing the trading areas - geographic areas which generate majority of the customers.
Trade area has its boundary. Thus, each trade area has a certain potential or the number of potential customers.
Each area is studied in terms of its demographic and life-style characteristics. A trade area can go beyond the limits
of a town or a city. It all depends upon the type of merchandise and the market segmentation. Trade area analysis
facilitates promotion decisions also.
Trading areas are based on travelling time and distance. They need not always be concentric. There can be different
sectors depending on different rents charged. There can be multiple nuclei where different types of activity tend to
group together. Different types of businesses will have different trading areas - people may travel greater distances
for certain product categories.
A destination store has a better assortment of products, promotes itself aggressively and projects a positive image.
It may have larger trading area than its staid counterpart located in the same shopping area. A parasite store on the
other hand has no real trading area of its own. Such a store depends on traffic generated by some other outlet, e.g.,
a magazine vendor in a five-star hotel or a florist near a cemetery.
The larger the size of the outlet, the greater is the trading area. The logic behind this is that a large-sized store has
greater product assortment. Trading areas for supermarkets are larger than those of convenience stores.
Competition influences the trading areas. If shoppers happen to be situated between two stores, the size of the
trading area of both the stores is reduced. If the two stores are situated apart, the trading area normally increases.
Residential concentration near a store tends to reduce the trading areas. Geographically spread out housing means
larger shopping areas.
Travel or driving time also influences the size of the trading area. Differential taxation also affects the size and
shape of the trading areas. A retail outlet can enhance its trading area by promotion. A trade area consists of three
components with the retail outlet or shopping centre as its epicentre, and the other being treated as concentric rings.
The three parts are appropriately named as: Primary, Secondary and tertiary.
Primary trading area: It is that part where majority of the customers are based, say 60-65 per cent. It is close to
the store.
Secondary trading area: It is situated at a distance of 2-7 miles or under 20 min utes of driving time from the
outlet. It contains 15-25 per cent of the outlet’s customers.
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The following figure illustrates the concept of the trade areas:
iary Trading Area

Tert
dary Trading A
econ rea
S
ary Tr adi ngA
rim r
ea
Retail Outlet
Fig. 4.1 Types of trading areas
Tertiary or fringe trading area: It contains the rest of the customers. It includes those who occasionally shop as
an alternative to local shopping. It can extend upto 50 miles, where there is a lack of alternatives.
4.3.2 Trading Area Overlap

A retail outlet can take business from existing stores or can cater to new customers. A store may have a trading area
of 2 miles. It may set up a branch three miles away from the present store. There will be overlap in the trading areas
of both these stores. In this overlapped area, the customers will receive service from both the stores. The same set
of customers, in other words, are served by both the stores.
2 miles
2 miles
1 mile
2 miles
2 miles
1 mile 1 mile
2 miles
2 miles
Trading Area of store A Trading Area of store A
Fig. 4.2 Overlapping of trade area
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GIS
Retailer uses the Geographic Information System (GIS) software for mapping their trading area and its analysis.
4.4 Site Identification and Selection

Once the market potential is assessed, a retailer has to decide the site to locate the store. This site could be a vacant
real estate, a plot of land or the site of a planned shopping centre.
Since many retail outlets go out of business, their vacant sites are available for occupation. Some of these sites may
be ‘jinxed’ by being failure-prone time and again. Some investigation is necessary before thinking of such sites either
vacant in ready-to-occupy form or a vacant plot of land. The reasons for the vacancy must be carefully analysed.
A shopping centre or a mall will have a proper mix of stores, the appropriate infrastructure like the parking facilities,
the security, insurance, etc. and healthy traffic. But maybe, the centre is not properly planned. A shopping centre
may have non-rented galas which needs consideration.
The following factors are considered while selecting the site:

4.4.1 Traffic
Both, vehicular and pedestrian traffic is taken into account. The traffic that passes the site indicates what its likely
sales potential is going to be. The sheer numbers are not important.
The nature of the traffic too must be considered. A fashion boutique selling haute couture may have two alternative
sites under consideration. One is in the downtown Mumbai with heavy traffic. The other is in an affluent area like
the Lokhandwalla or Santacruz-Juhu with sparse traffic but of the rich and famous. It is better to opt for the second
site.
Most importantly, these days while selecting the site something that needs to be checked foremost, is the availability
of sufficient parking space. There the shopping malls are at an advantage. The space for parking cannot be exactly
pinpointed. It depends upon the number of customers, the public transport available, the size of the store, the
frequency of customer visit and the length of customers visit. Roughly, a store needs five spaces for every 1000 sq.
ft. in midsized centres and ten spaces in large centres.
The case of access is another consideration. It depends upon the quality of the access road. Customers generally
tend to avoid highly congested areas.
4.4.2 Competition
Who are our neighbours? They can be good or bad, depending upon the nature of our business. A coaching class
and a pub are not good neighbours. A teaching institution and a bookstore are good neighbours. Goodness here
refers to compatibility with our line of trade and badness to incompatibility. Store compatibility improves sales.
Two bookstores side-by-side do greater sales than what each would have done had they been alone. Clustering is
helpful to customers to do comparative shopping and provide them easy access from store to store.
4.4.3 Buying / Leasing

A site can be purchased outright or can be obtained on lease. The lease terms require careful study - whether the
period of lease is long or short and the rent that is charged. A short lease may necessitate a change of location. A
high lease rental may affect the final accounts.
4.4.4 Product Mix

Merchandise available for sale also influences the site selection. A grocery store may be located in a residential
society. It may not work out in a commercial business district.
4.4.5 Anticipated Profits

Each possible site is evaluated on the basis of return (estimated) on assets. This will require three inputs - total sales,
total assets and net profit. Each will vary from site to site. The retailers generally do their own search, approach the
brokers and put ads in the media for site selection. Before selecting the site, a retailer prepares a comprehensive
checklist. An illustrative checklist is given here.
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4.4.6 Site Evaluation Check List
Site location
• City/Town
• Address
• Far;ade
• Area in sq. ft.
Population – Households
• Life-Style
• Income
• Age
• Education
• Occupation
• Store Location
Traffic
• Vehicles passing
• Access road
• Pedestrians passing
• Congestion
• Physical barriers like speed-breakers
• Bridges, etc.
Competition
• Types of stores in the area
• Key players
• Direct competitors
• Collaborative possibilities
Site characteristics
• Parking facilities
• Access Visibility
• Compatibility
• Physical condition of the building
• Entrance and exit routes
• Safety aspects
Cost lease cost and length

• Maintenance cost
• Restrictive clauses
• Voluntary regulations
The sites are shortlisted from the available lot. The sites are actually visited. They are assessed. The official site
visited report is generated.
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4.4.7 Different Types of Location Sites

Various sites are available for locating a store. The product lines dealt with and the target population we have in
mind and the format of the retail store-all these affect the type of site chosen. A designer boutique of course needs
a posh’location whereas a grocery store needs a modest neighbourhood location. The three typical options for
location are:
• The solitary site
• A planned shopping centre
• A business district or unplanned business district.
Solitary site
It is a single free-standing store on a road or a street. It does not have for its company other stores; in a sense it is
isolated. It is obvious that it faces no competition. Being isolated, it does not pay a high rent, and offers enough parking
space. Since the operational costs are low, these lead to consumer savings. Isolation itself makes it necessary to promote
the location, resulting into higher promotional costs. The sharing of security and maintenance is not possible, again
adding to costs. The solitary sites are preferred by food joints, dhabas on the highway, petrol pumps, convenience
stores, garages, and warehouses. Distance is a constraint and it tells upon its customer drawing ability.
Shopping centre
When a group of retail outlets co-exist near one another, and are planned, developed, and managed as a single property,
we get a shopping centre. Its architecture is unified. Mostly it has complementary retail outlets. Each shopping centre
has some key stores and smaller stores so as to have enough drawing power for the -diverse products. “
As a whole, it is a balanced property. A single centre gives opportunities to shop in comfort for diverse products.
The centre itself is promoted as a brand. The security and maintenance are stored. The centre is marketed as a whole,
e.g., Crossroads or In-Orbit Mall. The shopping centres are configured as malls and strip centres.
Shopping mall
A mall is a huge complex of stores admeasuring at least 100000 square feet. It is an enclosed building and is all
weather-proof or temperature-controlled. It has open pedestrian walkways, the sides of which have shops in a lipe.
Ifa mall has more than one floor, then the anchor store or stores may extend to the higher floors, e.g., Shoppers’ Stop
at In-Orbit mall extends from lower storey to the first floor. A mall may be a free-standing one, or in a shopping
area. Each mall has big brand stores and several smaller stores. A shopping mall is marketed as a whole. Each mall
is successful depending upon the type of shops it houses. Mostly, all retailers in the mall are non-discount ones
except a grocery hyper-market.
Strip centre
It is a row of stores with pushing facilities in front of the ‘store’. It is also called a retail park. Mostly, they are
developed on the outskirts of the city. These are not single-building properties like the malls. Retail Park has retail
outlets of at least 10000 sq. feet.
Unplanned shopping area

Here, retail outlets are situated near each other at a retail location. The development happens over a period of time
and is not due to any planning. The ownership is fragmented.
The majority of shopping areas in the city are unplanned. It gives a good variety to the customers. It is easily accessible.
The customers can take a comparative view. There are problems of parking and congestion. The overheads are high.
Properties may not be first-class. Manpower has to travel long distances, and so staff retention is problematic. Retail
stores located near one another at a centrally located place are said to be located in a Central Business District (CBD).
CBD happens to be the main centre of trade and commerce in the city. The shopping area and the office area within
the district are generally different. We have in Navi Mumbai CBD at Belapur. In Mumbai, CBD happens to be Fort,
Colaba and Nariman Point. CBD is well-connected by different means of transport.
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In addition to CBD, a city may have one or more Secondary Business Districtls (SBDs). It develops when a city
expands. Bandra-Kurla Complex (BKC), is developing in Mumbai as SBD. A neighbourhood business district is an
unplanned shopping area developed to serve the local needs of a residential colony, e.g., Lokhandwalla at Andheri
and I.C. Colony at Borivali have neighbourhood business districts.
Planned markets
The planned markets on the other hand are the shopping complexes, the Malls Etc. The advantages of planned
markets are that there is a well-rounded assortment of stores making it a one stop shopping experience for the entire
family. The malls have very large anchor stores which are either departmental stores or stores which have the crowd
pulling capacity.
Further in these malls you have a variety of stores, restaurants and services offered. There is high pedestrian traffic in
these markets and all the retailers in the market share the costs like lighting up of the market for festivals or running
of joint promotions to promote the market, which in malls is also supported by mall management.
The disadvantages of such a market are limited flexibility, the rents are higher compared to the earlier described
markets, and it creates a highly competitive environment and domination of the market by the anchor stores.
Example: The Sahara Mall, Metropolitan Mall in Gurgaon and the upcoming malls across major cities and towns
offering shopping, hospitality, entertainment and other personalised services.
4.5 Retail Site Selection Process

The mantra of real estate is location, location, location. However, location has vastly different meanings for a
business that owns commercial property versus a small retail owner looking to lease a storefront. While the real
estate owner is looking for property values and lease rates to increase, the retail storeowner is looking for a location
that is convenient for potential customers.
To find the best location, retail giants wield GIS systems with customised algorithms crunching census data with
years of actual customer preference data combined with geo-demographic databases. The cost of these types of
database programs are out of reach of small businesses, much less the teams of statisticians and programmers needed
to run them. A quick scan of the Census Bureau web site can generate more data than an owner could ever review,
but does that even help?
Making a retail site selection decision is just as important for a small retail owner as it is for major chains. In fact,
a small retailer is significantly less able to sustain a bad site decision than is a major retail player. The small or first
time owner is typically undercapitalised and not able to sustain months or years of underutilised business until it
can relocate or renegotiate a lease.
What’s a small business owner to do and what criteria should they consider? How does a small business owner
make a good site selection decision with the limited resources available?
This decision can be broken down into a seven step process that only requires internet access, a spreadsheet
program, a street map and a pack of colored markers. The process is really about identifying the characteristics that
are important to your business and gathering the data to find where those characteristics are present. The decision
is ultimately a financial decision, but the characteristics that build the financial model are all about your customers’
needs and expectations.
4.5.1 Create a Target Customer Profile

The most important question to be answered by the business owner has nothing to do with what location is ultimately
chosen, but rather who is the customer. Creating a profile of your customer's characteristics allows you to identify
where they live, work, play and drive. Think of your customers in census data terms. What is their income range?
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Is the customer married? Does the customer have children, own a home or drive a car? Identify those characteristics
that are present in your target customer. Knowing the characteristics of your customer allows you to more easily
target their location.
4.5.2 Create a Target Site Profile

Identify the ideal characteristics of your site, the absolute needs and the ‘cliff’ criteria. ‘Cliff’ criteria are characteristics
or groups of characteristics that are most indicative of potential for failure in your business. Don’t be lured by cheap
price or great visibility if your potential site has too many ‘cliff’ criteria present. These factors are usually too difficult
to overcome, even by other ideal characteristics.
Site characteristics include items such as available parking spaces, building square feet and layout, stand alone or a
strip, ingress and egress and similar characteristics. Identify which characteristics are important for your business. Each
business is different and small business owners need to put their personal egos aside to identify site characteristics
that are truly important for business success, not personal pride. Rank the importance of each characteristic by
assigning a percentage weight. The total of all your percentages should equal 100%.
4.5.3 Locate Target Customers and Market Keys

Once you know who your target customers are, find them in your area. Sort the demographic data by zip code for your
area by using the basic search criteria at the U.S. Census Bureau website. Identify those zip codes or neighbourhood
areas where your target customer is most concentrated. You may have to get in your car and drive around a zip code
area to identify your neighbouring areas. Take your map with you and mark where the high concentration of your
target customer likely lives.
Also locate the market keys, those items such as major work centres, traffic arteries, recreations areas and retail
centres. Once you’ve identified where you target customer lives, identify driving routes from home neighbourhoods
to work, shopping and recreational areas. Traffic count data is generally available from your local municipality. Use
your markers to identify the high traffic count streets.
Next, identify and note on your map the primary retail centres and feeder businesses. A feeder business is a business
where your target customer would also be expected to shop. Identify the location of your primary competition.
Whether you want to be close to or far away from your competition depends on your business and marketing
strategy. Your map should start to reveal primary trade areas in which the concentration of target customers and
market keys start to overlap.
Talk to your city council or plan commission to identify which areas of the city are targeted for future growth and
where pending development is planned. Analyse how this information might affect your choice for a location.
4.5.4 Identify Potential Sites within the Primary Trade Area

Now it’s time to get some help. Contact a local realtor with knowledge of commercial property market to help you
identify available sites within your primary trade areas. Visit those sites and generate a list of sites that seem to meet
your basic criteria. The realtor can assemble the financial information associated with each property. These items
include lease costs, fees, insurance, common area maintenance charges, property taxes and so forth.
With your target site profile in hand, visit each site during different times of the day and determine a grade for each
valued characteristic and ‘cliff’ criteria. I recommend a 1 – 5 scoring of each item where 5 means the site completely
meets your needs. Visiting at different times of the day will help you understand the patterns of customer behavior
and whether rush hour traffic renders the site completely unavailable.
4.5.5 Rank the Potential Sites

Utilise the site ranking matrix or other method, rank the potential sites. The site ranking matrix is a simple model
that allows you rank the sites using a weighted average based on the important site criteria and your value of their
importance.
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Select the top two to five sites for a pro forma analysis. You should select the number of sites based on the outcome
of your ranking. If two sites score well above the others, use only two. If several are all ranked closely, use that
group for the next step. Utilise the Site Ranking Matrix or other method, rank the potential sites. The Site Ranking
Matrix is a simple model that allows you to rank the sites using a weighted average based on the important site
criteria and your value of their importance. Select the top two to five sites for a pro forma analysis. You should
select the number of sites based on the outcome of your ranking. If two sites score well above the others, use only
two. If several are all ranked closely, use that group for the next step.
4.5.6 Analyse the Financial Data

Utilising the top sites from the Site Ranking Matrix, create a pro forma income statement and cash flow for each
target site. Each site will have different costs associated with the lease, taxes, insurance and other occupancy
expenses. You will also have costs associated with moving expenses and site preparation and build-out. Identify
these expenses and quantify the amount for each different site. In addition, each potential site will generate different
customer numbers and types that have different impacts on profitability and cash flows. Factoring the differences
between the potential sites, create pro forma income statements and cash flows.
If start-up costs for lease build-outs and other items are especially high, consider a net present value analysis of the
potential cash flows for each property. Using a three to five year cash flow projection, develop discount rates based
on the level of risk involved in your decision, including current interest rates, economic stability and local market
growth potential. Using a one year analysis period places too much emphasis on start-up costs, but utilising a three
to five year net present value methodology keeps those big lump sum items in the proper balance.
If your start-up costs are relatively low, you can skip the net present value calculations. While a net present value of
cash flows almost always gives you a better analysis of the financials, it’s fairly complicated math for non-financial
people. And frankly, at this point in the evaluation, it should either be clear which property is best or there probably
isn’t much difference between the top choices.
It’s often difficult to compare cost differences between categories and how they will impact financial performance.
Different sites have differing potential to generate sales revenue. By combining all factors in a standard business
model, the owner can see how the differences in cost and potentials impact the financial performance of the location.
A final ranking based on profitability and cash flow will give the business owner a good idea how the different
locations will impact the ultimate success of the business venture.
4.5.7 Select the Best Site

A final ranking of the sites based on profitability and cash flow should give the entrepreneur a good basis for selecting
a site that will give the business the best chance for success.
For any small business success, the owner must understand how what happens in the business world translates into
profitability and cash flow. Creating pro forma models helps to quantify the differences in costs and potentials for
the various sites. This process will allow any business owner to define what’s important to their business success,
find those locations that will most likely contribute to their success and compare how the small differences in site
and market potential between sites relates to profitability and cash flow.
4.6 Nature of Consumer Goods and Location Decision Area

Shopping goods usually imply products with a high unit price, which are purchased infrequently and involve more
intensive selling effort on part of the store owner. Shopping products are often sold in selected franchise outlets,
Further it is the character of the retail store rather than the goods it sells that governs the selection of the site. The
following are some of the characteristics of buyers of consumer goods:
• They compare Price, quality and features of such products across stores.
• While convenience goods are purchased by almost everyone, certain kinds of shopping goods are purchased by
only certain -segments of shoppers
• The consumers buy goods infrequently and plan their purchase
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There are two broad decisions in respect of the locations - destination retailing and proximity retailing: Proximity
Retailing and Destination Retailing.
4.6.1 Proximity Retailing

Proximity retailing provides convenience either at the workplace or home. We have thus retailers like a neighbourhood
‘bania’(grocer), chemist, green grocer, petrol pumps, newspaper vendors, general stores, etc. These retailers consider
the traffic and visibility. They try to satisfy the local needs. They meet our routine and day-to-day requirements.
4.6.2 Destination Retailing

Destination retailing pulls the consumers towards its location, which involves some travelling. The consumers are
drawn to destination retailers, as they happen to be large supermarkets, departmental stores, hyper-markets, life-style
stores, discount stores. Car ownership is the major contributing factor towards development of this type of retailing.
Mostly, these stores sell specialty goods and high involvement goods.
According to Paco Underhill, the worst location for retail store is next to a bank. It takes consumers 25 feet to slow
down from a quick walk. There is nothing to look at in a bank’s window, and so consumers pick up speed and do
not slow down fast enough to notice the store directly next to it.
4.6.3 Location Decision in Retailing- Issues

It is important for you to understand the role of retail location in the context of business practice. To do this it is
important for you to start with the broadest possible view on strategic planning .The assumption being that the
organisation can control its assets, the environment(s) it operates, but cannot control the environment
The following factors affect the choice of a retail location:
Corporate strategy
Wherein the retailer needs to ask himself the following:
Question 1: What business (es) should we operate? In what business environments are our core assets most
valuable?
Question 2: What should we be doing internally, versus outsourcing or not being involved at all?
This is implemented through decisions to enter and exit industries, acquire firms/ closure of non-complementing
businesses/vertical or horizontal integration or disintegration so on.
Business strategy
Here the retailer needs to answer as to how he will compete in this line of business which leads to explore the
following drivers:
• Product breadth
• Target market
• Quality/price etc.
Functional strategies (finance, production, marketing)

Here, the retailer needs to evaluate the best ways for him to serve his target markets with the desired products.
Further, geography enters all three levels of strategy wherein the incumbent retailer needs to ask himself the following
questions:
• Are we an Indian company or a global company?
• Do we have the assets to compete on the basis of worldwide low costs?
• Where should we obtain financing, source inputs, locate production, and locate distribution or outlets? Given a
production location, what technology and human resource policies can work best here? Given a retail location,
what product mix and price points work best for us here?
• Do we have the logistics to service these chosen markets.?
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• How many retail outlets do we need to cater to our chosen or desired market? ,
• Where do we locate each retail outlet?
• What is the product mix and level of product adaptation that is required for a -given retail outlet?
However, though location decisions are most often made explicitly at the level of functional strategy they must be
in tune to the overall competitive strategy. (So if you want to become a CEO of a retailing venture you need to gain
experience and expertise in additional contexts. Geography is generally a means to an end in an organisation).
Also, the choice of location means a basic economic-geographic trade-off between economies of scale and friction
of distance; relative concern for cannibalisation versus eliminating competition. More ambitious retailers might
change not just the product mix but the entire concept and even the brand name of the stores to serve their chosen
market (without weakening brand image/positioning). For this they need to introspect by asking themselves the
following questions:
• Where are our current or desired markets in general, located (assuming monopolistic market areas)?
• How should we go about dividing our market among our various outlets (assuming monopolistic market
areas)?
• How and where should we locate ourselves, what will our market distribution look like, in the context of our
competitors?
For instance an excellent site for a shopping goods store is next to a departmental store or between two departmental
store where there is a flow of traffic between them. Another good site is between a major parking area and a
departmental store.
Example: The recent phenomenon that departmental stores like Shoppers Stop and Pantaloon have started being
one of the anchor tenants for malls coming up in close proximity is a case in point. A case observed in Mumbai,
Gurgaon, Kolkatta on account of small catchment areas and range of complementary products and services offered
in the vicinity.
4.7 Types of Retail Location

There are a number of types of retail location available which a retailer can have:
4.7.1 Isolated Store
The isolated store is that where there are no other outlets available in the vicinity of the store. This is also called free
standing locations since it depends upon its own power and quality to attract the customers. Such a store is located
along a major traffic having no other competitor around it. Such a store has several advantages
• Absence of any competitor in close proximity.
• Rents are usually low.
• Flexibility in operation since no group rules need to be followed
• Larger space is available for operation as well as parking, etc.
• Better road and traffic visibility is possible.
• Facilities can be adapted to individual specifications.
• Possibility of cost reduction is there.
• The element of monopoly helps in increasing revenue.
However it has several disadvantages too, which are:

• It may be difficult to attract customers initially.
• People may not like to travel very far-off to get something unless they have to pass through that way.
• Most people like variety in shopping.
• Advertisement expenditure may be high
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• Additional costs such as outside lighting, security are to be incurred since no external economies are
available.
• A store must often be built rather than rented thus higher capital expenditure is required.
• Urban bodies zoning may restrict access to desirable locations.
• Generally planned shopping centres are preferred by the consumers
• The customer will avoid additional travel cost particularly when it is at a distance.
4.7.2 Neighbourhood Stores

Stores which are located in residential neighbourhoods to serve the small locality are known as neighbourhood
stores. Generally, they sell convenience products. Such stores operate on a lower scale and may charge higher price
even.
Part of a business district

A retail store can be located as a part of a business district, i.e., a place of commerce in a city which has developed
as the centre of trade commerce historically. Mostly, it is unplanned and has no preset format or structure. Such a
centre could be –
• Central
• Secondary
• Neighbourhood
The central business district is the main centre of commerce and trade in the city. It is a hub of retailing activity in a
city. It has the trade area that varies ‘according to the size of the city. In big cities like Delhi or Bombay customers
even from suburbs come for shopping. It has good accessibility in terms of transport from all the parts of the city.
Being part of such a business district has its own advantages and disadvantages. The retailer is not required to spend
any additional amount for drawing customers however the rents may be high and space may not be available for
facilities like parking.
The Central Business District has certain strength for which it is preferred by the customers.
• Excellent goods/service assortment
• Having variety of store types and positioning strategies within the area
• Range of prices may be large.
• Variety of customer services.
• Access to public transportation.
• Pedestrian traffic is large.
• Nearness to commercial and social facilities and the people may visit the area even having no intention to make
purchases.
However, there are number of weaknesses too.

• Lack of planned development of the Centre.
• Inadequate services such as parking, conveyance.
• Traffic and delivery congestion.
• Longer travel time for those living in the suburbs.
• Few stores may be old and traditional.
• Relatively poor image of some potential customers.
• High rents and taxes for the most popular sites.
• Space shortage for assortment.
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The Secondary business district is one which has evolved over a period of time as a result of increase in population
of the city. The number of such centres can be more than one. They attract customers from a large part of the city.
A large number of retail stores may be located here however the size may be smaller than the Central Business
District.
The neighbourhood business district is one which has emerged as a shopping area to serve the needs of the nearby
locality and in not planned. A number of retailers small in size may be established here.
4.7.3 Shopping Centre

Shopping centre has been defined by the International Council of Shopping Centres as “a group of retail and other
commercial establishments that is planned, developed, owned and managed as a single property.” It is planned
shopping centre which consists of a group of architecturally unified commercial establishments on a site that is
centrally owned or managed, designed and operated as a unit. Its location, size and mix of stores are related to the
trading area which it serves. The quality, variety of products etc. are determined by the needs of the population.
The parking facility is an important feature. To maintain the balance various product lines are allocated space in a
reasonable manner.
It has several advantages:

• Well planned assortments of goods and services keeping in mind the long range operation.
• Customers are mainly from sub urban areas.
• A centre for family shopping since it is only one stop shopping .
• Advantageous to retailers since common costs are shared.
• Unified distinctive image of shopping centre.
• Pedestrian traffic is maximised for individual store.
• Access to highways and availability of adequate parking facility.
• Generally rents and taxes are lower
• Growth of discount malls and competitive prices.
• Availability of many services including entertainment, controlled temperature and demonstration of even large
size products.
• More spacious hence more appealing than city shopping for a number of customers.
In spite of these, there maybe some limitations of such centres:

• Rent may be high as compared to isolated store.
• Regulations by the landlord may reduce the flexibility of retailer.
• A highly competitive environment within the centre.
• Sometimes there are restrictions on the goods/services that can be sold by each store.
• Extra payments for certain common purposes which may not be revenue earning to retailer such as membership
of the merchants’ association.
• The number of malls may be large in an area.
• Domination by large anchor stores.
These shopping centres are quite important. According to the International Council of Shopping Centres, there are
48000 US shopping centres, about 1130 of which, are fully enclosed shopping malls. In India, Connaught Place was
developed initially as a shopping Centre. Now a large number of cities are having such Centres.
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During the course of time, the retail markets in the West have brought a various shopping centre formats. The
International Council of Shopping Centres has defined 8 types of shopping centres
• Neighbourhood shopping Centre
• Community shopping Centre
• Regional Shopping Centre
• Super Regional Centre
• Fashion/Specialty Centre
• Power Centre
• Theme Centre
• Outlet Centre
4.7.4 Periodic Market

In India, a different type of markets are found which may be termed as periodic markets Such markets are organised
at a particular place on particular days during a week. Such markets generally operate during evening and serve
lower and middle class families. These are very popular at places where there is high concentration of population
particularly of a given income level. They provide large number of products. The shops are arranged on a temporary
basis for certain hours and a nominal rent is paid to the local government. The major features of various types of
shopping centers are given below to have a comparison at a glance.
Name Radius Building Area Parking Area

Convenience/
6 min 30-100 KSF NH
Neighbourhood
Community 15 min 100-500 KSF Negligible
Regional 30+ min 500-1000 KSF Limited
Super-Regional 45 min >1,000,000 SF Adequate
Table 4.1 Comparison of various types of shopping centers
4.8 Techniques for Location Assessment

There are a lot of techniques used in choosing of a store location. Some of the techniques used in locational choice
assessment are as follows:
4.8.1 Judgemental Technique

Where there is a heavy reliance on one’s gut feeling through environmental scanning leading to one of the following
possibilities of locational imitation of competitors(or nearby competitors).
4.8.2 Systematic Screening Technique

Here the incumbent/existing retailer assumes the size of the market area using general rules of thumb survey of
current customers like:
• What radius or drive time would encompass a certain percentage of all customers? (But would this be the same
in a denser, less-dense, or less auto-prone region?)
• How to identify (and perhaps rank) preferred market areas of the given size?
• What patterns or indicators to look at in published data on the household income, consumer expenditures,
business growth, or population growth by metropolitan area or broadcast media market?
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4.8.3 Analogue Technique
Where the incumbent/existing retailer can look for market-area characteristics that are similar to the market areas
of successful, analogous stores using the following techniques:
Differential analysis
This involves analysing characteristics like-market areas and nature of stores, their product mix, management
strengths, size etc. Thus they go on to differentiate between the most-successful and least-successful locational
choices.
Regression analysis
This involves determining the level of profitability (or revenues) across all sites (perhaps sales per square foot) as
a function of a set of characteristics, and uses the location-specific variables that are most significant.
Further if the analysis also includes non-geographic variables (age or training or experience of managers, age of
the store, years since last renovation, etc.), then he can assume that he has a reasonable level of control on some of
the things that make stores disimilar to each other.
Market- area analysis

Where he can seek market areas that have generally desirable characteristics and then gradually build up his data
from a small-area data depending on what he sees is desirable for his product and marketing strategy.
This requires: Geo-demographic data (data on the median or average economic and demographic characteristics of
inhabitants within small geographic areas), or
• Lifestyle data (data on the location and buying habits of individuals), or
• Geo-lifestyle data (data that draws inference about the buying habits of the inhabitants of small geographic
areas).
4.8.4 Retail Saturation Coefficient

This coefficient measures the potential sales per square foot of store space for a given product line within a particular
market area. As a market area evaluation tool, it incorporates both consumer demand and competitor presence.
The coefficient of retail saturation depends on the size of the population, per capita expenditure on consumer goods,
amount of retail space available for sales, and the maximum value each of these variables can be in a particular
market area. This coefficient can take a value of between 0 and 1, but the key question to be asked is whether the
retailer would be inclined towards a 0 or 1 value.
The formulation of the index of retail saturation is expresses as follows:
Retail saturation index /R3D for market area(i).
RSIi =
where P is a measure of population, E is a measure of per capita expenditure (on consumer items in general, or
on your particular product category), and .R is a measure of the amount of retail space (or space devoted to your
particular product category), each within the market area where max [R / (P E)]is the maximum value of R / (P E ,
,)
that can be achieved in any market area.
Example 1: In India for instance many consumer good conglomerates and merchandisers are moving towards down
town areas for merchandising their goods with several specialist categories such as linen and items relevant to the
area for consumption by the local populace.
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Example 2: McDonalds in India is moving their retail outlets to suburban areas dependent upon the consuming
population and the number of footfalls it envisages in the area. The evaluation of this coefficient is therefore
important for the retailer to determine the market potential of selling its wares in the area and also McDonalds for
setting up a food outlet.
4.9 Retail Location Theories

The retail location theories are classified into two types: quality and distance theory and land value theory.
4.9.1 Quality and Distance Theory

This theory suggests that the footfalls in a retail space have a direct correlation to the quality of the retailed item
and inversely proportional to the distance of the retailer from the consuming populace. The most common measure
of “quality” is the size, in square feet of retail space. Distance, of course, can use any number of metrics.
4.9.2 Land Value Theory

This is used for determining and explaining the arrangement of urban land usage and location of economic activity
zones in a given area. It goes on to state that the competition for a given land area will determine the price of the
urban land and therefore will have bearing on the nature, quality of the goods merchandised thereby ensuring that
the best use of the retail space is effected.
4.10 Retail Market Identification

Retail market identification is the process of understanding the profile of likely customers in a chosen area through
the following techniques:
Customer spotting: This involves observing and mapping the actual customer footfalls through the following data
sources:
• In-store surveys
• Point-of-sale query (telephone nos.)
• bank account information
• redeemed coupons that had been mailed to the customer’s address
• family size
• car/vehicle ownership
The mapping is done by dividing the entire region into zones (Census studies etc.).
Then the market penetration is computed as the ratio of the number of observed customers to the number of potential
customers (population? number of households?) in each zone.
For Example: The identified and mapped zones with market penetrations that meet particular thresholds (60%, 25%,
10%, for example) across criterias like distance from the store, per capita income, etc. could be used for decision
making using multiple regression
4.10.1 Spatial Interaction Model

This theoretical model explains the relationship between metrics observed on the amount of demand a product has
at the source and its destination, the distance between them and the impact of transport cost on the demand of the
product at the retail store. This model helps us to systematically estimate as to how much demand a given outlet will
likely draw from each market area. This may help us in estimating whether the sales can be expected to increase
with any of the following factors and variables:
• Attractiveness (for example, square footage)
• Demand
• Distance (or cost of distance) between them
• Nearby destinations etc
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4.10.2 Geo- demographic Marketing Approach
This approach to marketing recognises that some part of the retailer’s market may be highly fragmented geographically.
Further customers respond strongly, across various distances, to some specialised attribute of the retailer. While the
location of the retailer may not be affected, geographically targeted promotions (for example, direct mail) may be
arranged on the basis of geo-demographic data, targeting individuals by targeting neighbourhoods. Further we can
use geographic analogue reasoning with the following possible scenarios:
• Customer spotting to determine the sources of current customers.
• Identifying the generalised characteristics of the neighbourhoods or zones housing concentrations of current
customers.
• Identifying other neighbourhoods or zones, with similar generalised characteristics, to target.
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Summary
• Choice of location is an analytic challenge that requires an understanding of the customer and the market
potential for a retailer at a location.
• A market’s potential can be assessed by studying the demographic characteristics of the market (size, sex,
education, rural-urban break-up, etc.), further enlarged by studying household income and the distribution of
the income.
• Trading areas are based on travelling time and distance.
• A trade area consists of three components with the retail outlet or shopping centre as its epicentre, and the other
being treated as concentric rings.
• Primary trading area is that part where majority of the customers are based, say 60-65 per cent. It is close to
the store.
• Secondary trading area is situated at a distance of 2-7 miles or under 20 minutes of driving time from the
outlet.
• Tertiary trading area contains the rest of the customers. It includes those who occasionally shop as an alternative
to local shopping.
• The factors are considered while selecting the site are Traffic, Competition, Buying / Leasing, Product Mix and
the Anticipated Profits.
• Solitary site is a single free-standing store on a road or a street.
• When a group of retail outlets co-exist near one another, and are planned, developed, and managed as a single
property, we get a shopping centre.
• A mall is a huge complex of stores admeasuring at least 100000 square feet.
• Strip centre is a row of stores with pushing facilities in front of the ‘store’. It is also called a retail park.
• Retail stores located near one another at a centrally located place are said to be located in a Central Business
District (CBD).
• The planned markets on the other hand are the shopping complexes, the Malls Etc.
• The seven key steps involved in a Retail Site Selection Process are creating a targeting customer profile, creating
a target site profile, locating targeting customers and market keys, identifying potential sites within the primary
trade area, ranking the potential sites, analysing the financial data and selecting the best site
• The Site Ranking Matrix is a simple model that allows you to rank the sites using a weighted average based on
the important site criteria and your value of their importance.
• Proximity retailing provides convenience either at the workplace or home.
• Destination retailing pulls the consumers towards its location, which involves some travelling.
• The isolated store is that where there are no other outlets available in the vicinity of the store.
• An isolated store is also called free standing locations since it depends upon its own power and quality to attract
the customers.
• Stores which are located in residential neighbourhoods to serve the small locality are known as neighbourhood
stores
• The Central business district is the main centre of commerce and trade in the city.
• The Secondary business district is one which has evolved over a period of time as a result of increase in
population of the city.
• Shopping centre has been defined by the International Council of Shopping Centres as “a group of retail and
other commercial establishments that is planned, developed, owned and managed as a single property.”
• The International Council of Shopping Centres has defined 8 types of shopping centres are Neighbourhood
shopping Centre, Community shopping Centre, Regional Shopping Centre, Super Regional Centre, Fashion/
Specialty Centre, Power Centre, Theme Centre and Outlet Centre
• Periodic Markets are markets that are organised at a particular place on particular days during a week
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References
• Location decision [pdf] Available at: < http://www.egyankosh.ac.in/bitstream/123456789/7793/1/Unit-7.pdf >.
• Chunawalla, S. A., 2009. Contours of Retailing Management. Global Media.
• Poer, D., 2008. Class is in Session - Retail Strategy: Retail Market Strategy and Retail Location. [Video Online]
Available at: < http://www.youtube.com/watch?v=kEDd08tQgQY >. [Accessed 5 Octoberober 2011].
• My own business, 2008. Finding a Location for Your Business. [Video Online] Available at: <http://www.
youtube.com/watch?v=sF6eX2Qb-kA> [Accessed 5th Octoberober 2011 ].
• Thrall, G., 2010. Retail Location Analysis - Beginning 12-steps. [Video Online] Available at: <http://www.
youtube.com/watch?v=chqTPpJhhjw&feature=related >. [Accessed 5th Octoberober 2011 ].
• Better Retail Site Selection. [Online] Available at: < http://www.mappinganalytics.com/site-selection/retail-site-
selection.html> . [Accessed 5th Octoberober 2011 ].
• Retail Site Selection for Small Business.[Online] Available at: < http://bluepointstrategies.com/uploads/
Retail_Site_Selection_for_Small_Business.pdf > [Accessed 5th October 2011 ].
Recommended Reading
• Dawson, J. A. Retail geography. Taylor & Francis.
• Berman., 2007. Retail Management: A Strategic Approach, 10/E.,Pearson Education India.
• Bennett, A. G., 2009. The Big Book of Marketing ., McGraw-Hill Professional
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Self Assessment
1. __________ is a single free-standing store on a road or a street.
a. Solitary site
b. Strip centre
c. Shopping centre
d. Shopping mall
2. ___________ is a row of stores with pushing facilities in front of the ‘store’.

a. Solitary site
b. Strip centre
c. Shopping centre
d. Shoopin mall
3. An ___________ is also called free standing locations.

a. isolated store
b. neighbourhood stores
c. shopping centre
d. retail store
4. Retail stores located near one another at a centrally located place are said to be located in a ___________ .
a. Secondary Business District(SBD)
b. central market
c. retail market
d. Central Business District (CBD).
5. ___________ involves observing and mapping the actual customer footfalls.

a. Customer spotting
b. Land value theory
c. Quality and distance theory
d. Retail market identification
6. When a group of retail outlets co-exist near one another, and are planned, developed, and managed as a single
property, we get a _____________ .
a. retail store
b. shopping mall
c. shopping centre
d. strip centre

a. A Strip Centre is also called a retail park.
b. Shopping complexes and Malls are examples of the planned markets
c. The Secondary business district is one which has evolved over a period of time as a result of increase in
population of the city.
d. Proximity retailing pulls the consumers towards its location, which involves some travelling.
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8. ______________ suggests that the footfalls in a retail space have a direct correlation to the quality of the retailed
item.
a. Customer spotting
b. Land value theory
c. Quality and distance theory
d. Retail market identification

a. Land Value Theory is used for determining and explaining the arrangement of urban land usage and location
of economic activity zones in a given area.
b. Retail market identification is the process of understanding the profile of likely customers in a chosen area
through a series of different technique methods.
c. Retail Saturation Coefficient measures the potential stores per square foot of store space for a given product
line within a particular market area.
d. Differential analysis involves analysing characteristics like-market areas and nature of stores, their product
mix, management strengths, size etc.
10. The ___________ is a simple model that allows you to rank the sites using a weighted average based on the
important site criteria and your value of their importance.
a. site ranking matrix
b. differential analysis
c. regression analysis
d. business strategy
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Chapter V
Store Design and Layout
Aim
• discuss the importance of store design and layout
• identify the types of design
• enlist the different lighting layout methods
Objectives
• recognise the various types of store layout
• enumerate different forms of store designs
• explain the lighting strategies for different strategies
Learning outcome
• justify the importance of store designing and layout in retailing
• differentiate between various types of store layouts
• comprehend different types of designs
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5.1 Designing
Design and layout are the integral part of retailing. Designing of a store layout and appearance is one of the most
important factor in determining the sales, image and customer satisfaction. The physical appearance of a building
provides customers with their first impression of a business and contributes significantly to establishing its identity
in the customer’s mind. New businesses should plan their space requirements one to two years ahead and update the
estimates every six months. As retailers move into the realm of designing a customer oriented environments, three
critical elements of commerce, content and community must be addressed in order to build and facilitate customer
relationships.
5.1.1 Store Design

The design of a store is not merely a matter of aesthetics. It communicates to the shopper what a store stands for.
Store image is the launch pad for all the marketing activity. Store design must be understood from the point of view
of both the retailer and the shopper. The exterior as well as the interior of the store is a part of the store design.
• A shopper requires a pleasant, easy to navigate store which gives him a sense of security, assurance and
belongingness. The components like merchandise, sales staff, cashiers, location and pricing, contribute to the
store image.
• However, the most important part is the ambience that affects a consumer and makes him relate to the store.
Ambience and other elements together create a desired image of the store.
5.1.2 Store Front Design

Storefront is the most visible part of a store, and is a key to identify it. It should be memorable since it creates the
first impression.
• It should carry the name of the store, and must indicate the type of merchandise it carries. The frontage,
architectural style, location, physical facilities and display windows are the part of the store exteriors. Display
windows must be maintained on regular basis, with frequent changes to reflect the merchandise within. The
building can have special architecture, for example, a heritage structure.
• The store theme is related to the clientele it serves and the merchandise it offers. If the store is a part of the
mall, its exterior should be consistent with the image and design of the mall. The lighting of the exterior is also
carefully considered. The exteriors play a great role in attracting the customers within a store.
5.1.3 Interior Design

Here we have to consider the fixtures, flooring and ceilings, lighting, wall coverings and graphics and signages.
• The floor covering could be concrete, vinyl or wooden. There could be the use of marble, granite, vinyl or synthetic
carpets. These surfaces leave an impression on the shopper. The floor covering could give a low-cost statement,
upscale statement, home-like statement; or an exclusive statement. Walls can be painted or wood-panelled.
• Ceilings can also be variously designed; suspended ceilings are very common. There could be various architectural
designs, from floor to wall to ceilings.
• Parking lots must be adequately lighted. Lighting plays an important role. There should be ambient lighting
which is general lighting and special lighting for some areas of the store. Coloured lighting can be used on the
walls to give visual relief.
• Graphics and signages inform the customers about the merchandise, schemes, and prices. They also indicate the
directions for traffic circulation. A store can follow a theme in graphics, or can have graphics as per the present
advertising campaign or SP graphics.
• Signages can be directional, merchandise-related, instructional and courteous. Signs and graphics are examples
of visual communication.
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Store design is also a sensory experience that touches all senses - sight, sound, touch and smell. Some stores employ
greeters while the customers enter the store. Before allowing the customer into the actual selling area, some stores
allow them to be in the decompression zone which acclimatises them to the store ambience waiting for them. Smell
creates mood, and one can introduce such smell in the lingerie section, tie section and so on. Piped in music brings
about a relaxing environment. Music selection is based on the merchandise and clientele served.
5.1.4 Retail Identity

A retailer’s name, logo and supporting visual elements are components of his identity. Name and logo are on the
front of the store. Besides, they are used in all media of communications consistently. Formerly, retailers named
the stores after the founders, but this practice has slowly gone out of favour. Retailers now search for meaningful,
trendy, distinctive and memorable names. A logo is developed to accompany the name creatively. A tagline might
be appended to the logo - each logo must be simple, yet suggestive. A single brand store can easily acquire a brand
identity but it is challenging to have it in case of a multi-brand store. The store has to hold it against the various brands
it stocks. This is resolved by following a ‘shop-within-a-shop’ approach. The store must have its unique layout and
promotion. Visual communication must focus on the retailer only. The store itself should become a destination.
5.1.5 Objectives of Good Floor Design

The objectives of good floor design are as follows:
• Design should be consistent with image and strategy: The retailer must determine the target customers and
land their needs while designing a store.
• Design should be consistent with the life style and culture of the people: It must be remembered that customers
are guided by their culture and behave mostly according to their life style.
• Design should influence consumer behaviour: The consumer behaviour is influenced both positively and
negatively by the total environment of store. Care has to be taken so that no negative signal is communicated
influencing the behaviour of consumer.
• Considering costs versus value: The retailer must consider the costs associated with each store design element
versus the value received in terms of higher sales and profits. A retailer must develop the planograms that
prescribe the location of merchandise based on profitability and other factors.
• Design should be flexible: The design should be such that has maximum flexibility. This flexibility can be of two
types. Firstly, the ability to physically move store components and secondly, the ease with which components
can be modified. Earlier, this factor was not given importance. However, now most stores are designed keeping
in mind the desired flexibility.
• Design should encourage customers to spend more time shopping: Longer the period a customer stays in
store, the higher are purchases he is likely to make. The amount of time a shopper spends in a store is the single
most important factor in determining the amount of purchases.
5.2 Types of Design

The retailers are using various types of design. The major ones are:
5.2.1 Grid
Grid design is typically used in a supermarket where aisles and fixtures are at right angles to each other. Most grocery
drug store operations are having this design. Although grid is not most aesthetically pleasuring arrangement, still
it is very good for shopping trips in which customers need to move throughout the entire store and easily locate
products. This saves the time of the customer and is cost effective to retailer. The merchandise on the floor can be
significantly more than with other layouts.
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5.2.2 Racetrack
Racetrack is used in larger and wider stores where the customer is made to circle around the flow and get back to
the beginning, usually the lift or staircase lobby, to move to the next level of the store. It is also known as a loop. It
provides a major aisle to facilitate customer traffic, with access to the store’s multiple entrances. The problem with
the grid design is that customer is not exposed to all of the merchandise in the store unless he is clear in the mind
that what he is going to buy. The design should be such that the customers are encouraged to explore and seek out
new and interesting merchandise. The racetrack design encourages impulse purchasing since as the customer goes
around the racetrack, his eyes are forced to take different viewing angles.
5.2.3 Free Form

Free form is successfully used primarily in small specialty stores or within departments of large stores particularly
where the merchandise and fixtures are grouped in clusters. This provides a relaxed environment and a customer
feels that he is at someone’s home rather than in a store. This facilitates and encourages shopping. However, this
is more expensive since such an atmosphere creation requires additional expenditure. Moreover it is difficult for
sales persons to keep watch on adjacent departments; there is greater possibility of theft. Similarly, some additional
space is required to create spacious environment for the customer. Nevertheless, if properly designed, such layout
increases the sales and the profit margin.
5.2.4 Herringbone Circulation

Herringbone layout is used for a narrow store particularly where the highway is a single two way one. There are side
roads leading to the walls from it. If side roads are not there, it is called the spine form. Besides these designs, there
are a number of issues which are related with designing. Feature areas refer to the areas within a store designed to
get the customer’s attention. These are the part of promotional activity which include:
• End caps: These are displays located at the end of an aisle to catch consumer attention. One can notice a large end
cap display of cold drink or any food item. It is the high visibility that is used to feature special promotion.
• Promotional area: It is the area which is used to display merchandise that is being promoted particularly in
case of seasonal merchandise. Lawns or open space is decorated and lighted during Diwali and other festival.
The merchandise is often placed in the back.
• Windows: Windows are external to the store yet they form an important component of the store layout. Window
displays help in drawing customers into the store provided they are properly used. A visual message is provided
through these windows about the type of merchandise for sale in the store and the type of image the store wishes
to convey.
• Walls: Since, the space is limited and expensive walls are used to display merchandise and creatively present
a message by proper design. It suits and catches the eyes of customer since he feels comfortable with larger
space to move. Overall, the designing layout should take these things into consideration to achieve the goal of
larger sales and profit margin.
5.2.5 Size
A building must be large enough to accommodate a business’s daily operations comfortably. For example, there
should be an area inside the front door that is void of product display. This area of perhaps 12 or 14 feet square has
been termed the “decompression zone”. The decompression zone allows customers to enter your store and adjust
to your environment. The decompression zone, when done right, communicates a “welcome” to your patrons and
allows them to make their first judgements of your retail world.
5.2.6 Construction and External Appearance

It pays to have an expert look over it before buying or leasing the property. Recognise the importance of creating the
proper image for their store and how their shop’s layout and physical facility influence this image. The appearance
should reflect the business’s personality. Externally the store front, its architectural style and colour, signs, entrances
and general appearance give important clues to customers about the business’s image. A glass front enables a retail
business to display merchandise easily and to attract potential customers’ attention.
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5.2.7 Entrances
All entrances to a business should invite customers in. Wide entry ways and attractive merchandise displays that
are set back from the doorway can draw customers into a business. Underhill has observed that when given the
opportunity people prefer to, and most often do, move to the right after entering a store. This is a fact which he has
named as the “invariant right”. Stores should take a lesson from the culture and create store layouts that facilitate
a quick traverse.
5.2.8 Balance and Symmetry

A couple of additional store layout basics that are considered are balance and symmetry. Most people react positively
to both balance and symmetry. The shopping war is one by stores that “feel better” to their patrons. Never forget
how important retail store layouts are to the feel of a store.
5.2.9 Signs
One of the lowest cost and most effective methods of communicating with customers is a business sign. Signs
should be large enough for people passing by to read. Contrasting colours and simple type faces are best. Therefore,
always check for sign ordinances. There should be co-ordination between signs and graphics with the store’s image.
Informative signs and graphics make merchandise more desirable; the signs and graphics should be used as props. It
is a great wail to unify a theme and merchandise for an appealing overall presentation. The signs and graphics should
look fresh. They should be relevant to the items displayed and should never be left in the store or in windows after
displays are removed. Irrelevant, forgotten, faded and having water spots signs do more harm than sell merchandise.
Signs can also be used to create theatrical effects. It is necessary that appropriate typefaces are used since different
typefaces impart different messages and moods.
5.2.10 Interiors
Designing a functional, efficient interior is important. Ergonomics is the science of adapting work and the work
environment to complement employee’s strengths to suit customer needs (helps employees perform the job more
productively). This process should reduce accidents, injuries, and absenteeism and increase productivity and morale.
It can also increase store traffic and boost sales and profits.
Proper lighting
It is measured by what is ideal for the job being done. Lighting is usually an inexpensive investment. The use of
natural and artificial light in combination can give a business an open and cheerful look. The appropriate lighting
positively influences customer’s shopping behaviour. A good lighting system helps to create a sense of excitement
in the store. The lighting is used to highlight merchandise. The lighting is also used for popping the merchandise,
i.e., focusing spotlights on special feature areas and items. Lighting, music and decor determined by the type of
department.
Music
Like lighting and colour, music too can attract or detract customer from a retail store.
Scent
Many buying decisions are based on emotions rather than need and rationality. The fragrance has a deep impact on
our emotions. It influences feelings of happiness, hunger, disgust and nostalgia. The marketers can take advantage
of this.
5.2.11 Building
The look and design of building has immense effect on customer. Timely renovation may help retailer in increasing
the sale. It has certain advantages and disadvantages mentioned below.
• Advantages: Business looks new and creates a modern image, efficient, top quality; by using up to date
equipment can lower operating costs.
• Disadvantages: High initial fixed costs require more time and money
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Decision to buy a new building has also several advantages. It allows for remodelling without seeking permission;
payment for facility is fixed. However, the disadvantages such as limiting mobility and expensiveness are also
there.
5.2.12 Displays
Retailers are putting more emphasis on the display of merchandise to attract consumers because there are so many
alternatives for shopping, such as e-commerce and catalogues Displays change on an ongoing basis, yet the emphasis
remains the same: Make the store easier to shop and persuasive enough to get the customers to buy. Some of the
points considered here can be:
“Give the lady what she wants”
“Attract children as early as possible”
“Provide comfort to customer”
“Men’s only on Second Floor”
“Children only on III Floor”
“Women’s on Fourth & Fifth Floor”
“All accessories on First Floor”
The retailer should start brainstorming or “white-boarding” ideas what his target audience might expect when they
enter the store. It suggested making a list of all the factors one can think of including display space, aisles, aisle width,
shipping/receiving area, storage space, office space, in-store traffic flow, etc. Once he is able to visualise what the
shopping experience looks like for his customer, he will gain a better idea of what will be required in a location.
5.3 Store Layout

An industry expert observed that “a shopper should be able to determine the following about a store in three seconds;
its name, its line of trade, its claim to fame, its price positions and its personality.” This requires developing a
distinct image of the store in which its design and layout plays a vital role. A well-planned-retail store layout allows
a retailer to maximise 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.
A retailer must plan store layout, atmosphere, and create irresistible visual merchandising displays. He needs to view
floor plans and other retail store designs. He must learn how to select and care for store fixtures, as well as using
special lighting techniques to accent his products. He should find store layout software and browse his resource of
vendors selling store fixtures and displays.
The purpose of designing store layout is quite clear that customer is attracted to enter the store and once entered in
the store he is motivated silently to visit the entire store offering. The entrance creates expectations and contains
promises. Customers need to be led on a journey throughout the store. This is achieved by planning the circulation
and location of the merchandise. While designing store layout, generally circulation planning is done to lead the
customer from area to area with the help of aisles that weave through the merchandise area. With the help of accent
lighting and displays strategically placed the focal points are highlighted. The width of the aisles is planned according
to the density and traffic pattern.
5.4 Types of Store Layout

The specifics of a store layout are sequentially planned and enacted. It requires floor planning in such a way that
fulfils the objectives of retailer. There are following basic retail floor plan:
• Straight floor plan
• Diagonal floor plan
• Angular floor plan
• Geometric floor plan
• Mixed floor plan
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5.4.1 Straight Floor Plan

The straight floor plan is an excellent store layout seen in the designing of a 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. It takes into consideration the traffic flow. It places displays and aisles in a rectangular or grid iron
pattern.
Fig. 5.1 Straight floor plan

(Source: http://retail.about.com/od/storedesign/ss/store_layouts)
5.4.2 Diagonal Floor Plan

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.
Fig. 5.2 Diagonal floor plan

5.4.3 Angular Floor Plan

The angular floor plan is best used for high-end specialty stores. The curves and angles of fixtures and walls make
for a more expensive store design. However, the soft angles create better traffic flow throughout the retail store.
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Fig. 5.3 Angular floor plan
5.4.4 Geometric Floor Plan

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.
Fig. 5.4 Geometric floor plan

5.4.5 Mixed Floor Plan

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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Fig. 5.5 Mixed floor plan

5.5 Retail Lighting Layout

The selection of the right lighting can be a major contribution to retail sales. Lighting can establish a store’s image,
lead customers inside, focus their attention, make the products attractive and visible, and in general, encourage
purchasing. “Energy effective” lighting provides all these benefits for the lowest lifecycle cost, while saving energy,
operating costs and maintenance. It should be done with sample layouts and specifications that are energy effective,
and energy code compliant. Retail lighting must have good colour, contrast and balance between lighted surfaces.
There is no single formula for all retail lighting. A professional lighting designer or retail designer may be able to
create successful designs.
5.5.1 Lighting Layouts

There are four types of lighting layout methods as discussed below:
Ambient lighting
Uniform lighting using light fixtures distribute the light widely, directly or indirectly. Ambient lighting enables
the customer to see and examine the merchandise, and the sales staff to complete the sale and perform their other
duties.
Accent lighting
Spotlighting used to provide higher levels of light in a focused pattern to accentuate selected objects in relation to
their surroundings. Accent lighting establishes the importance of certain objects through the use of contrast, and
highlights the form, structure, texture or colour of the merchandise.
Perimeter lighting and valance lighting

It involves lighting the vertical surfaces. Asymmetrical light fixtures can direct light on tall vertical shelving and
displays, typically located at the perimeter of the merchandise area. Valance lighting allows the source to be quite close
to the merchandise, providing a shield or “valance” to conceal the light sources from the view of the customer.
Valances are often built into the wall, shelving unit or gondola. Although primarily intended to provide light down
on the merchandise, they also can be designed to light up on signage or provide indirect ambient lighting for the
space.
Shelf lighting and case lighting

Small or miniature light sources located very close to the objects being displayed, shielded from the customer’s
view. This lighting must be, carefully selected for the particular application to avoid accidental contact with hot
lamps and to prevent damaging the merchandise with too much ultra-violet radiation or heat.
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5.5.2 Retail Lighting
The first step is to establish the store lighting category with the owner, since there will be a trade off between accent
lighting and ambient light levels. There is no single right way to design retail lighting, so it’s important to agree on
which lighting approach to follow: “basic,” “intermediate” or “higher-end.”
Basic retail lighting

This includes:
• Type of stores
High activity retailing such as mass merchandising, discount stores, hardware, video, fast food, grocery,
service establishments and sale of bulk or large objects such as appliances or furniture.
A destination store that doesn’t require lighting to draw customers inside, and that offers inexpensive products
and/or significant value for money.
• Purpose of lighting
To light all objects uniformly, provide good visibility for reading labels and to create a bright, clean,
stimulating environment.
• Lighting strategies
Exposed sources are effective to project a “discount” or “speedy service” image. Fluorescent sources provide
the best value, giving good colour rendering, high
Efficiency lighting with the longest life.
Use light coloured finishes on all wall surfaces to increase overall brightness and reflected light.
For a greater sense of brightness and consistency with daylight use “841” colour lamps. This stands for a
Colour Rendering Index of 80+ and a Correlated Colour Temperature of 4100K.
Consider neon or coloured lights for window displays or to identify departments.
• Lighting levels
50-80 foot candles; ambient lighting
Intermediate retail lighting

This includes:
• Types of stores
Clothing, stationary, beauty shop, gourmet shops, accessories, house-wares, furniture and small objects
Most common store type, with average level of retail activity
Sufficiently uniform illumination necessary to see and examine product and read labels
Limited accent lighting is desirable to set products apart, to create highlights or enhance texture and to
attract attention to window displays
Partially conceal ambient light sources with louvers or baffles to create more emphasis on product
Locate accent lights close to displays
Use exposed or decorative accent lights to create attention or establish image
• Lighting levels
30-50 fc ambient, 75-100 fc accent
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Higher-end retail lighting

This includes:
• Types of stores
More expensive or exclusive merchandise, such as jewellery, gifts, antiques, fine clothing and accessories,
fine house-wares and beauty salons
The activity is lower than other retail types.
Most personalised attention and assistance from sales personnel
To establish image and enhance product colour, sparkle or texture
Encourage lingering, examination and impulse buying
Use lower illumination levels for ambient lighting to enhance contrast of accent lighting, but do not eliminate
ambient system.
Use fluorescent lighting for ambient lighting. White-painted parabolic louvers may be preferable in small
spaces or low ceilings. For highest end applications, consider smaller diameter (T-5 or T-2) fluorescent
lamps for concealed applications such as coves, valances and shelf lighting.
Use the best colour rendering lamps (CRI above 80) and a warmer colour temperature of 3000 to 3200
Kelvin.
For example, select fluorescent lamps designated 830.
Use accent lighting to establish a hierarchy of importance. Since the eye is attracted to the brightest object
in the field of view and then to the next brightest object, provide the highest wattage or the tightest focus
lamps on the most important items or areas of the store.
Use exposed or decorative sources to attract attention to specific displays or areas of the shop.
• Lighting levels
15-40 fc ambient, 75-100 fc accent
Accent lighting is coupled with areas of lowest ambient lighting levels.
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Summary
• Designing of a store layout and appearance is one of the most important factor determining the sales, image
and customer satisfaction
• Components like merchandise, sales staff, cashiers, location, pricing contribute to the store image.
• The most important part of a store image is the ambience that affects a consumer and makes him relate to the
store.
• The frontage, architectural style, location, physical facilities and display windows are all part of the store
exteriors.
• Interior design comprises fixtures, flooring and ceilings, lighting, wall coverings, graphics and signages.
• The types of design includes grid, racetrack, free form, herring hone circulation, size, construction and external
appearance, entrances, balance and symmetry, signs and interiors.
• Grid design is typically used in a supermarket where aisles and fixtures are at right angles to each other.
• Racetrack is used in larger and wider stores where the customer is made to circle around the flow and get back
to the beginning, usually the lift or the staircase lobby, to move to the next level of the store. It is also known
as a loop.
• Free form is successfully used primarily in small specialty stores or within the departments of large stores
particularly where the merchandise and fixtures are grouped in clusters.
• Herring hone circulation is used for a narrow store particularly where the highway is a single two way one.
• Feature area is the area within a store designed to get the customer’s attention. These are the part of promotional
activity.
• End Caps are displays located at the end of an aisle to catch consumer attention.
• Promotional area is the area which is used to display merchandise that is being promoted particularly in case
of seasonal merchandise.
• Windows provide a visual message about the type of merchandise for sale in the store and the type of image
the store wishes to convey.
• There should be an area inside the front door that is void of product display. This area of perhaps 12 or 14 feet
square has been termed the “decompression zone” which allows customers to enter your store and adjust to
your environment.
• One of the lowest cost and most effective methods of communicating with customers is a business sign.
• Ergonomics is the science of adapting work and the work environment to complement employee’s strengths to
suit customer needs.
• Store layouts generally show the size and location of each department, any permanent structures, fixture locations
and customer traffic patterns.
• Types of store layout consist of the straight floor plan, diagonal floor plan, angular floor plan, geometric floor
plan and the mixed floor plan.
• There are four types of lighting layout methods, namely; the ambient lighting, accent lighting, perimeter lighting
and valance lighting, shelf lighting and case lighting.
• Ambient lighting is general, uniform lighting using light fixtures that distribute the light widely, directly or
indirectly.
• Accent lighting is spotlighting used to provide higher levels of light in a focused pattern to accentuate selected
objects in relation to their surroundings.
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• Valance lighting allows the source to be quite close to the merchandise, providing a shield or “valance” to
conceal the light sources from the view of the customer.
• Asymmetrical light fixtures can direct light on tall vertical shelving and displays, typically located at the
perimeter of the merchandise area.
• Shelf lighting and case lighting are small or miniature light sources located very close to the objects being
displayed, shielded from the customer’s view.
• Basic retail lighting includes high activity retailing such as mass merchandising, discount stores, hardware, video,
fast food, grocery, service establishments and sale of bulk or large objects such as appliances or furniture.
• Intermediate retail lighting includes clothing, stationary, beauty shop, gourmet shops, accessories, house-wares,
furniture and small objects.
• Higher-end retail includes more expensive or exclusive merchandise, such as jewellery, gifts, antiques, fine
clothing and accessories, fine house-wares and beauty salons.
References
• Waters, S. Types of Store Layouts [Online] Available at: <http://retail.about.com/od/storedesign/ss/store_
layouts_3.htm> [Accessed 5 Octoberober 2011].
• Small Retail Lighting [Online] Available at: <http://www.designlights.org/downloads/retail_guide.pdf>
• Tiwari, R.S., 2009. Retail Management, Retail Concepts and Practices, Global Media.
• Chunawalla, S.A., 2009. Contours of Retailing Management, Global Media.
• Milne, D., 2008. Retail Design – DMD [Video Online] Available at: <http://www.youtube.com/watch?v=TtU
_9qbnqOE&feature=related>. [Accessed 5 Octoberober 2011].
• “Liefde” Retail Store Design, 2009. [Video Online] Available at: <http://www.youtube.com/watch?v=nBfz4Hp40N4>
. [Accessed 5 Octoberober 2011].
Recommended Reading
• Madaan, Fundamentals of Retailing, Tata McGraw-Hill Education.
• Bhatia, S. C., 2008. Retail Management, Atlantic Publishers & Dist.
• Mathur, C. U., 2010. Retail Management: Text and Cases, I. K. International Pvt. Ltd.
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Self Assessment
1. The frontage, the architectural style, the location, the physical facilities and the display windows are all part of
the _____________.
a. store exteriors
b. store interiors
c. store image
d. store-space
2. ______________ design is typically used in a supermarket where aisles and fixtures are at right angles to each
other.
a. Free-form
b. Grid
c. Race-track
d. Herring hone circulation
3. ___________ layout is used for a narrow store particularly where the highway is a single two way one.
a. Free-form
b. Grid
c. Race-track
d. Herring hone circulation
4. ___________ are displays located at the end of an aisle to catch consumer attention.
a. Feature areas
b. Promotional areas
c. End caps
d. Free-form
5. ____________ is the section within a store designed to get the customer’s attention.
a. Feature areas
b. Promotional areas
c. End caps
d. Decompression zone
6. This area inside the front door of a store; of perhaps 12 or 14 feet square that is void of any product display has
been termed as _____________.
a. feature areas
b. promotional areas
c. end caps
d. decompression zone
7. __________ is general, uniform lighting using light fixtures that distribute the light widely, directly or
indirectly.
a. Ambient lighting
b. Accent lighting
c. Valance lighting
d. Shelf lighting and case lighting
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8. __________ allows the source to be quite close to the merchandise, providing a shield to conceal the light
sources from the view of the customer.
a. Ambient lighting
b. Accent lighting
c. Valance lighting
d. Shelf lighting and case lighting

a. The decompression zone allows customers to enter your store and adjust to your environment.
b. Windows also provide a visual message about the type of merchandise for sale in the store and the type of
image the store wishes to convey.
c. When given the opportunity people prefer to, and most often do;-move to the left after entering a store, an
attribute which Underhill has named as the “invariant left”.
d. One of the lowest cost and most effective methods of communicating with customers is a business sign.
10. Match the following:

1. Purpose of basic retail A. provide sufficiently uniform illumination necessary to see
lighting and examine product and read labels
2. Purpose of intermediate B. to establish image and enhance product colour, sparkle or
retail lighting texture
3. Purpose of higher-end
C. to accentuate selected objects in relation to their surroundings
retail lighting
D. to light all objects uniformly, providing good visibility for
4. Accent lighting
reading
a. 1-B,2-C,3-A,4-D
b. 1-C,2-D,3-A,4-B
c. 1-D,2-A,3-B,4-C
d. 1-B,2-D,3-A,4-C
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Chapter VI
Pricing in Retailing
Aim
• discuss various pricing techniques and methods
• analyse the retail pricing strategies and tools
• explain the various concepts related to retail pricing
Objectives
• discuss the various types of retail pricing objectives
• classify the external influences on retail pricing strategies
• determine the steps involved in setting retail prices
Learning outcome
• identify the pricing methods in retailing
• understand the concept of pricing in retailing
• formulate the methods for setting retail prices
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6.1 Introduction
The pricing technique used by most retailers is cost-plus pricing. This involves adding a markup amount (or
percentage) to the retailers cost. Another common technique suggested is retail pricing. This simply involves charging
the amount suggested by the manufacturer and is usually printed on the product by the manufacturer.
Before discounting exploded, many retailers adhered to suggested list prices, except when running sales. Consumers
did not do much comparison shopping among stores and suggested list prices let retailers (particularly smaller ones)
meet profit margin goals. But, today, the situation is quite different. More consumers expect regular prices to be
below those suggested by manufacturers; as a result, many retailers are not using list prices as their regular prices.
So, what is the value of suggested list prices to retailers and when should they be used by them? Suggested list
prices remain important to retailers in computing markups. Typically, when a manufacturer uses list prices, it offers
markups to retailers that are based on those prices. If a retailer knows that its actual customer selling prices will be
lower than suggested prices and computes markups accordingly, the retailer may be in a better bargaining position
with a supplier; at the very least, the retailer can to choose whether to stock items based on the real markups.
Generally, retailers have a better chance to adhere to list prices if they are positioned as full-service stores, particular
items are popular, or they sell items with customary prices like newspapers and gum. In Western countries, retail
prices are often so-called psychological prices or odd prices: a little less than a round number, for example, $6.95.
In Chinese societies, prices are generally either a round number or sometimes a lucky number. This creates price
points.
Often prices are fixed and displayed on signs or labels. Alternatively, there can be price discrimination for a variety
of reasons, where the retailer charges higher prices to some customers and lower prices to others. For example, a
customer may have to pay more if the seller determines that he or she is willing to. The retailer may conclude this
due to the customer’s wealth, carelessness, lack of knowledge, or eagerness to buy. Another example is the practice
of discounting for youths or students. Price discrimination can lead to a bargaining situation often called haggling,
in which the parties negotiate about the price. Economists see this as determining how the transaction’s total surplus
will be divided into consumer and producer surplus. Neither party has a clear advantage, because of the threat of
no sale, in which case the surplus vanishes for both.
Retailers who are overstocked, or need to raise cash to renew stocks may resort to ‘Sales’, where prices are ‘marked
down’, often by advertised percentages, for example, ‘50 per cent off’. ‘Sales’ are often held at fixed times of the
year, for example January sales, or end-of-season sales, or Blue Cross Sale.
Helpful in retail strategy

The role of pricing in a retail strategy shows that pricing decisions must be made in an integrated and adaptive manner.
Pricing is crucial to a retailer because of its interrelationship with overall objectives and the other components of
the retail strategy. A price plan must be integrated and responsive and provide a good value to customers.
Helpful in examining the impact of consumers

Retail pricing helps to examine the impact of consumers; government; manufacturers, wholesalers, and other
suppliers; and current and potential competitors on pricing decisions. Before designing a price plan, a retailer must
study the factors affecting its decisions. Sometimes, the factors have a minor effect on pricing discretion; other
times, they severely limit pricing options.
Retailers should be familiar with the price elasticity of demand and the different market segments that are possible.
Government restrictions deal with horizontal and vertical price fixing, price discrimination, minimum prices, unit
pricing, item price removal, and price advertising. There may be conflicts about which party controls retail prices; and
manufacturers, wholesalers, and other suppliers may be required to provide price guarantees (if they are in a weak
position). The competitive environment may foster market pricing, lead to price wars, or administered pricing.
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Helpful in presenting a framework
Retail pricing helps in presenting a framework for developing retail price strategy. This framework consists of five
stages: objectives, broad price policy, price strategy, implementation of price strategy, and price adjustments. Retail
pricing goals can be chosen from among sales, dollar profits, return on investment, and early recovery of cash. After
they are chosen, a broad policy is set and a coordinated series of actions is outlined, consistent with the retailers’
image and oriented to the short and long run. A good price strategy incorporates demand, cost, and competitive
concepts. Each of these orientations must be understood separately and jointly.
Psychological pricing, markup pricing, alternative ways of computing markups, gross margin, direct product
profitability, and pricing below, at, or above the market are among the key aspects of strategy planning. When
enacting a price strategy, several specific tools can be used to supplement the broad base of the strategy. Retailers
should know when to use customary and variable pricing, one price policies and flexible pricing, odd pricing, leader
pricing, multiple-unit pricing, and price lining.
Price adjustments may be required to adapt to various internal and external conditions. Adjustments include
markdowns, additional markups, and employee discounts. It is important that adjustments are controlled by a budget,
the causes of markdowns are noted, future company buying reflects prior performance, adjustments.
6.2 Retail Pricing Objectives

Retailers are supposed to determine their objectives as first step in pricing. When deciding on pricing objectives
retailer needs to consider:
• the overall financial, marketing and strategic objectives of the retail business
• the characteristics of product or brand
• consumer price elasticity and price points
• the resources available
With these broad objectives, the retailer could be trying to fulfil the following specific objectives such as:
Profit-objective
The retail store may price its product with the objective of maximising profits in the short run or long run or both.
The objective of profit maximisation must be studied carefully because it may lead to unethical practices such as
overcharging or deceiving the customers. This in turn may lead to some form of intervention by either the government
or consumer groups (NGOs). At other times, the marketer may price his products with the objective of obtaining
only a target rate of return on his investment. This is particularly with products in the mature stage of the product
life cycle.
Market share-objective
The retailer or marketers may also price his product with the intention of increasing his market share, or stabilising
his market share. He can set the price of his product lower than that of his competitors.
Competitor-oriented objective
The retailers or marketer may price his product to counter any existing or prospective move by his competitors.
Retailer may deliberately price its merchandise low to:
• Discourage potential retailer from entering the market
• Advance the exit of the potential competitors and marginal firms from entering the market
• Spoil the market of retail competitors with the eye on getting future benefits
With a low price, the marketer can prevent price-cutting by competitors. At other times, the retailers may cooperate
with his competitors by setting a common price. A good example of this type of pricing is very common among
traditional business centres in India where all retailers dealing in similar merchandise set similar common prices.
This practice is common among retailers of beauty salons, garment retailers and grocery etc.
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Buyer-oriented objective
Another pricing objective adopted by retailer may be buyer-oriented. The aim of such pricing is to maintain socially
acceptable prices and to be fair to customers. The prices of goods of super bazaars ‘Margin Free’ (Kerala) and ‘Rythu’
(Andhra Pradesh) can be considered buyer-oriented as these retail chains practice the professed pricing objectives
of bypassing intermediaries and sharing savings with the ultimate consumers. Most of the five star hotels stress on
the kind of ambience and services extended by their hotel, as these are of prime concern to their customers. Tanishq,
the jewellery retail chain, emphasises on the other elements of the marketing mix, such as heavier promotion and
advertising, as well as highlighting the quality and the characteristics of their offerings, primarily to justify the
relatively higher prices charged by them.
Government-oriented objectives
The pricing of some products may be constrained by existing laws or may be influenced by government action.
The prices of petrol, grocery items, and vegetables in India are, to a large extent, controlled and influenced by
government action. Consumer Protection Act 1986, Indirect Tax provisions and MRTP has a bearing on the pricing
of the merchandise.
Product-oriented objectives
The retailers or marketers, at times, make their offerings more “visible” by means of pricing. Customers are usually
attracted by the advertisements in newspapers highlighting special offers and discounts. With a lower price, the retail
store can, therefore, catch the attention of buyers and this will help him to introduce new offerings, increase the sale
of weak products etc. Many of the retail stores in India such as Big Bazaar are using these pricing techniques.
6.3 Retail Pricing Approaches

The pricing strategies affect both margins and positioning of the retailer. Various pricing strategies can be followed
by the retailer depending on his business objectives, the influence of other external factors and the impact of the
pricing strategy on other aspects of the marketing mix. There are three retail-pricing approaches based on the long-
term objectives of the pricing decision. They are:
6.3.1 Discount Orientation

In this, low prices are used as the major tool for competitive advantage wherein the store portrays a low status image
while profit margins are kept low to target price-based customers. The model works on high inventory turnover and
lower operating costs. This is arguably the most common model in India because of the low per capita income and
price consciousness, for example, Janpath market in New Delhi.
6.3.2 At-the-Market Orientation

Normally, these kinds of stores set average prices. It offers solid service, a nice atmosphere to the shoppers, margins
are average to good, and it stocks moderate to above quality products. Since this model caters to the middle class, it
has a huge target market. Westside in India focuses on providing value for money merchandise for the entire family
along with an international shopping experience. The private label of the company gives it the flexibility of a wide
range of merchandise and also has the advantage of generating better margins for the company.
6.3.3 Upscale Orientation

Here competitive advantage is derived from the prestigious image of the store. The profit margins per unit are high,
but coupled with higher operating costs and lower inventory turnover. These stores usually stock distinctive product
offerings and provide high quality service, building up customer loyalty. The products stored generally go with the
image of the store. Like such stores would stock Christian Dior perfumes and Rolex watches. It may be appropriate
in situations of inelastic demand in which an organisation decides to keep its prices high.
These approaches may be implemented using various pricing strategies. Discount orientation may take the form of
every-day-low-pricing strategy or high-low strategy. Up-scale orientation is reflected in premium pricing strategies.
At-the market orientation is reflected in strategies that offer average prices for most products. Hence, while stores
like LifeStyle and Arcus do reflect an up-scale pricing orientation they do offer rebates and discounts at various
intervals.
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Hence, the pricing approaches adopted by a retailer should be in accordance with the other elements of the
retail marketing mix. The following table offers a representative list of the pricing approaches along with their
complimentary retail mix strategies. This is only an indicative list and many retailers do follow a different set of
combination to meet their specific requirements.
Retail Marketing Price Below Market Price above Market

Price at Market Price
Mix Variable Price Price
Location • No Parking • Central Business District • Monopoly

• Poor Layout • Proximity to Competition • Compatible location to
• Inaccessible target segment
Service attributes • Self-service • Support from sales people • Personalised attention
• Limited offerings to customers
• No salesmen support • Home delivery
• Exchange facility
• Customised offerings
Assortment • Limited Variety • Medium Variety • Extensive Assortment
Store Environment • Poor Quality fixtures, • Compare store environment • Very Inviting and
• Limited space to move • Arranged wall shelves impressive store decor,
• Untidy Wall shelves • Better movement within • Attractive Visual
the space Merchandise
Natrue of Brands • Unbranded • Best sellers • Exclusive name brands
• Smaller manufacturers
Table 6.1 Pricing approaches along with their complimentary retail mix strategies
6.4 Retail Pricing Strategies

In order to select various pricing approaches, certain effective pricing strategies need to be implemented in its
support. The adoption of these strategies is guided by the basic pricing approach of the retailer.
6.4.1 Every Day Low Pricing (EDLP)

EDLP has been popularised by large international retailers like Wal-Mart and Home Depot. This strategy demands
stability of retail prices below MRP (maximum retail price), mentioned on the goods i.e. at a level somewhere
between the regular price at which the goods are sold and the deep discount price offered when a sale is held.
In India, many co-operative stores have adopted this strategy. One store that uses EDLP is Big Bazaar. Here, goods
are either sold below their normal prices, or some sales promotion scheme is available. Subhiksha also possesses
the essentials of a discount store. Most of these retailers have discovered the benefits of adopting this EDLP strategy
such as:
• less reliance on price reduction by retailers
• reduced need of advertising
• improved customer service
• better inventory management
6.4.2 High Low Pricing

In high/low pricing, retailers offer prices that are sometimes above their competition’s ELDP, but they use
advertisements to promote frequent sales. Nowadays, retailers also use sales to respond to increased competition
and a more value-conscious customer. Some of the benefits of adopting such a strategy are:
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• same merchandise can be used to target different segments

• interest is created amongst customers
• a quality image is created
6.4.3 Leader Pricing

Retailers sometimes price particular fast moving products at a lower price to attract customers to the store. For
example, a grocery retailer can sell eggs cheaper than other competing stores so that customers consider him while
purchasing foodstuff. Since, the customer is also likely to buy milk, bread, flour etc. along with eggs; these products
are priced slightly higher. So, the profit foregone on eggs is more than recovered on other items of groceries.
Sometimes, the fast moving products are sold at cost, or even at a loss. So, these are also called loss leaders. If the
sale of other profitable products is insufficient to cover the losses incurred on sales of loss leaders, then this strategy
can backfire. The retailer normally chooses his own store brands for higher pricing. Items such as pulses, rice, flour,
etc. are priced higher because it is also not easy to compare the price against quality offered by other stores.
6.4.4 Skimming Pricing

Price skimming is a pricing strategy in which a retailer sets a relatively high price for a product or service at first, and
then lowers the price over time. It allows the firm to recover its sunk costs quickly before competition steps in and
lowers the market price. However, being positive, there are some potential problems with this strategy such as:
• The inventory turn rate can be very low for skimmed products.
• Skimming encourages the entry of competitors. When other retailers see the high margins available in the
industry, they may decide to quickly enter.
• The retailer could gain negative publicity if he lowers the price too fast and without significant changes in
product profile.
6.4.5 Penetration Pricing

Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often lower
than the eventual market price. The expectation is that the initial low price will secure market acceptance by breaking
down existing brand loyalties. Penetration pricing is most commonly associated with the marketing objective of
increasing market snare or sales volume, rather than short term profit maximisation. Price penetration is most
appropriate when:
• product demand is highly price elastic
• substantial economies of scale are available
• the product is suitable for a mass market
• the product is likely to face stiff competition
• there is inadequate demand in the low elasticity market segment for price skimming
6.4.6 Price Lining

Price lining refers to the offering of merchandise at a number of specific but predetermined prices. Once set, the
prices may be held constant over a period of time, and changes in market conditions are adapted to by changing the
quality of the merchandise. A limited number of predetermined price points are set at which merchandise may be
.
offered for sale, for example, Rs. 79.50, Rs.109.50, Rs.149.50.
6.4.7 Psychological Pricing

Psychological pricing is a method of setting prices intended to have special appeal to consumers. This can be
conducted in several ways:
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Prestige pricing
Prestige pricing uses high prices to convey a distinct and exclusive image for the product. This is done in order
to evoke perceptions of quality and prestige with the product or service. Various clubs like Gymkhana Clubs and
DLF Golf Club price their products to indicate exclusivity similar strategy is followed by five star hotels like Taj
and Radisson in terms of their menu offerings. For instance, Kababs at its famous Kabab Factory could cost close
to Rs. 800-1000.
Reference pricing
Reference pricing uses consumers’ frame-of-reference that is established through previous experience purchasing
the sports product or high levels of information search.
Traditional pricing
Here, traditional pricing uses historical or long-standing prices for a sports product to determine the pricing.
Odd-even pricing
This is quite a popular pricing method. Here, the prices are set at odd numbers (for example, $9.95) to denote a
lower price or a “good deal” or setting prices at even numbers (for example, $ 10.00) to imply higher quality. Many
discounters like Big Bazar in India and Wal-Mart in USA use odd prices to denote lower prices. Many retailers in
Japan use even pricing to denote quality - a very important issue with Japanese consumers.
Apart from these, few other popular strategies of setting retail prices are:
6.4.8 Multiple Unit Pricing
Retailers use multiple unit pricing to encourage additional sales and to increase profits. The gross margin that is
sacrificed in a multiple unit sale is more than off-set by its, savings that occur from reduced selling and handling
expenses.
6.4.9 Bundle Pricing

It is the practice of offering two or more different products or services at one price. Price bundling is used to increase
both unit and rupee sales by bringing traffic into the store. It can also be used to sell less desirable merchandise by
including it in a package with a product of great demand. Like a hotel can offer a 2 days stay for Rs.5000 inclusive
of lunch, even though separately these two items (stay and lunch) would cost more than Rs.5000. In many cases a
retailer may bundle a set of extra-large T-shirts with large size T-shirts to promote the sale of the slow moving item.
Same strategy is some times used for low selling shoe sizes.
6.4.10 Pre-emptive Pricing

Pre-emptive pricing is a strategy which involves setting low prices in order to discourage or deter potential new
entrants, to the retailer’s market, and is especially suited to markets in which the retailer does not enjoy any market
privilege and entry to the market is relatively straightforward.
6.4.11 Extinction Pricing

Extinction pricing has the overall objective of eliminating competition, and involves setting very low prices in the
short term in order to `under-cut’ competition, or alternatively keep away potential new entrants. The extinction price
may, in the short term, be set at a level lower even than the suppliers own cost of production, but once competition
has been extinguished, prices are raised to profitable levels.
6.4.12 Perceived-Value Pricing

A method of pricing in which the seller attempts to set price at the level that the intended buyers value the product.
It is also called value-in-use pricing or value-oriented pricing. If the perceived value is high, the retailer can charge a
premium price for the product. The example of well-established traditional independent retailers in small townships
can be cited in this respect. They charge a premium price on their offerings because of quality and variety offered to
their customers. Kala Mandir, the ethnic women apparel store in Ludhiana, provides exclusive collection of sarees
and ladies suits to their customers at prices above the market average.
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6.4.13 Demand-Oriented Pricing

A method of pricing in which the seller attempts to set price at the level that the intended buyers are willing to pay.
It is also called value-in-use pricing or value-oriented pricing.
6.4.14 Fixed and Variable Pricing

Most firms use a fixed price policy, i.e. they examine the situation, determine an appropriate price, and leave the price
fixed at that amount until the situation changes, at which point they go through the process again. The alternative
has been variable pricing, a form of first degree price discrimination, characterised by individual bargaining and
negotiation, and typically, used for highly differentiated items, like real estate, unbranded garments, fresh vegetables
and fruits etc. In India, there are certain markets which are well known for bargaining, for example, Gaffar market
in Delhi, Fashion Street in Bombay, Ranganathan Street in Chennai, S.M Street in Kozhikode, Kerala. There are
some shops in markets like Sarojini Nagar and LalpatNagar in Delhi which specifically advertise that they do not
bargain and have a “Fixed Price”.
Considering all the above choices of pricing strategies, it is observed that very few retailers have a clear cut, simple
to understand pricing strategy. It differs from time to time, product to product, and location to location. The table
given below indicates some of the issues faced by retailers while setting a price.
6.4.15 Competitive Pricing

The objective of some retailers is not to compete on price but alternatively not to be seen as charging the highest
price. These retailers, who often operate in specialty markets, aggressively monitor the market to insure their
pricing is competitive but they do not desire to get into price wars with discount retailers. Thus, other elements
of the marketing mix (for example, higher quality products, nicer store setting) are used to create higher value for
which the customer will pay more.
6.4.16 Full Price Pricing

Retailers targeting exclusive markets find such markets far less price sensitive than mass or specialty markets. In
these cases the additional value added through increased operational spending (for example, expensive locations,
more attractive design, more services) justify higher retail prices. While these retailers are likely to sell in lower
volume than discount or competitive pricing retailers, the profit margins for each product are much higher.
Setting the price must be compatible with your established store policies and your desired image
Will a one-price system, under which the same price is charged to every purchaser of a particular
item, be used on all items or is the price negotiable with the customer?
Will odd-ending prices such as $1.97 and $44.95, be more appealing to your customers than even-
ending prices?
Will consumers buy more if multiple pricing, such as 2 for $8.50, is used?
Should any loss leader product pricing be used?
Will price lining, the practice of setting up distinct price points and then marking all related merchan-
dise at these points, be used?
Would price lining by means of zones be more appropriate than price points?
Will prices include applicable taxes for customer convenience?
Will cent-off coupons be used in newspaper ads or mailed to selected consumers on any occasion?
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Would periodic special sales, combining reduced prices and heavier advertising, be consistent with the
store image you are seeking?
Has the impact of various sales items on profit been considered?
Will “rain-checks” be issued to consumers who come in for special sale merchandise that is temporar-
ily out of stock? Rain checks are written promises that the store will sell the merchandise that is out of
stock at sale prices as and when the merchandise arrives.
Table 6.2 Pricing issues and store policies
6.5 External Influences on Retail Pricing Strategies

Using Porter’s model to analyse these factors for strategic pricing, they can be broadly segregated into four “forces”
namely, customers, suppliers (manufacturers, wholesalers and other suppliers), competitors and government.
6.5.1 Customers
Every retailer needs to understand the price sensitivity of customers that form his target segment. This price sensitivity
is based on various personal, social or geographical factors that present a major challenge for retailers while setting
prices. For example, in the case of the Bangalore-based coffee chain, Cafe Coffee Day (CCD), it plans to expand
and set up 200 stores across 60 cities before the end of 2004. Here, it has chosen to increase its presence in the small
cities because it is observed that the youth in such small towns have adopted the lifestyles of their counterparts in
metro cities. The only challenge company feels is pricing. A cup of coffee at Rs 35 is accepted in metro cities but
in small towns such price points may be difficult to sell. The company feels that it may not be possible to change
prices in order to retain uniformity and also to build its image among the customers.
Keeping this in mind, the following points can be remembered while evolving the pricing strategy.
• One needs to know their customer's desires for different products and whether price is an important issue in
their purchasing decision?
• A price range that people will pay for the product need to be established i.e., what is the high and low price that
the merchandise will have to fall within for someone to buy the product?
• Consider an apt pricing strategy, which would be compatible with your store’s overall retail marketing mix that
includes merchandise, location, promotion, and services.
• The retailer is faced with a tough challenge of dealing with price sensitivity and its variability while considering
separate consumer segments. Let’s discuss on how they target consumer segments based on price sensitivity.
• Economic oriented: They don’t differentiate among various retailers on other factors other than price such as
store image, service, etc.
• Convenience oriented: They are willing to pay higher prices for reduction in the shopping effort. So, they tend
to prefer buying from websites like phoolwala.com, or establishments like Domino’s Pizza where there are no
delivery hassles and orders can be placed quickly.
• Image oriented: They differentiate between various stores on the basis of image and the products they stock,
and not the price. They look for prestige value from their shopping. These customers would prefer retailers like
Tiffany, Allukas, Dewan Saheb or restaurants like Ruby Tuesday.
• Variety oriented: They prefer retailers who have a wide range and assortment to choose from and charge fair
prices. Retailers that would attract such type of customers are Sears for tools and appliances, Nallis for sarees,
etc.
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• Loyalty oriented: These customers purchase at familiar places, where the retailer or staff of the retail outlet,
recognises them. They will pay slightly above average prices, or on the contrary they may look for discounts
since they have been loyal to that retailer. Indian customers generally look for personalised transactions while
buying jewellery. This aspect of consumer behaviour is somewhat peculiar to India because of the huge gray
and duplicate goods market.
• Key effects examining price elasticity: While still on discussion about customer, lets touch upon an important
point of price elasticity on customer’s demand. Price elasticity is a measure of the responsiveness of demand to
a change in price. If demand changes by more than the price has changed, the good is price-elastic. If demand
changes by less than the price, it is price-inelastic. The following are the key effects while examining price
elasticity.
• Difficult comparison effect: Customers are more sensitive to price when it is easy to compare competing
offerings. A retailer cannot charge higher prices on Amul Butter, which is widely available and where customers
can easily compare prices. So, many retailers have developed their own private label merchandise. For example,
Food World sells its own branded rice. It is very difficult for the customer to compare prices of private labels.
• Benefits/price effect: This defines the relationship between people’s perception of the benefits they receive
from a product and the price they pay for it. For example, a customer would buy a Mont Blanc Pen at a much
higher price even if similar quality pen is available at a lower price.
• Situation effect: Customers’ sensitivity to price can differ depending on the situation. For example, when people
go on an outing to a hill station then they don’t hesitate to buy an item for double the price that they can get in
their local market. This is because this shopping is a part of the entire outing experience.
• Many restaurants take advantage of the situation effect. Their lunches cost less than their dinners because
customers expect to pay less for a lunch. On the other hand, “low price” retailers maintain a utilitarian environment
with minimum decorations.
6.5.2 Suppliers
Both the retailer and the supplier like, to have control and want to price according to their own image, goals and
objectives. With the advent of Internet manufacturers are selling their goods directly to the final customer. In case of
an exclusive distribution network, the retailer carries products of the particular manufacturer only. The manufacturer
is able to exercise fairly large amount of control in this case. Then, some manufacturers first estimate the price at
which the goods would be sold to the customer and subtract the required profit margin of the retailer/wholesaler to
determine the selling price to the retailer. For example, if the estimated final price is Rs. 100, and the accepted profit
margin is 25% on sales, then the manufacturer would sell to the retailer at Rs.75. So if the retailer buys at Rs.75, he
can make a profit of 25% on the selling price of the concerned product, i.e., Rs.25. Apart from the manufacturer or
wholesalers, the other suppliers to the retailer are his employees, landlord, suppliers of fixed assets, etc. - Following
characteristics influence the bargaining power of supplier:
• Number of supplier, few large suppliers or fragmented source of supply
• Number substitutes for the particular merchandise
• Supplier’s level of forward integration in order to obtain higher prices and margin
• The switching costs from one supplier to another
6.5.3 Competitors
Competitors are the most influential factor in determining price. The competitive environment affects the freedom
of a retailer to fix prices to a great extent. Competition can range from being perfect competition to a monopoly.
• A perfectly competitive market is the most competitive market imaginable. Products are homogeneous and
information is perfect. Everybody is a price taker where firms earn only normal profit. If firms earn more than
that (excess profits) the absence of barriers to entry means that other firms will enter the market and drive the
price level down until there are only normal profits to be made.
• A monopoly is said to exist when the production of a good or service with no close substitutes is carried out
by a single firm with the market power to decide the price of its output. It decides its price by- calculating the
quantity of output at which its marginal revenue would equal its marginal cost, and then sets whatever price
would enable it to sell exactly that quantity.
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• Oligopoly is when a few firms dominate a market. They either behave so by forming an alliance or plan informally
to prefer a non-price competition. When they do compete on price, they may produce as much and charge as
little as if they were in a market with perfect competition. An example of oligopoly is the cola, industry where
there are only two major players, Coca Cola and Pepsi.
• Monopolistic competition lies somewhere between a perfect competition and a monopoly. It is also known
as an imperfect competition. Here, there are fewer firms than in a perfectly competitive market and each can
differentiate its products from the rest somewhat, perhaps by advertising or through small differences in design.
As a result, firms can earn some excess profits, although not as much as a pure monopoly, without a new entrant
being able to reduce prices through competition.
6.5.4 Government
Legal issues affecting the retail environment can be broadly divided into two. One that affects the buying of
merchandise, such as price discrimination and vertical price fixing and the other that affects the customer (horizontal
price fixing, predatory pricing, and bait and switch tactics). Let’s examine the different techniques of price
setting.
• Price discrimination: This means when a vendor sells the same product to two or more customers at different
prices. This discrimination can occur between retailer and customer or between the retailer and his vendor. In the
USA, price discrimination between vendors and their retailers is generally illegal, but there are three situations
where it is acceptable.
• Vertical price fixing: It involves agreements to fix prices between parties at different levels of the same marketing
channel (for example, retailers and wholesalers). The agreements are usually to set prices at the manufacturer’s
suggested retail price. So pricing either above or below MRP is often a source of conflict. Retailers cannot sell
above the MRP however. It is not permissible under law.
• Horizontal price fixing: It involves agreements between retailers that are in direct competition with each other
to have the same prices. Horizontal price fixing is always illegal since it suppresses competition while often
raising the cost to the consumer. Suppose there are three stores in a locality. Two of them join hands and start
selling groceries at very low prices, as loss leaders. If the third store is selling only groceries, he would lose
sales and would have to shut shop.
,
• Predatory pricing: This means establishing merchandise prices to drive competition away from the marketplace
and it is illegal. A retailer can however sell the same merchandise at different prices at different geographic
locations if the costs of sale or delivery are different.
In the Indian context, government exercises a very strong influence on the prices through its legal and policy
directives. As per the Weights and Measures Act, it is illegal to sell goods above MRP (Maximum Retail Price). A
customer can negotiate and purchase goods below MRP, but a retailer is not supposed to sell the product above the
mentioned MRP. However, in practice, it is not uncommon to see goods being sold above their prescribed MRP.
Like in the case of cinema halls, roadside dhabas and also sometimes in selling cigarettes.
Government Manufacturers, Current and

Consumers (federal, state and wholesalers and potential
local other suppliers competitors
Total effects
on pricing strategy
Fig. 6.1 Factors affecting retail price strategy

(Source: http://www.scribd.com/doc/37187836/Berman-Chapter-17-Pricing-in-Retailing)
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6.6 Tactics for Fine Tuning of Base Price

Following are some of the tactics used by retailers to fine tune the base, price:
6.6.1 Coupons
These are documents that provide a right to the holder to purchase at a reduced price or entitle him or her to a discount
on the product. The coupons are disbursed by retailers through various means, depending on the type of customers
that they want to target, economy of distribution, etc. Sometimes coupons are issued in newspapers for cut-out; they
can be given along with purchase or purchases of particular product/products,, above a certain amount.
For example, anybody who buys a television would get a coupon entitling him to avail of a discount on microwave
oven purchases. Or, anybody who buys goods worth Rs 5,000 would get a coupon to purchase Rs 500 worth of
goods free of cost. Coupons are used to attract customers to buy for the first time, convert those first-time customers
to regular ones, induce large purchases and increase usage.
6.6.2 Rebates
Rebate is basically money returned to the buyer on the basis of some portion of the purchase price. The buyer would
return the empty packaging, or anything that would serve as a proof of purchase, and the retailer/manufacturer
returns the mentioned amount to the buyer. For example, one scheme could be that if the his future purchase. Or, if
the pack is worth Rs.50, then on returning the pack, the buyer would be returned Rs.5. Rebates are used when the
price is large, because for small amounts the handling costs do not justify rebates.
But let’s examine a review of the pricing strategy on private labeled brands in Indian fast moving consumer goods
market.
Private Label Brands

A study by Economic Times (2004) reports that these brands are cheaper by 20-25% than the organised
FMCG majors in the market place. Attractive pricing had helped these brands catch the customer’s
eye. The margins on own-store brands are nearly two-and-half times higher than on regular FMCG
brands. Food, grocery and tobacco account for 72.2% of the total Indian retail market. Store brands
owned by FoodBazar, the food retail division of Pantaloon Retail (India), are steadily gaining market
share. This is to a large extent driven by the performance of in-house Foodbazar brands. Hence, they
have started thinking of launching new products under different brand names. The company sells
salt, tea, masala and pulses under the Food Bazar label and dal and spices under the Premium Harvest
label. The company’s in-house brands have garnered a market share in the range of 25-40% at its
existing stores. Foodbazar’s in-house tea brand, which is 20-30% cheaper than major FMCG brands,
has cornered a 40% market share. In the salt category, the Foodbazar brand has cornered a market
share of 40-45%. The company has launched a premium health salt in the price range of ordinary
iodised salt from Tata Chemicals and HLLL. It is believed that retail chains are offering products at
cheaper prices through direct tie-ups with tea gardens and salt refineries. Similar strategies are being
followed by major retail chains like FoodWorld, Shubhiksha and Nilgiris. Ability to offer customers
better value for money is attributed to better management of supply chain and logistics. Wide options
in everything from snacks, grocery items like atta, salt and grains and other household food products
coupled with attractive discounts and free gifts seem to have appealed to the customer.
(Source: ‘Private labels peel big brands out of stores’, Economic Times, January 21, 2004)
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6.7 Setting Retail Prices
To set retail prices it is important to understand some of the concepts and calculations related to it, basic methods
employed for setting prices and factors like price elasticity and price sensitivity which impact the effectiveness of
the pricing strategy. The price that a customer pays for an offering comprises of two main components: the cost of
the offering or the price that retailers pays to a supplier/ manufacturer, and the gross profit margin, which is selling
price minus the cost of the product.
In the retail business, the cost of goods (costs of acquiring products) includes the price paid for the merchandise,
handling, freight charges, and import duties. Operating expenses include rent, wages, advertising, utilities, and
supplies.
6.7.1 Mark Up
Markup is the difference between the price you pay for the product and the selling price. The markup can be
established as a percentage of the cost or as a percentage of the retail price. A price based on markup percentage on
cost is determined by adding a percentage of cost to the cost of goods as follows:
Cost of shirt: Rs 20.00
X Markup % 25%
Markup amount Rs 05.00
Cost of shirt Rs 20.00 + Markup amount 5.00
Selling price Rs 25.00
Percentage Mark up is expressed as a percentage of cost.
(Mark up _ Cost of goods) x 100
• Retailer can decide to use a standard markup percentage for all the merchandise, or have different markups for
different products. The key is to make sure the average markup or gross margin is enough to cover the operating
expenses and meet its target profit margins. When establishing the markup on particular merchandise, two points
should be noted: The cost of the merchandise used in calculating markup consists of the base invoice price for
the merchandise plus any transportation charges minus any quantity and cash discounts given by the seller.
• Retail price, rather than cost, is ordinarily used in calculating percentage markup. The reason for this is that
when other operating figures such as ,, wages, advertising, and profits, are expressed as a percentage, all are
base on retail price rather than on the cost of the merchandise being sold.
But while calculating such prices, it is essential to know the following important data:
Cost of Goods Sold (COGS)

COGS takes into consideration every expense incurred to bring the goods to the point of sale, it includes other
expenses besides the invoice cost of goods moved out of stock. COGS is the largest expense incurred by a retailer
and the price is generally determined by adding a margin for other expenses plus profit to service and replace the
capital. COGS would typically include:
• The purchase cost of all the goods that have moved out of stock. This movement may be by means of sales, or
theft, breakage and other losses. This purchase cost is the price charged in the purchase invoice. Trade discounts
given in the invoice are considered (therefore subtracted from purchase price) however, cash discounts are not
considered.
• Expenses incurred to bring the goods to the point of sale such as carriage inwards (freight), travelling expenses
incurred by the buyer to purchase the goods, etc.
• Depreciation on the remaining stock at the end of the period.
• Transfers from other departments or branches.
Therefore, Cost of Goods Sold can be calculated by the given formula:

Opening Stock (at cost or market price, whichever is lower) + Purchases & additions during the year (after including
the costs as detailed above)
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Closing Stock (valued on the same basis as opening stock)
Net sales
This is the total sales figures adjusted for goods returned by customers and allowances. Net sales is therefore, gross
sales less returns and allowances.
Gross margin (also called gross profit)

It is the difference between net sales and the cost of goods sold. Net sales means sales adjusted for any goods
returned.
Percentage gross margin (or Gross profit percentage)

This is the gross margin expressed as a percentage of net sales (Gross margin, Net sales) x 100
6.7.2 Markup and Margin

Markup is a percentage of the cost. Margin is the same rupee amount as mark-up, but expressed as a percentage of
the selling price.
Example
Item costs Rs.20.00; Item sells for Rs 25.00
Markup is Rs.5.00 or 25% of the cost.
Margin is Rs.5.00 or 20% of the selling price.
This is the easiest way to determine prices but can get into trouble if the margin between the cost of goods and the
suggested retail price is not enough to cover operating expenses. The income of a retail business is determined on
the basis of gross profit margins and number of goods sold. This provides resources to incur expenditure towards the
stock purchases, meeting operating costs and investing funds for expansion of business. In order to achieve desired
success in retail business, setting of prices by retailer is important. Retailers are expected to take into account these
factors while setting prices of its offerings:
• Owner’s returns
• The portion of rent going for storage space
• Maintenance and repairs
• The costs of business services (such as accounting and legal services)
• Advertising and promotion costs, insurance premiums, interest payments etc.
This is a reduction on the normal selling price. Sometimes, a particular line of goods is not moving; therefore the
retailer reduces the price on such goods to make them attractive to the customers.
Mark down = Normal selling price - reduced selling price
One needs to understand various uses of mark-downs and factors that ultimately result in a mark-down.
• Correctional mark-downs are used to encourage customers to respond more satisfactorily to a line. For example,
if a new product has been launched, it may be sold at a reduced price to induce customers to purchase it.
• Operational mark-downs are used to sell off obsolete, end-of-season goods. Or goods that are damaged, shopworn
and broken. For example, if a lot of crockery has been chipped, then it can be sold at a reduced price.
• Promotional mark-down is used to increase sales by offering the customers the incentive of lower prices.
• Correctional mark-down is used to correct errors resulting from wrong pricing, buying or selling.
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6.8 Methods for Setting Retail Prices
Generally one of the following three methods could be used for setting retail prices - cost oriented, competition
oriented and demand oriented method.
6.8.1 Cost Based Method

This is the most fundamental method of setting prices. The retailer adds a standard mark up to the cost of goods to
arrive at the selling price. This is a fairly simple approach and easy to implement. However, it ignores the prices set
by competitors and the demand for the product.
6.8.2 Competition Based Method

This method means closely matching the prices of competing retailers. This method is very easy to implement, as it
does not need forecasted demand as in the case of demand oriented pricing. A retailer merely follows his competitors
and cannot differentiate himself from his peers. It does not allow a retailer to maximise profits because demand and
costs are not considered while pricing.
The competitive markup method is used to price the goods similar to those of the competitors. In effect, the markup
is controlled by competitors and it fluctuates based on what the competitors are charging for their products and
services. Retailers can price either above, below or at parity with the competition. A low-cost provider would try
to price below competition while a retailer with high quality image, unique merchandise, etc would price above
competition. Stores like Shoppers Stop, which has a significant brand image, sell above competitor’s prices.
6.8.3 Demand Oriented Pricing

Demand oriented pricing should be ideally used along with cost-oriented pricing. When these two are used in
conjunction, the retailers can not only consider their profit structure but also the impact of price changes on sales. For
example, if the customers are insensitive to price (the demand is price inelastic), an increase in prices would result
in higher profits, as sales would decrease insignificantly. Similarly, if customers are price sensitive, a decrease in
prices would actually result in greater profits, as sales increase much more to offset the decrease in prices. Demand
oriented pricing, therefore, seeks to maximise profits.
6.9 Role of Price Elasticity and Sensitivity Consumer Responsiveness to Prices

While setting retail prices it is important to understand the impact of various price points on demand. In this context
the various price elasticities need to be factored in for calculation of price. While price elasticity is a characteristic
of the product price sensitivity is a characteristic of the consumer. Price sensitivity in turn affects price elasticity.
6.9.1 Price Elasticity

Price elasticity of an offering plays a key role in setting of prices. Price elasticity determines the extent to which
demand for an offering responds to change in price. Retailers required to identify will customers still buy its offerings,
even if the price is high? Or do significantly more customers buy the product if the price is low?
If an offering is price elastic, a change in price will cause an even larger change in the quantity demanded. This usually
means that if retailer lowers price of its merchandise, the quantity demanded of product or service will increase. If
retailer is selling price inelastic product or service, a change in price will cause less of a change in quantity demanded.
So, whatever price you charge, your demand will be relatively stable. Items that are price inelastic usually have no
similar items available, and no substitutions for the product exist.
6.9.2 Price Sensitivity

To determine retail prices, the price sensitivity of customers needs to be determined. Price sensitivity is influenced
by a number of factors like substitute awareness effect and income effect.
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Substitute awareness effect: When there are a lot of substitutes available to the customers, and comparing prices
among them is easy, the price sensitivity is high. The customers can switch easily if they perceive that the price
they are paying is high.
Total expenditure effect: The customers are price sensitive when the expenditure incurred on particular product is
high. The expenditure is large both in terms of absolute rupees as well as a percentage of the customer's income.
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Summary
• The pricing technique is used by most retailers is cost-plus pricing.
• Cost-plus pricing involves adding a markup amount (or percentage) to the retailer's cost.
• Retail pricing involves charging the amount suggested by the manufacturer and usually printed on the product
by the manufacturer.
• Three retail-pricing approaches based on the long-term objectives of the pricing decision are Discount Orientation,
At-the- Market Orientation and Upscale Orientation
• EDLP has been popularised by large international retailers like Wal-Mart and Home Depot. This strategy demands
stability of retail prices below MRP (maximum retail price) mentioned on the goods
• Price skimming is a pricing strategy in which a retailer sets a relatively high price for a product or service at
first, and then lowers the price over time.
• Penetration pricing is the pricing technique of setting a relatively low initial entry price, a price that is often
lower than the eventual market price
• Price lining refers to the offering of merchandise at a number of specific but, predetermined prices.
• Psychological pricing is a method of setting prices intended to have special appeal to consumers.
• Prestige pricing uses high prices to convey a distinct and exclusive image for the product. This is done in order
to evoke perceptions of quality and prestige with the product or service.’
• Reference pricing uses consumers’ frame-of-reference that is established through previous experience purchasing
the sports product or high levels of information search.
• Traditional pricing uses historical or long-standing prices for a sports product to determine the pricing.
• Bundle Pricing is the practice of offering two or more different products or services at one price.
• Coupons are documents that provide a right to the holder to purchase at a reduced price or entitle him or her to
a discount on the product.
• Rebate is basically money returned to the buyer on the basis of some portion of the purchase price.
The price that a customer pays for an offering comprises of two main components, the cost of the offering or
the price that retailers pays to a supplier/ manufacturer, and the gross profit margin, which is selling price minus
the cost of the product.
• Markup is the difference between the price you pay for the product and the selling price.
• The markup can be established as a percentage of the cost or as a percentage of the retail price.
• Net sales is gross sales less returns and allowances.
• Gross margin (also called gross profit) is the difference between net sales and the cost of goods sold.
• Net sales means sales adjusted for any goods returned.
• Percentage Gross Margin (or Gross profit percentage) is the gross margin expressed as a percentage of net sales
(Gross margin, Net sales) x 100.
• One of the three methods used for setting retail prices could be cost oriented, competition oriented and demand
oriented method.
• When these two are used in conjunction, the retailer can not only consider their profit structure but also the
impact of price changes on sales.
• Price elasticity is a characteristic of the product.
• Price sensitivity is a characteristic of the consumer.
• Price sensitivity in turn affects price elasticity.
• Price elasticity determines the extent to which demand for an offering responds to change in price.
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References
• Evans, B., Pricing in Retailing [Online] Available at: < http://www.scribd.com/doc/37187836/Berman-Chapter-
17-Pricing-in-Retailing> [Accessed 5th October 2011].
• Retail Categories: Pricing Strategy.[Online] Available at: < http://www.knowthis.com/principles-of-marketing-
tutorials/retailing/retail-categories-pricing-strategy/> [Accessed 5th October 2011].
• Sharma, B.M., 2008.Strategic Retail Management, Global Media.
• Pricing in retailing [pdf] [Online] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7796/1/
Unit-10.pdf> [Accessed 5th October 2011 ].
• Waters, S., Retail Pricing Strategies [Video Online] Available at: <http://video.about.com/retail/Retail-Pricing-
Strategies.htm> [Accessed 5 Octoberober 2011].
• Mooney, S., 2009. Pricing Strategies for Retail Profits [Video Online] Available at: <http://www.youtube.com/
watch?v=ccBtaCL6LlE> [Accessed 5 Octoberober 2011].
Recommended Reading
• Krafft, M. & Mantrala , M. K., 2008. Retailing in the 21st Century: Current and Future Trends, Springer.
• Berman, 2007. Retail Management: A Strategic Approach, 10/E, Pearson Education India.
• Dunne, P. M., Lusch, R .F & Carver. J., 2010. Retailing, Cengage Learning.
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Self Assessment
1. ___________ is a method of pricing in which the seller attempts to set price at the level that the intended buyers
are willing to pay.
a. Demand-oriented pricing
b. Cost-based pricing
c. Competitive pricing
d. Full price pricing
2. ___________ is quite a popular pricing method wherein the prices are set at odd numbers (for example, $9.95)
to denote a lower price or a “good deal” or setting prices at even numbers (for example, $ 10.00) to imply
higher quality.
a. Demand-oriented pricing
b. Perceived-value pricing
c. Competitive pricing,
d. Odd-even pricing
3. _________ is a pricing strategy in which a retailer sets a relatively high price for a product or service at first,
and then lowers the price over time.
a. Leader pricing
b. Skimming pricing
c. Penetration pricing
d. High/low pricing
4. In______________, retailers offer prices that are sometimes above their competition’s ELDP, but they use
advertisements to promote frequent sales.
a. prestige pricing
b. psychological pricing
c. high/low pricing
d. penetration pricing
5. ____________ is a method of setting prices intended to have special appeal to consumers.

a. Psychological pricing
b. Reference pricing
c. Prestige pricing
d. Traditional pricing
6. __________ is basically money returned to the buyer on the basis of some portion of the purchase price.
a. Coupon
b. Rebate
c. EDLP
d. MarkUp
7. ________________ is the difference between net sales and the cost of goods sold.
a. Markup
b. Gross margin
c. Net-sales
d. Percentage gross margin
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8. ______________ is the difference between the price you pay for the product and the selling price.
a. Markup
b. Gross margin
c. Net-Sales
d. Percentage Gross Margin

a. Price sensitivity is a characteristic of the product.
b. Price elasticity is a characteristic of the consumer.
c. Price elasticity in turn affects price sensitivity.
d. Price elasticity determines the extent to which demand for an offering responds to change in price.

a. Cost of Goods Sold (COGS) is the largest expense incurred by a retailer.
b. Cost of Goods Sold (COGS) includes other expenses besides the invoice cost of goods moved out of
stock.
c. To determine retail prices, the price elasticity of the customers needs to be determined
d. Competition based method means closely matching the prices of competing retailers.
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Chapter VII
Information Technology in Retailing
Aim
• identify the application of information technology in retailing
• discuss the factors influencing the selection of technology
• enlist the latest trends in technology available for retailing
Objectives
• recognise the involvement of it in retail operations
• enumerate various latest trends in technology for retailing
• discuss the limitations of information technology in retailing
Learning outcome
• understand the need for adoption in technology
• identify the precautions to be taken while handling technology in retail
• differentiate between intranet, extranet and internet
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7.1 Introduction
Information is a key resource that retailers need to manage effectively in order to satisfy their customer needs and to
remain competitive in the industry. The number of products carried by a retailer and the large number of customers
and suppliers means that retailers generate huge amounts of information. The advent of information technology
has given retailers the means to harness it and enabled them to improve the efficiency of their businesses and the
service that they provide to customers.
Information technology is ubiquitous in retailing today, with its most obvious manifestation in the electronic
point-of-sale (EPOS) cash register and the laser scanner used at checkouts by the vast majority of retailers. Electronic
Funds Transfer at Point of Sale (EFTPOS) systems also allow customers to pay either by credit or debit cards at
checkouts without cash. Many retailers also use electronic loyalty cards to add incentives. In the background, store
retailers use the information provided by the EPOS system and direct communication with their suppliers through
electronic data interchange (EDI) to allow automatic reordering and replenishment. The internet has also changed
how retailers communicate with their suppliers and retailers use information technology in general to improve their
marketing and merchandising performance.
Information Technology(IT) has been used by retailers for three main purposes: item identification, improvement
of communication internally and externally and information processing and analysis. EPOS systems are a direct
outcome of item identification. The development of internal networks, intranets and EDI and the internet represent
attempts to improve communications; internally and externally. Retailers have gone beyond simply using information
technology to collect information; increasingly they are using it to analyse and to better understand the needs of
their customers for improving retail business processes.
Need of information technology in retailing

Information technology, as defined by the Information Technology Association of America (ITAA), is “ the study, design,
development, implementation, support or management of computer-based information systems, particularly software
applications and computer hardware.” Encompassing the computer and information systems industries, information
technology is the capability to electronically input, process, store, output, transmit, and receive data and information,
including text, graphics, sound, and video, as well as the ability to control machines of all kinds electronically.
Information technology’s role today

Every day, people use computers in new ways. Computers are increasingly affordable; they continue to be more
powerful as information-processing tools as well as easier to use.
One of the first and largest applications of computers is keeping and managing business and financial records. Most
large companies keep the employment records of all their workers in large databases that are managed by computer
programs. Similar, programs and databases are used in such business functions as billing customers, tracking
payments received and payments to be made, and tracking supplies needed and items produced, stored, shipped,
and sold. In fact, practically all the information companies need to do business involves the use of computers and
information technology.
7.2 Involvement of IT in Retail Operations

Forecasting is the process of estimation in unknown situations. It’s an essential and very important process in any
business organisation. Business leaders and economists are continually involved in the process of trying to forecast,
or predict, the future of business in the economy. Business leaders engage in this process because much of what
happens in businesses today depends on what is going to happen in the future.
Retail demand forecasting

Modern demand-forecasting systems provide new opportunities to improve retail performance. Although the art
of the individual merchant may never be replaced, it can be augmented by an efficient, objective and scientific
approach to forecasting demand. Large-scale systems are now capable of handling the mass of retail transaction
data – organising it, mining it and projecting it into future customer behavior.
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This new approach to demand forecasting in retail will contribute to the accuracy of future plans, the satisfaction
of future customers and the overall efficiency and profitability of retail operations.
Inventory management
Inventory can be raw materials, finished items already available for sale, or goods in the process of being manufactured.
Inventory is recorded as an asset on a company’s balance sheet. To optimise the deployment of inventory, retailers need to
manage the uncertainties, constraints, and complexities across their global supply chain on continuous basis. This allows
them to improve their inventory forecasting ability and accurately set inventory targets. An IT solution is a proven and
market leading solution for determining optimal time-varying inventory targets for every item, at every location throughout
supply chain. This allows retailers you to significantly reduce inventory without adversely affecting service levels.
Store management
Another example where information technology can be beneficial is a store management that alerts out-of-place or
stock-out items. A store, commonly a shop or stall for the retail sale of commodities, but also a place where wholesale
supplies are kept, exhibited, or sold. A place where something is deposited for safekeeping is called a store. The
in-store system uses magnetic strips or barcodes or RFID to monitor actual versus intended product location on the
floor or in the stockroom.
7.3 Application of IT in Retailing

Technology can be applied or rather is being applied to different departments of retailing. It will be good if we study
the departments one by one and then see the technology application.
7.3.1 Sourcing
We can divide various functions under this broad head. First of all, we take sourcing of merchandise. Sourcing
includes deciding about the depth to be maintained in each category to the number of categories to be maintained.
It also includes short listing and selecting of vendors and planning orders. A retailer needs to gather information
about various categories in vogue in the market. He needs to keep a tab on latest trends in this context. Nowadays
retailers collect their own stores purchase data to study the buying trends. He is also collecting data through the
internet similarly vendors can be short listed. Various vendor databases can be used to find suitable merchandise
suppliers. Availability of goods can be ascertained and order placed through the internet
7.3.2 Stocking/Warehousing
Here the technological element is maintaining data of the stocks received. Necessary changes are made on a regular
basis as per the consumption at the store. A retailer decides upon the reordering level based on consumption and
delivery lead time. Thus once the stocks reach that level, an intimation automatically goes to the purchase department.
Technological contribution has come to such a level here that if the retailer has a long term contact with the vendor
then the order can also be directly placed to him automatically once the stocks reach the reordering level. This is
possible through ERP programme.
Store management
It includes various issues, such as, human resource management, finance and accounting, store display, security
and miscellaneous issues. Technology has contributed in each sphere depending upon the scope. From an HRM
perspective the manpower planning is now done with the help of systems. Software are available which shows the
total position of available staff in a given day. It also can shuffle personnels based on programming done. Such
manoeuvring can be done once the name of personnel on leave is keyed in.
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Finance and accounting is now commonly used system based. There are specific software available to handle cash
flows, payments and receipts. Billing machines have now become an age old phenomenon. Since products are
generally bar-coded in retail stores-the mechanism is different. At the point of sales (POS) all the product codes are
saved in the computer memory. Thereon with the identification of this code the prices are simultaneously tabulated
and added up. Moreover it is technological advancement in the banking sector which is helping the retailer in his
accounting work. A retailer can at any time log on to the bank site and with the help of a password have an access
to his account details. Thus sitting at his store he can come to know whether the cheque deposited for clearance has
been received or not. This also keeps him updated with his cash in bank position.
Plastic money is another contribution technology. Credit cards have made purchasing an easy activity. They are
being widely accepted. Debit cards are also in vogue. This has also increased the propensity to consume amongst
the customer community. For more efficient handling of cash, now advanced cash drawers are in vogue. These cash
drawer are multi layered with space for different denominational currency notes and coins respectively. It is connected
to the billing machine. As soon as a new transaction is entered in machine the drawer opens automatically with trays
coming out. After the cash keeping and change picking is through the drawers automatically close again.
Store display is another area which has been greatly benefited by the technological contribution. Nowadays lighting
in the stores is a result of advanced technology. Various effects can be created with lighting. This in turn totally
transforms the store atmosphere. As a result store experience can be enriched thus stimulating sales. Besides lighting
nowadays the entire display design can be visualised and actually seen on the computer monitor without investing
a single rupee.
Security is a critical area for any store. Close circuit televisions are age old concept but have become more common
now even with medium size retailers. Security from theft is not the only risk zone for the retailers. Another area is
fire. Smoke sensors are now being installed in all big retail outlets. Besides being a credible investment it has even
become mandatory to install fire safety devices in big retail outlets.
Marketing and customer relationship management

Every store would like to promote itself. They have been employing all novel methods to ensure an enhanced footfall
into the store. Most importantly every retailer strives to have a number of loyal customers. Such customers not only
remain loyal to the store but also tend to influence their peers store selection towards the specific store. Nowadays all
the big retail stores use available software to store data about customers and their purchases. This is then classified
to find the most valuable customers, frequently visiting customers, most highly demanded categories, colours and
varieties. Earlier bin cards or store purchase cards were used for this purpose. With technology coming in, now data
mining is the latest to be used in this regard.
Retail stores are also offering loyalty cards now which have been in vogue for quite some time in air travel. As per
the purchases made the scores are added up to that account, leading to attractive gifts later. Here with just swiping
of the card that specific account is activated. In such a case a central data centre exists which stores all the data. The
retail store can at any point of time retrieve the classified data from the central database Technologies under this
broad head are titled as CRM technologies where CRM stands for Customer Relationship Management. With CRM
software we can identify specific market segments, which were earlier statistically done by cluster analysis.
The greatest benefit of technology from marketing point of view is the accuracy of processed data When the
retailer has exact information about buyer preferences, then he can plan his market promotion strategy accordingly.
Promotional schemes can also be designed based on available information sourcing.
7.3.3 Limitations
IT is a late comer. IT boom has started in the concluding part of the last century. It has still a long way to go. In India,
a vast sector of the unorganised retail is still untouched by IT. It is still not very affordable. There are questions of
security and quality of data. E-shopping faces the risk of frauds, though data encryption and 128-bit security are a
great help. Retailers should have a long-term commitment to IT to reap its full benefits.
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7.4 Factors Influencing Selection of Technology
Since every store wants to have a modern image, at times they make an erroneous decision regarding technology
adoption. Since each store is not equal on all business parameters thus technology adoption has to be dealt on a case to
case basis. Certain factors must always be kept in mind by the retail store owner before going for any technology.
7.4.1 Need for Adoption of Technology

Any technological product needs high investment, trained personnel and periodical updating. A retailer should first
look into the return on investment as well as recurring cost besides the one time sunk cost. Can the job in focus be
done manually or with some cheap technological substitute? For instance, for recording simple day to day retail
activities of a small retail store any general software is sufficient.
7.4.2 Volume of Business

Most important factor is what sort of volumes the retailer is operating with. Larger volumes do necessitate
technological interventions. Here it’s very important to note that large volume is a relative term. The biggest store
in a small town can be much smaller than a medium sized store in a metropolitan city. When we speak of such
products we must look into the issue accordingly.
7.4.3 Nature of Products Dealt With

Each retailer deals with a set of products which when combined generally are a part of an industry. For instance
Pantaloon or Westside who are in the apparels trade are a part of the fashion industry. Since fashion is very temporary
in nature, they have to take aid of technology to gather data about latest fashion trends in India and abroad. This
helps them to have a proper hold on the production planning and control.
7.4.4 Availability of Financial Resources

In any business the buck finally stops here. After considering all the factors, a store has to have a serious look at its
resources. Most importantly a wise retailer should never dig into his working capital to meet such fixed expenses.
Although exceptional cases do exist, but, thumb rule still remains the same.
7.5 Latest Trends in Technology for Retailing

There have been a series of latest trends in technology for retailing, some of which are listed below:
7.5.1 Electronic Retailing

Although it’s not latest as far as international retailing is concerned, however in India it’s still in an early stage. In
electronic retailing, internet is used as a platform by the retailer to communicate with the customer and offer products
and services on sale. In India Baazee.com Times Internet, Rediff etc. are some of the examples of retailing. It will
be dealt in detail in the next chapter on Non Store Retailing.
7.5.2 Interactive Projection Displays

Interactive rear projection displays allows the viewer to control the content displayed on a screen with a touch. It
can be used within the store to promote services or offerings, or within the shop window. This actually facilitates
window shopping. They are run on touch screen technology.
7.5.3 Attention Seeking Display Units

Such units can be installed within the store or even outside. Their main aim is to seek attention from the passers by.
These illuminated and uniquely designed units carry promotion messages as well as vital information about some
specific products:
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7.5.4 Vending Machines

Such machines have been recently installed in selected railway stations for vending platform tickets. Milk vending
machines also exist. Presently opportunities are being explored in this area with more emphasis on new features
and uses.
7.5.5 Handheld Computer Devices

Such devices have been successfully used by supply chain personals at the lowest end. It has been found useful to
replace loads of paper which the driver had to carry while delivering consignments of product to the customers with the
total data stored in the handheld device now. Thus the driver can very well refer to that for any cross checking.
7.5.6 Data Capture by POS

Retail data can be collected by several methods. The most widely used method is to capture data through point-of-
sale (POS) device or a computer by inputting data manually at the time of retail transaction. The most important
details provided are the merchandise purchased mode of payment, use of loyalty card, time and date of transaction,
the sales person who attended and the value of the transaction.
This has marketing implications. The stores can be divided into trial stores and control stores, and new products
can be tested. Manufacturers can be given access to POS data to test new products, promotional strategies, seasonal
sales, etc. POS data are timely and accurate. Retailers use POS data for their own use and for the vendors. Data
communication can also be integrated to POS to pass on the data to HQ frequently.
7.5.7 Coding Systems

A retailer has several hundred pieces of merchandise. He has to assess sales in terms of quantity sold, colour, size
and other attributes of products sold. All this is impractical to handle manually; and is quite error-prone. There is
thus a need for a machine readable system, which would identify the merchandise across the various retail locations
and make available the relevant information about them. This led to the development of Universal Product Code
(UPC) or bar code in 1952, which was later introduced into the retail industry.
The first patent for what was originally meant to speed up the check-out process at the grocery stores was issued
to inventors by Joseph Woodland and Bernard Silver in 1952 which was for bar codes. In the UPC, there are bars
and spaces which denote alpha-numeric information. In 1977, the European Article Numbering (EAN) Association
was formed which represents 101 countries. Each national association allocates a random 13digit code (EAN 13)
to manufacturers and retailers to identify their products.
Digits Denotes
Issuing organisation,e.g., UK Article Numbering Association code is 50, France
First two digits
32, US 00, India 89
3-7 Manufacturer or company marketing the product
8-12 Product
13 Check digit to ensure that the code is entered rightly
Table 7.1 The 13 digit code by national association
The allocation for 13 digits is as follows:

The US uses a 12 digit UPC, which is compatible with EAN 13. Shorter codes for fashion goods are introduced
consisting of 8 digits. Supplementary information can be added to this code, e.g., batch number, sell-by-dates and
other information using symbology called Code 128. Publishers use International Standard Book Number (ISBN).
Prices are added using a five-digit supplementary code.
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EAN codes are useful for the manufacturers, distributors, exporters and repackaging units.
Manufacturers generally supply bar coded merchandise to the retailers. The EAN 13 code can be read by a
scanner in any direction - it is omni-directional. New symbology called snowball can be read vertically as well as
horizontally.
On June 26, 1974, a 10-pack Wrigely’s chewing gum was the first product logged in a grocery store by a bar coding
system using the modern universal product code. Later that year, the Uniform Grocery Product Code Council became
the UPCC which regulates the issue and the use of all universal product codes. In 1971, the Plessey Company
developed a bar code scanner and tracking system for library book check-out. Intermec developed Code 3 of 9,
a bar code that could store alpha-numeric information. All after codes prior to this could only represent numeric
digits. PoS or computer capture data in terms of brands sold, size sold, colour sold and price at which sold. If a
loyalty card is used, customer’s individual details are also captured. Card swipe terminals are secure way to accept
payments. Magnetic strips at the back of the card is read and decoded by the swipe devices. Bar codes generally do
not include prices. Merchandise price is kept on file within Pos; or the central computer. The correct price is then
entered automatically as soon as the bar code is read. It is called Price Look UP (PLU). PLU is also useful in eff.
ecting price changes. Excitement can be built into the system by reducing prices in some specified hours for certain
specified products. Promotional prices are correctly calculated by the PoS.
7.5.8 Database Marketing

Database marketing makes use of databases of customers’ suppliers and others to prospect them or to sell to them
or to establish relationship with them. The database is built carefully and then maintained by proper updating.
A database is a strong source of intimate customer knowledge. Database marketing has two components - data
warehousing and data mining. Data warehousing is a storehouse of total customer information. Data mining is a
set of techniques applied to the data to segment the customers. It facilitates targeting. It helps the customisation of
products and tailoring of the communication mix.
Database marketing also helps in measuring the value of a customer. It is a good method to cross-sell the products.
For instance, a customer who has availed of car finance can be sold vehicle insurance. Database marketing these
days is considered an investment. In India, Diners Card was the pioneer of database marketing. Before the card was
acquired by City, it was issued by the Agarwals. Firms used Diner database to market shares and securities. Even
today, credit card and mobile phone users are good databases.
A database is different from a mailing list. A database is a refined data that provides valuable information like
customer spends, life-styles, buying frequencies and quantum, demographic characteristics and socio-economic
characteristics. The data is extended to cities, states and age-groups. Data is focused. A mailing list has a price,
whereas database has value.
The crucial inputs of database must be constantly updated. Outdated and irrelevant data must be eliminated. The
basic quality of data must be good. Data available must have been verified and filtered. But it is also true that a
perfect database is a myth. Database marketing also shares information on consumer transactions. It should be seen
that this does not violate the consumer privacy.
7.5.9 Business Data Communications

Computer files with data are exchanged amongst retailers, distributors, various offices, headquarters and vendors.
Such communication is through PSTN lines, private telephone lines, ISDN or VSAT apertures. Data exchange could
be retail data transaction files, electronic data exchange (EDI) and E-commerce, Extranet and Intranet.
We must be clear about the concept of customer service. It essentially means the facilitation of shopping, the
awareness being created about a retailer’s offering and the customer satisfaction as a result of this. Thus, service is
three-dimensional transaction: before the transaction, transactional and after the transaction.
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7.5.10 Retail Data Transaction Files

PoS transmit files electronically to HO for processing and analysis. This is automatic transfer of data. In a large
store, individual computers exchange data with the central computer. It enables a merchandise manager to get a
progress report every evening. The price files are updated everyday. The store computer transmits the price files to
the PoS terminal.
7.5.11 Electronic Data Exchange (EDE) and E-Commerce

These days orders are sent to the suppliers electronically. A manufacturer receives it and approves it. It is passed
on to the distribution system for execution. The dispatch information is sent electronically to the ordering store. An
Invoice is generated and sent to the store.
Extranet
It is web EDI that uses Internet technology for B2B transactions instead of the usual ED. Extranet is closed and
secure Internet service to receive orders from the retailers.
Intranet
Intranet is electronic sharing of data amongst the manpower.
Internet: the media of the new millennium

Internet is a global computer network in which millions of computers owned by the individuals and organisations,
both private and public, are linked for fast transfer of data. The transfer of data is governed by internationally
accepted protocol called TCP/IP. Within the Internet, there are documents or pages linked together - this constitutes
the World Wide Web (www). The user’s computer called the client accesses these pages from the server computer of
either the ISP (internet service provider) or the computers connected to this server. The pages are accessed through
software called web browser such as Internet Explorer or Opera or Netscape.
Most retailers now maintain a website that is accessible round the clock and throughout the world. Web is a democratic
medium which allows equal opportunity to all the players to promote and sell their products and provide information
about their products. Internet has an advantage over the other media because of its high degree of interactivity.
Consumers can establish contacts through E-mails and can fill the forms online. Internet can give customised
information to an individual consumer.
Internet can be used to sell a retailer’s products. The consumer can access an electronic catalogue. He can decide
to order. The order can be confirmed as per the schedule he wishes. The payment is made either through a debit or
credit card. There is also an option of paying cash on delivery (COD). The card details are protected by encryption
and secured sockets. This consumer-to-business transaction is called e-tailing. There are also business-to-business
selling (B2B) transactions. Together, consumer-to-business (C2B) and business-to-business (B2B) transactions make
up the E-commerce. E-tailing is very commonly used to sell PC hardware and software, books, music, gift items,
groceries, apparel and entertainment.
7.5.12 Radio Frequency Identification (RFID)

This is a wireless technology which is presently revolutionising the retail information system. A basic RFID system
will have a transceiver, an antennae and a RFID tag also called a smart tag. The antennae emit radio signals which
activate the smart tag, following which the transceiver decodes the data from tag into the computer. This has been
used for tracking. RFID has been very successful in accurate tracking. However, due to very high price of RFID its
large scale adoption has not been possible yet.
7.5.13 Retail Solutions

Some solutions are end-of-end retail solutions, covering everything from PoS to back-office and head-office. Solutions
can range from a single store with one PoS to a complete multi-store environment. Some better-known solutions
are LS Retail, SAP Oracle Retail, JDA and Landsteiner. These offer end-to-end solutions which are scalable and
work in geographically distributed environments and are modular enough to suit most retail requirements with
minor customisation.
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7.6 Precautions while Handling Technology in Retail
A retail store before adopting any new technology should spend time in studying the applications. It’s advisable to
speak to stores who have already adopted such technology successfully. Complete prior information comes in very
handy while deciding on such issues.
• Any technology transfer without proper training support and updating is useless. While going for any new
technology a retail organisation must be very clear on these issues. Moreover training is a continuous process.
The need may arise anytime in future to may be train some newly recruited personnel. There should be scope
for such in the contract for technology transfer.
• It is always in the interest of the retail organisation to have its own data processing or technology using staff.
Depending on technology vendor, such services may be quite expensive and also not fit from a strategic
perspective.
• At any point, retail organisation should not assign the handling of processes which are technology oriented only
to one or two personnels. Such indispensability of those personnels can put the organisation in a fix. A second
line of command should always be present in such critical areas.
• In the post WTO era issues related to copyrights and title of technology are very critical. Especially if purchasing
from international vendors one must carefully read through the contract and take legal advice before signing
on the contract.
• As a part of the disaster plan a crisis management plan should be in place to tackle situation arising out of system
failure or snags in the software. Such circumstances are common and should be planned for.
• While acquiring any technology one important aspect is its price. This is also a decisive factor for its acquisition.
Thus generally it has been seen that to show the product pri6e low some hidden costs in other forms exist in the
contract. Such hidden costs make the product’s cost to company much higher. While taking such decisions one
must consider all monetary aspects including recurring costs as minutely as possible.
• In traditional organisations existing for long periods older people resist implementation and introduction of
any technological products. Instead of replacing them with younger people one must get down to motivation,
persuasion, training and incentivising such usage. This approach will be in the greater interest of the
organisation.
7.7 Future Trends in IT for Retailing

These days data on cards is encoded on the magnetic strip. But now cards are embedded with a chip which are called
smart cards. Smart loyalty cards can be used across a number of retailers. Smart cards will enable fund transfer
electronically. The transactions will become more secure. Smart cards will act as electronic purses or wallets.
Multimedia kiosks put at strategic locations will be increasingly used. Customer specific offers can be generated
by the grocery stores. The electronic body scanners will record biometry of the anatomy to fit the clothes to the
individual’s measurement. Paper labels are likely to be replaced by electronic shelf edge labels (ESELS) which
could be directly linked to PoS.
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Summary
• Information technology, as defined by the Information Technology Association of America (ITAA), is “the
study, design, development, implementation, support or management of computer-based information systems,
particularly software applications and computer hardware.”
• Sourcing includes deciding about the depth to be maintained in each category to the number of categories to be
maintained. It also includes short listing and selecting of vendors and planning orders.
• Forecasting is the process of estimation in unknown situations.
• Interactive rear projection displays allow the viewer to control the content displayed on a screen with a touch.
• Attention seeking display units are illuminated and uniquely designed units that sometimes carry promotion
messages as well as vital information about some specific products:
• The most widely used method to capture data is through point-of-sale (POS) device or a computer by inputting
data manually at the time of retail transaction.
• The most important details provided by the POS device are the merchandise purchased mode of payment, use
of loyalty card, time and date of transaction, the sales person who attended and the value of the transaction.
• Coding systems refers to a machine readable system, which would identify the merchandise across various retail
locations and make available relevant information about them.
• Database marketing makes use of databases of customers, suppliers and others to prospect them or to sell to
them or to establish relationship with them.
• Database marketing has two components,viz.; data warehousing and data mining.
• Data warehousing is a storehouse of total customer information.
• Data mining is a set of techniques applied to the data to segment the customers.
• Service is a three-dimensional transaction: before the transaction, transactional and after the transaction.
• Internet is a global computer network in which millions of computers owned by individuals and organisations,
both private and public, are linked for fast transfer of data.
• PoS transmit files electronically to HO for processing and analysis.
• Extranet is web EDI that uses Internet technology for B2B transactions instead of the usual EDE
• Intranet is electronic sharing of data amongst the manpower.
• The transfer of data is governed by internationally accepted protocol called TCP/IP.
• Within the Internet, there are documents or pages linked together - this constitutes the World Wide Web
(www).
• Radio Frequency Identification (RFID) is a wireless technology that is used for tracking and consists of a
transceiver, an antennae and a RFID tag also called a smart tag.
• Retail Solutions offer end-to-end solutions which are scalable and work in geographically distributed environments
and are modular enough to suit most retail requirements with minor customisation.
• Smart cards are cards embedded with a chip.
• In accordance with the future trends in IT for retailing, paper labels are likely to be replaced by electronic shelf
edge labels (ESELS) which could be directly linked to PoS.
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References
• Bhatia, S.C. [Online] Available at: <http://books.google.co.in/books?id=5tnIDdWLQI0C&pg=PR7&dq=I
nformation+Technology++in++Retailing&hl=en&ei=OeaKTq3VCJDsrQeW1MyNAg&sa=X&oi=book_
result&ct=result&resnum=5&ved=0CFcQ6AEwBDgK#v=onepage&q=Information%20Technology%20%20
in%20%20Retailing&f=false> [Accessed 5th October 2011].
• Tiwari, P. Applicaton of IT in Retailing [Online] Available at: <http://www.indianmba.com/Faculty_Column/
FC546/fc546.html> [Accessed 5th October 2011].
• Unit 20 [pdf] [Online] Available at: <http://www.egyankosh.ac.in/bitstream/123456789/7833/3/Unit-20.pdf>
• Chunawalla, S. A., 2009. Contours of Retailing Management, Global Media.
• Mour, A., 2011. Impact of Information Technology on Retail sector [Video Online] Available at: < http://www.
youtube.com/watch?v=ZWQMNU2a6co> [Accessed 5 Octoberober 2011].
• Cherian, J., 2009. Information Technology In Food Retail [Video Online] Available at: <http://www.youtube.
com/watch?v=y0m4enSwTfI> [Accessed 5 Octoberober 2011].
• 2009.Technology at Work in Retail, [Video Online] Available at: <http://www.youtube.com/watch?v=rsvgW3
qT0u4&feature=related> [Accessed 5 Octoberober 2011].
Recommended Reading
• Joshi, G., 2008. Information Technology for Retail, Oxford University Press.
• Khurana, 2010. Information Technology For Retailing,Tata McGraw-Hill Education.
• Bromley, D. F & Thomas, V. J. Retail change: contemporary issues, Publisher Taylor & Francis.
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Self Assessment
1. ________________ allows the viewer to control the content displayed on a screen with a touch.
a. Attention seeking display units
b. Radio frequency identification
c. Interactive rear projection displays
d. POS(Point-of-Sale) device
2. The most widely used method to capture data is through _____________ or a computer by inputting data
manually at the time of retail transaction.
a. POS(Point-of-Sale) device
b. radio frequency identification
c. data-base mining
d. data-base warehousing
3. ____________ refers to a machine readable system, which would identify the merchandise across the various
retail locations and make available the relevant information about them.
a. Business data communication
b. Coding Systems
c. Vending Machines
d. Electronic Retailing
4. ____________ makes use of databases of customers, suppliers and others to prospect them or to sell to them
or to establish relationship with them.
a. Data-base mining
b. Data-base warehousing
c. Data-base marketing
d. Data capture by POS
5. ___________ is web EDI that uses Internet technology for B2B transactions instead of the usual EDE.
a. Extranet
b. Intranet
c. Internet
d. WWW (world-wide web)
6. ________ is electronic sharing of data amongst the manpower.

a. Extranet
b. Intranet
c. Internet
d. WWW (world-wide web)
7. ____________ is a wireless technology that is used for tracking and consists of a transceiver, an antennae and
a special tag also called a smart tag.
a. WWW
b. Code system
c. Retail, data transaction files
d. Radio Frequency Identification Tag ( RFID)
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8. In _________, internet is used as a platform by the retailer to communicate with the customer and offer products
and services on sale.
a. electronic retailing
b. vending machines
c. handheld computer devices
d. retail solutions

a. Vending machines offer end-to-end solutions which are scalable and work in geographically distributed
environments.
b. Forecasting is the process of estimation in unknown situations.
c. Data mining is a set of techniques applied to the data to segment the customers.
d. Data warehousing is a storehouse of total customer information.
10. _____________ includes deciding about the depth to be maintained in each category to the number of categories
to be maintained.
a. Forecasting
b. Sourcing
c. Stocking
d. Store-marketing
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Chapter VIII
Mall Management
Aim
• enlist the key success factors for malls
• analyse the mall design process
• explain the shopping mall management process
Objectives
• introduce, define and state the meaning of mall management
• enlist various design issues for shopping centres
• discuss the new mall breed
Learning outcome
• differentiate between various types of malls
• understand the objectives and scope of shopping mall management
• identify the objectives and scope of house-keeping and security services
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8.1 Introduction
India has witnessed a frenetic pace of retail development over the past five years. While local shopping centres
have always existed in India, their structure, ambience and method of doing business served the needs of the local
population. The pace of change in retail development has triggered a frantic pace in the development of malls. A
number of factors such as income growth, changing demographic profile and socio-economic environment have
driven this transformation in retail in India.
Goldman Sachs has estimated that the Indian economic growth could actually exceed that of China by the year
2015. It is believed that the country has the potential to deliver the fastest growth over the next 50 years. Keeping
in mind the rates of growth predicted for India and China, the balance of economic power is poised to tip in favour
of two of the world’s largest populations over the next 50 years. The Global Retail Development Index developed
by A.T. Kearney has ranked India first, among the top 30 emerging markets in the world.
Formats new to the Indian marketplace have emerged rapidly over the past five years. There is little doubt that retail in
India is revving up for an exiting phase ahead. Developments in retail formats and patterns of shopping have always
been influenced by mobility and the lifestyles of the consumer. Typically, the development of shopping centres has
followed a pattern, which ahs always synchronised with the development of the retail sector in that economy and
the needs and wants of the consumer.
Meaning and definitions

Before getting into the intricate details of mall development and management, we need to know the basic overview
of mall culture.
Definitions: The difference between a shopping centre and shopping mall will get clear once we have a look at both
these terms, as many a times these are used interchangeably.
“Shopping Mall”: The Cambridge Dictionary defines a “mall” as a large, usually enclosed shopping area.
“Shopping centre”: Is commonly referred to open-air retail. In simple terms, a number of stores situated close to
each other in an unenclosed (open) area.
Period Description
Ishfahan’s Grand Bazaar- Tehran

• 10 kms long.
15th Century AD
• 58 streets
• 4000 shops
1916 Indoor Mall - Duluth. Minnesota
First fully - enclosed mall South dale Mall in Seattle was designed by Victor Gruen
1950
(Known as Father of Malls)
West Edmonton Mall-Alberta

1986 • World’s largest parking lot
• Largest shopping centre
Table 8.1 History of malls
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Globally, mall management broadly includes:

• Positioning a mall
• Zoning – formulating the right tenant mix and its placement in a mall
• Promotions and marketing
• Facility management – infrastructure, traffic and ambience management
• Finance management
Types of mall
There are four types of malls based on their size, number of anchors and location. They are:
• Regional mall: Larger with 4.00.000 sq. ft. to 8.00.000 sq. ft., gross leasable area with at least 2 anchors .
• Super regional: Over 8.00,000 sq. ft. and serves as dominant shopping venue for the region in which it is
located.
• Retail districts: Combination of big box at one place. This one is the latest trend in the retail market.
• Vertical malls: These are in the form of buildings and are created when the land price is high. Therefore, the
space allocated to retail is configured over a number of stores accessible by escalators linking the different levels
of the mall. In this case, the challenge is how to encourage shoppers to move upwards and downwards.
Emerging trends in retail mall real estate

Some of the emerging trends in retail mall real estate are:
• Larger formats and conscious differentiation: Developers are interested in having larger retail formats and are
paying peculiar attention in differentiating their retail space to their competitors.
• Growing interest towards mall management
• Innovative lease terms and models - Revenue Share becoming common.
Revenue share as a model recently introduced in the major retail markets of Mumbai and Delhi.
Revolves around concept of Minimum Guarantee + % share of monthly revenue of retailer
Encouraging developers to become active participants in brand promotion along with retailers
Rationalisation in maintenance and services
Mall developers have started paying greater attention to design and infrastructure planning such as
parking
Retail mall space supply - reaction to vast demand

Certain facts regarding retail mall space are as follows:
• Concentration of mall space is still in Tier 1 cities of Delhi, Mumbai and Bangalore. Delhi has maximum sq.ft.
of malls currently as well as upcoming.
• Till 2008(E),Mumbai had approximately 17.5 million sq.ft. of mall space.
• Chennai and Hyderabad demonstrate same trend in mall space growth, with Pune being the leader among Tier
2 cities in terms of mall space.
• Mall sq.ft. available per person is high for Delhi and Pune with lowest being for Kolkata.
Tier I Cities: traditional cities of choice

Following are the reasons for choosing the cities for mall development:
Mumbai: business metro

• India’s Largest City
• Population Base: 17 million
• Financial Hub
• Advertising, Fashion Capital, Bollywood
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Delhi: political capital
• Political Advantage(National Capital Region)
• Highest GDP/Capita
• Booming Suburbs
Bangalore: IT hub
• India’ Silicon Valley
• Moving up Value Chain
• High Quality Labour
Tier II cities: today’s rising urban stars

• Competitive Business Environments
• Human Resources Availability
• Telecom Connectivity
• Urban Infrastructure
• Governance
• Real Estate Provision
Tier III cities: next generation of emerging city winners

• Proximity to Tier I Cities
• Connectivity
• Education
• Urban Infrastructure
• Quality of Life
• Tourism
8.2 New Mall Breed

Like insecure teenagers, malls keep changing their style. They are ripping away their roofs and dry-walled corridors;
adding open-air plazas, Sidewalks and streetside parking; and rechristening themselves “lifestyle centres”. This
new look may remind you of something: a vibrant urban street. Yet, while these new malls may appear to be public
space, they’re not public at all - at least if you want to do anything but shop. They represent a bait-and-switch routine
on the part of developers, one that exchanges the public realm for the commercial one. They’re also enormously
successful.
This is civic life in America, circa 2005, and its spreading. The International Council of Shopping Centres estimates
that 17 more lifestyle centres are set to open here. The Memphis-based developer, Poag & McEwen coined the term
in the late 1980s. but most centres have been built in the last two years, typically near affluent suburbs. They are
upscale outdoor shopping areas designed to look like city streets, with an emphasis on restaurants and spaces for
people-watching. They also have what planners call “ a mix of uses” - a bit of housing, some offices and occasionally
actual people living in apartments above the stores.
Shopping-mall developers believe that lifestyle centres will improve the fortunes of medium-sized malls, which
have been losing customers to the mega malls. Ever since Victor Gruen constructed the first indoor shopping centre
in a Minneapolis suburb the mall has been super - sizing itself. Over the years, they have become behemoths that
serve entire regions, such as the King of Prussia Mall in Pennsylvania and the Mall of America in Minnesota. All
of these malls turn their backs to their surroundings and concentrate activity in and on them. By contrast, lifestyle
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centres gesture toward their environments. With their street grids and sidewalks, they convey a sense of being out
and about in the world. Developers hope that, by emphasising convenience and entertainment, people will visit
lifestyle centres more often and stay there longer.
Unlike the previous reinvention of the mall as a “festival marketplace”, lifestyle centres do not attempt to evoke
some idyllic past. Faneuil Hall in Boston, which opened in 1976, and the South Street Seaport in New York, which
opened in 1983, grafted a mall onto historic market, hoping to make shopping feel tourism. At lifestyle centres,
the most discernable theme is urbanism itself. Their developers recognised that “shopping” is only one urban
entertainment among many, like eating at restaurants, people-watching, open-air concerts, or looking at art. More
incredibly, lifestyle centres do all the things that urban planners have promoted for years as ways of counter-acting
sprawl: squeeze more into less space, combine a mix of activities, and employ a fine-grained street grid to create a
public realm - a “sidewalk ballet”, in Jane Jacobs’ alluring phrase. The irony is almost too perfect: Malls are now
being designed to resemble the downtown commercial districts they replaced. What sweet vindication for urban
sophisticates!
8.3 Key Success Factors for Malls

The success factors for malls are as under:
8.3.1 Design
With regards to design the following parameters if followed by mall developers, would lead to success.
• Site planning and circulation
• Adequate junctions and on-site circulation to avoid traffic queues
• Phased & flexible approach to allow for future expansion in terms of parking
• Configuration: Placing the anchor tenants (super-regional mall/ hypermarket) on 1-2 levels
External design
• Based on internal design of shopping centre
• External signage, prominence of anchors
Internal design - visibility and circulation

• Horizontal-avoid dead ends dark corners), straight/Prefer (anchors to generate pull; avoid dead curved corridors,
central courts/nodes) areas
• Vertical - encourages people to visit upper floors through vertical anchors (department stores, decked car parking),
escalators and lift, visibility between levels (set backs and line of sight)
• Clear signage/directions throughout.
Internal design - finishes

• Avoid overly complex design - will conflict with retailers’ store fronts
Internal design - layouts

• Based on the attraction factor of anchors, allocate highest margin retailers to highest footfall locations.
• Create broad zones to allow comparison shopping.
• Keep flexibility to deal with changing retailer market- modular, flexibility in design.
• High quality environment to encourage dwell time - shopping as a leisure experience:
• Different zones - some relaxing and calming; others dynamic and buzzing.
• Lighting (natural light. artificial light).
• Make the mall a meeting place.
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8.3.2 Tenant Mix
Mall developers must create convincing offers to maximise footfalls and ticket size. This can be achieved by:
• Anchors - These are characterised by low margin and high volume. (e.g., hypermarket, electronic, furniture)
• Retail gallery - Characterised by high margin and low volume.
• Entertainment and F&B - These are included to improve leisure experience, by increasing dwell time and
broaden appeal.
Obtain high quality anchors (not luxury but with “est”): biggest, best, lowest prices, fastest service
• Improve financing (pre-lease to credit tenants).
• Generate footfall by offering best value and wide selection of goods.
• Confidence in project to pull in high quality retailers at lease.
• Marketing and promotion.
Ensure sufficient choice of operators in each category to ensure negotiating position for each retail unit.
8.3.3 Asset Management

Develop partnerships with retailers:
• Improving their turnovers will improve rent potential.
• Bring to multiple locations.
• Maintain flexibility in design for future reposition.
• Establish training programs’ and property management systems.
• Commitment to high quality marketing and branding.
8.4 Mall Design Process

The mall design process is categorised in three different steps:
• Changing directions
• Future trends
• Current planning framework
Let us discus these points in brief.
Changing directions
During the late 60’s and 70·s. the design of shopping centres resulted in some very basic. pragmatic layouts and
often unimaginative exterior presentation. Features of these centres included:
• Large car parks
• No links to the local community
• Large box shapes
• Often poor regard for the surrounding environment
• The capture and content mentality
As the 70’s progressed, we find a few centres starting to question the design and layout that had become regarded
as “typical”. After this, we find the approach to shopping centre design changed rapidly with greater amounts of
style being created.
However, one could see that the customer was beginning to demand better designed environments to shop in and
of course recreate in. Recreation time had been recognised as “a commodity” and hence the retail sector started to
provide recreational opportunities such as:
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• Cinemas
• Cafes
• Lifestyle retail
• Entertainment in various forms
Then the 90’s came along with the growing world movement and new urbanism and smart growth, a search for
authenticity, and even greater focus on entertainment and eating. The market is also now demanding an environment
whether the basic aspects of daily life can be accommodated in a way that is convenient and enjoyable. The
establishment of mixed used areas where people can work, rest and play have become the focus of both the new
areas and urban renewal projects.
Future trends
The following list highlights some recent trends:
• Increasing spending on food and merchandise
• Greater diversity of uses in shopping centres, entertainment/lifestyle
• Creation of precincts targeted towards certain parts of the market
• Impact of increasing popularity of electronic services such as internet, shopping and phone-banking
• Creating environments that respond to changing demographics, including more singles and childless couples
and increasing average age
• Creating environments where people feel comfortable, including the identification of “the third place” - A place
away from home and work where people want to spend their time.
• The breaking-down of visits into categories including chore-shopping, discretionary shopping and leisure
activities, such as eating, drinking and movie-going
• The importance of design aesthetics, incuding the use of high-profile architects/ interior designers
Current planning framework

These days, shopping centre designers know that their proposals will be subject to intensive scrutiny by a vast range
of professionals, politicians and the public.
• Mall developers now take the issue of design very seriously, which include:
Safety and security
Functional requirements, and
Identity in the layout and design
• Every development has convenient and prominent pedestrian entrances, in terms of design, signage, lighting
and gradient.
• Expansion of ground-level blank walls along street frontages and entrances to car parks are avoided.
• A feeling of security is assisted by buildings and active uses such as cafes and front verandahs, being oriented
to the street.
• In activity centres, parking is placed at the rear of buildings or internal to the block.
• Parking for people with disabilities is provided adjacent to key facilities - must be enforced.
• Buildings and their pedestrian entrances are oriented to the street. Building setbacks are minimised to provide
natural surveillance of footpaths, bus stops and taxi ranks, while still allowing sunlight access and minimising
wind tunnel effects.
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8.5 Design Issues for Shopping Centres
Some of the design issues for shopping centres are:
8.5.1 The Design Process

Before discussing the design process, it is considered appropriate to emphasise two financial aspects of shopping
centre design that sets it apart from other forms of development.
The first is that shopping centre owners/developers are, in the vast majority of circumstances, committed to a
financial return over a long period. Unlike some other forms of development, the shopping centre developer’s
involvement does not end upon the completion and sale of the building. Given this long-term commitment, there
is greater interest in ensuring profitability on an ongoing basis. This interest in the current environment encourages
high-quality design.
The other financial factor is financial viability. Shopping centres are affected by changes in the market including
competition. Competition is an integral part of the retail environment and the risk from competition is acknowledged
in feasibility analysis. However, changes to the retail hierarchy brought about by poor planning decisions are a
risk that cannot be predicted. Given the significant amounts of capital required to develop and redevelop shopping
centres, the developer needs to be confident and there is no unforeseen threat to achieving an appropriate return on
their investment.
The starting point for the design of a shopping centre is to establish ‘a first cut’ tenancy mix. As Jean Louis Solal,
a French specialist in retail layout and a writer on shopping centres; said, “A good tenant mix is the blood line of
the shopping centre industry.”
Solal goes on to say that the development process should not be started by the architect, but by the establishment of
a merchandising concept. This tenant mix will drive a range of issues in the brief and will provide a self-regulating
effect on the changing phase of shopping centres.
Key steps are the identification of:

• demographics
• tenant mix
• size
• requirements of the shoppers, i.e., the community
• the physical concept
• the construction
• the leasing
The character of shopping centres will be determined by the users and these users continue to be educated about
lifestyle. The character of a shopping centre is often a response to customer needs, climate, design trends and planning
trends. Competition will always be the driver and the mother of inventive design outcomes for retail.
The key design elements are considered to be:

Planning
• Convenience
• Security
• Customer-orientation
• Lines of visibility
• Efficient planning and strong anchoring of malls.
• Comfort
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• Dynamics
• Promenade
• Location of amenities
• Meeting place
• Flexibility of environment
Specialist retail environment

• External appearance
• Internal and external style
• Point of difference in competitive market
• Clarity of presentation
• Lighting
• Environmental graphics
• Colour Dynamics of space
• Excitement of the space
• Flexibility of the environment
Tenancy mix
• Focus retailing
• Community use and a community focus
• Retail mix
Entertainment
• Leisure
• Passive and active entertainment
• Environmental graphics Excitement
• Promenade
• Meeting place
Visual & Impact

• Care of the environment
• Environmental graphics
People spaces
• Convenience
• Security
• Customer orientation
• Efficient planning and strong anchoring of malls
• Comfort
• Dynamics
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• Promenade
• Location of amenities
• Meeting place
Connectivity to fabric of community

• Street patterns
• Pedestrian connection
• Part of the fabric of community
• The functional requirements for shopping centres which include:
The need for ‘big boxes’ in which to contain large format retailing
Convenient parking to meet the needs of customers
Provision of easily accessible and loading docks
Large format retailing

The need for shopping centres to provide large, unrestricted spaces for major tenants is a significant element in the
design of a centre. The constraints of these large formats include:
• Planned dimensions are usually rectangular or square.
• Height internally usually requires an external height of approximately 6.0 metres.
• Cinema boxes are the highest of the large format users requiring between 9 metres to 12 metres.
• They have a requirement for strong visual identification usually with signage and sometimes with external
colour.
Major tenants typically have very rigid requirements in terms of space they require. This is because duplication
of the same or similar configuration over many stores creates efficiencies that are of great value to the retailers.
Notwithstanding the above, recent developments are reducing the impacts of the buildings required to accommodate
large format tenants through innovative and good design.
In the majority of cases, it is simply not viable to provide car parking underground. It is also not practical in most
cases, as customers demand parking with easy access to the shops and as such parking levels match retail levels.
Due to the functional nature of car parking, the provision of large car parking structures above ground, creates a
design issue. In the past, large simple concrete structures would meet the functional needs with little attention given
to the external appearance. In many cases, only amelioration was done to provide thick screen planting. Whilst in
some cases, this illusion provides a reasonable outcome.
Loading docks
Loading docks are an integral feature of shopping centres that create specific issues such as noise, odour, visual
appearance, light spill and hours of use. As with parking, regulatory authorities often require a particular ratio of
loading docks in relation to the size of centres. However, these requirements are often increased to accommodate
retailer’s specific needs and the desire to recycle garbage and packaging. Loading docks can be designed in such
a way as to be screened from external view lines and often have a service yard enclosure which helps to disguise
them.
Sustainability
The issue of sustainability has great relevance to retail environments. Many centres are designed to collect good
natural light within the internal space to create a feeling of outdoor environment.
The recurrent cost of a retail centre can be greatly reduced by energy-efficient design and management practices.
Passive solar design and the provision of cross ventilation are provided. However, due to the size and functional
requirement of shopping centres and the need to provide a climatically-stable environment for customers, such
measures are often difficult to incorporate into design, Construction, operational and management measures which
are energy efficient are playing a much greater role in conserving resources. Such measures include: retail centre
can be passive
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• High shading coefficient and high thermal resistance leasing material used to minimise heat transmission.
• Triphosphor lamps are used instead of conventional fluorescent tubes.
• Metal halide lamps to replace tungsten halogen.
• Circuit management of the lighting zones.
• Photo-cell control for external lighting.
• Automatic on/off when the ambient illuminating level is required.
• Power factor correction system.
• Building services (including air-conditioning) which are fully programmable and can be updated to suit any
changes to the building and maintain high energy efficiency.
There is also widespread commitment to recycling and reuse of materials. In addition to the issue of energy efficiency,
shopping centres assist in creating sustainable neighbourhoods. By providing for a wide range of needs locally, there
is less need for residence to travel greater distances, thereby reducing the length and number of vehicle trips
Security
Security is a significant issue for both shopping centre owners and customers. Buildings are designed to minimise
the potential for criminal activity with measures such as providing good sight lines, removing spaces that can be
used for hiding and shortening ‘dead’ spaces such as walkways to toilets. As there is limited scope in building design
to address security issues, the chief measures used are surveillance and security personnel.
Community enhancement
Shopping centres have many strong community benefits. They accommodate retail ‘chain’ stores which provide
an efficient method of distributing goods allowing these goods to be sold at lower prices. They also accommodate
speciality shops which respond to the demand of the local community and are often owned by local people. Shopping
centres provide safe, pleasant meeting places for the community often providing focus for social activities. As noted
previously, in recent times the shopping centre industry has sought to enhance the role of the shopping centre in the
community, expanding the range of uses provided. Many shopping centres now include entertainment and leisure
facilities. Others are going a step further, aiming to be the focus for the business centre in which they are located
by creating ‘town square’ or ‘high street’ environments.
Public/Private space
The issue of the blurring of the public and private domain is growing in importance as a result of societal changes
and the shopping centre designer’s response to these changes. Key aspects of this ‘blurring’ include:
• The public domain for commercial uses such as outdoor dining and market retailing
• The greater permeability being provided by shopping centres and required by authorities
• Greater integration with surrounding public domain
• The provision of true ‘open space’ within shopping centres, that is outdoor, unencumbered recreation spaces.
Most large shopping centres have always provided semi-public space to allow for the circulation of customers.
These spaces are generally required to be publicly accessible, but usually only during operating hours. Due to the
nature of these spaces, in some cases, consent authorities have excluded such areas from floor space calculation.
These spaces are becoming more public in terms of level of accessibility provided and the actual nature of space,
often as a requirement of the consent authority.
Often what is being provided is high quality public domain which comes at no cost to the public. Whilst there is
some benefit in providing such environments for shopping centre owners, to further encourage the creation of such
areas, the consideration of some credit to the owner would be beneficial. This would also create some equality in
the present public/private domain situation where public spaces are leased to private users for substantial fees.
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8.5.2 Feasibility Study
The design element of a mall is reliant upon many factors and not just the land parcel available. The initial decisions
about positioning, branding and the look and feel of the mall weigh heavily on the demand for services. We need to
discover and understand this demand before we proceed. This is achieved through feasibility studies.
One of the first actions to be taken when considering constructing a building with the intent to conduct a business is
to analyse the feasibility. Without the correct analysis reports and data you cannot make the decision to proceed.
The feasibility study is a project analysis outlining informative and precise information in relation to many areas
including:
• master plan location
• building site location
• catchment analysis, demographics and customer-demand analysis
• competition overview
• future growth
• financial analysis and viability
• market overview
• development vision
• trade and tenant mix
• development configuration
The objective of feasibility study is to discover information to enable the developer:

• To define the vision of a successful retail concept for their sites.
• To leverage the macro and micro retail real estate market opportunities.
• To arrive at an optimal trade and tenant mix for the retail developments.
• To determine indicators, the market-linked assumptions A micro-look at feasibility study would include: and
conclude financial
• To give recommendations on the design, services and facilities, lease and operating model based on market
practices and international best practices.
Stage 1: Pre feasilbilty

• Advisory and Strategy formulation: Includes a concise assessment of-the location & site. Research & study the
macro and micro market dynamics and project future demand.
• Location analysis: The accessibility and visibility of the site would have its implication on the development and
the marketability. A SWOT analysis will assist in determining the development on a particular site.
• Market Synopsis and competition scan: Identify and analyse select competing developments in the surrounding
city, especially the projects in the immediate vicinity.
• Assessing demand: Primary estimation of the demand will assist in determining the development mix
• Benchmarking: Details of Retail developments of similar nature and derive key factors for their success and/
or failure.
• Pricing: Based on the retail category, market conditions and expected future trends, the achievable rental values
will be presented.
• Financial analysis: Conduct a brief financial analysis to ascertain the optimal development mix to maximise
the projected revenue.
• Tenant and trade mix for the retail development: The long-term sustainability for any project shall be the result
of the tenant and trade mix of the scheme. A perfect mix results in bringing success to the overall development
by generating higher complementing footfalls and generating higher revenues out of the scheme. This shall
bring us to the end of the first stage of the development analysis, where the scale of the development and project
positioning of the scheme are ascertained.
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Stage 2: Post feasibility

Zoning and tenant allocations: Post the decision of finalising the quantum of development and derivation of the
product positioning, it is crucial to prepare a wish-list of the retailers who would bring more than mere rentals to
the development. This wish-list allocated in an appropriate manner:
• Ensures circulation within the scheme which shall ensure higher rentals for the scheme. - Secondly, it shall
increase the footfalls throughout the scheme instead of limiting it to a few hot spots within the scheme
• It shall increase the lease ability of the overall scheme
• Planning at this stage makes the project go the distance, since there are no surprises that come up during the
execution of the project
Retail planning
Beyond the layout and the planning of the scheme by the architects, there are the marketing and leasing issues with
each and every development. This is most prominent in retail schemes since visibility, pedestrian and signage, etc.,
are important for the retailers who shall lease the space from the developer. The unique concepts generated in the
earlier phase to enhance the catchment area, has to be integrated in this phase with the overall retail plan created
by the architects. This is a continuous process, where interaction between the developer and the architects shall
together bring the project to a stage where it is ready for the leasing activity.
8.5.3 Architects
Once the feasibility study in the selection process is complete, it’s time to consider the architects’ selection process.
Once you have short-listed the preferred architects, they will forward proposals with a company profile and head
designers CV’s. Once the company has been chosen and the process commences, with preferences and guidance
from the developer, the initial three stages are as follows:
Stage one: preliminary concept design

• Summary of project vision
• General site-plan showing building configuration and site-layout
• Site circulation diagrams showing access and ingress, vehicular flows, car park plans, retailer servicing, etc.
• Shopping centre layouts showing configuration, vertical and horizontal circulation, indicative position of retail
units and common areas
• Key building sections with the indication of key levels (ceiling and floor levels and building heights)
• Indicative facade drawings
• Summary of gross and net development floor area by category
Stage two: schematic design

• Using the approved concept design to proceed with the schematic design
• Develop the schematic design in consideration of the current concept design, the Client’s requirements, planning
parameters and other necessary consultants’ designs (e.g. GD, M&E, ID consultants)
• Present the design to the Client and the relevant authorities for approval before proceeding with further steps
The schematic design architectural drawings shall include:

• Typical overall floor plans
• Basement floor plan (including calculating parking capacity)
• Rendered site suitable scale. plan showing indicative landscape concepts in 1500 or suitable scale
• Elevations in 1:200 or 1:250 scale (including proposed building facade)
• Sections in 1:200 or 1:250 scale
• Schematic architectural details showing design intent
• Rendered architectural perspectives showing design intent
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• Design data calculations
• Material boards proposed for exterior finishes
• Outline architectural specifications
• Outline finish schedules for both exterior and interior
• Design brief
• Attend and co-ordinate with client and/or consultant team meetings
• Amend the drawing if required by the Government
• Co-ordinate with authority approval; consultant to necessary drawings for authority submissions
• Co-ordinate with quantity surveyors for cost plan
Stage three: detail design

• Co-ordinate with other consultants (e.g. C&S. M&E. ID and other specialist consultants) in order to incorporate
their design into the architectural design.
• Further develop the schematic design to the level of design development drawings. The architectural detail
design drawings are similar to the schematic design drawings stated above but they shall be co-ordinated with
the C&S and M&E engineering requirements and include more details as follows:
This is where your tenancy mix and zoning come alive.
Once these drawings are complete, it’s time to construct.
8.6 Shopping Mall Management

Shopping Mall Management can be defined as operation and maintenance of the entire building infrastructure,
including the services and utilities, ensuring that they are used in a way that are consistent with the purpose for
which it was acquired.
The Shopping Mall Management services are customaries as per the client’s needs with listed specifications and
guidelines for the executives, shifts engineers, supervisors, operators and technicians who form the functional
unit intrinsic to the service delivery process that carries out the listed services bearing in mind the quality and cost
effectiveness.
Schedules, procedures, controls, responsibilities are formulated and decided with respect to each and every service,
installation or building component. These are upgraded and reworked with time to change/improve as per the
feedback and prevailing industry standards.
Shopping mall management is a key component of an efficient and professionally administered business. The
benefits include:
• Readily identification of availability/status of Equipment.
• Saves money by reducing waste, redundancy and Equipment loss (by allowing a better maintenance plan).
• Allows the client to have an accurate record of its investment in Equipment.
• Facilitates tracking and recording of maintenance and warranty information.
• Provides data which enables the clients to obtain indirect cost recovery for Equipment depreciation.
• Allows the managers to issue timely and accurate property reports.
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Objective of shopping mall management manual

The purpose of Shopping Mall Management quality model is to familiarise the property manager and all other team
members with the various processes required to successfully manage a property for their clients.
The procedures within the document should be used as guidelines to assist team members accomplish Shopping Mall
Management efficiently and professionally. The manual is an ever-changing document that should be improved by
on-site shopping mall management staff to incorporate any required changes or improvements.
Scope of shopping mall management

• Arrange and oversee all the day-to-day operations of the property
• Provide a 24-hour emergency service
• Provide a 24-hour emergency maintenance staff
• Create a continuing building and utilities maintenance programme.
• Create and Update a manangement plan
• Obtain and create contacts for all necessary goods and services and create specifications
• Inspect the property a predetermined scheduled (yearly planners) for defects, improvements and overall
operations
• Maintain up-to-date Shopping Mall Management records to include all documents and maintenance of
records
• Provide an annual review of current and future for budgetary purposes
• Train and supervise on-site staff
• Operation and maintenance of HVAC systems
• Building fabric and landscaping maintenance
• Operation in minor maintenance of lifts/elevators
• Disaster management
• Operation and maintenance of fire control systems
• Operation and maintenance of plumbing and water systems
• Co-ordination of annual maintenance contracts for all building services
• Enforcing and monitoring safety norms
• Co-ordinating and monitoring security surveillance including (if applicable) SS controls
• Landscaping (cultivation, irrigation, lawn of turf area, tree, shrub, weed, control, flowerbed maintenance,
etc.)
• Operation and maintenance of electrical and mechanical systems including BMS and PLCs
Methodology for shopping mall management

The prudence should be abetted through a step-by-step process which should be tailored to best meet the needs of
the clients. The guidelines followed are:
Quality assurance: Develop and implement policies, standards and best practices designed to achieve consistently
high quality services delivery within property and Shopping Mall Management services.
Inventory management:This includes receiving and verifying quantity and quality maintaining computer inventory
record of items lists.
Accountability and stocking: The activities associated with asset management include recording and condition
monitoring, financial devolution, maintenance, operation, risk management and disposal. All these activities are
inter-related and must be fully co-ordinated and dealt with as a whole, if effective asset management is to occur.
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Physical asset register: These contain textual and financial information about each of the real property assets with
condition report.
Asset conditioning monitoring: Quality and assess equipments and facilities in terms of their future life and
maintenance costs to add these components to the maintenance planning process.
Annual budgets: Annual Budgets should include the total revenue allocation for various activites relating to
operations and maintenance of various assets and services.
Customer service centre: A key step in establishing workplace management on-site should be coordinating the
customer service centre operation function. The service centre should be the primary link between the client personnel
and Workplace Management.
8.6.1 House Keeping Services

House-keeping services is an important aspect of facilities and Shopping Mall Management services, dealing with
the health and the hygiene of the occupants and needs due deliberation. House-keeping services deal with the upkeep
of the areas, including common areas, parking, lavatories, etc. To cater to the client’s expectations, workplace
management along with qualified housekeeping services provider, provides the global standards services with quality
measuring tools such as SLA’s (Service Level Agreement) and KPI’s (Key Performance Indicators) .
Objectives
The objective of this section is:
• to detail out the operating guidelines to provide highest standards of excellence
• implement systems and procedures for effective discharge of duties
• introduction of professional monitoring systems that ensures performance with optimum efficiency
Scope of service
Provides cleaning services of a character customarily provided in star hotels/ Big business houses and maintain the
hygiene standards of the complex. Scope of services includes the upkeep of the following areas:
• Common areas/lobbies/stair wells/electrical rooms
• M/C rooms
• Terrace
• Facade
• Lavatories
• Landscaping
• Water drains
• Parking
The intent of this section is that the Contractor should provide clearing services of a character customarily provided
keeping the best house keeping; whether such services are included in the section or does the Owner or an occupant
request special services. Owner to be the sole judge of said quality and required frequency of services to be provided
herein.
Services standard
Coverage
All common areas-lobbies, corridors, stairways, lavatories, passageways, utility areas, landscaping and mechanical
areas including the Equipment are to be cleaned.
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Quality
To maintain the highest standards, a well-planned quality system should be developed with customised checklists.
The starting point in the process is the service standards and KPI’s set out in the Shopping Mall Management contract
between the Client and Workplace Management. These service levels set the minimum standard that is to be achieved
through the service delivery period. These central standards from the nucleus of the monthly management issued
to the clients against which all standards are measured.
Irrespective of services mentioned above in scope of work or special services requested, client/occupants along
with the property manager are the sole judges of the said quality standards and required frequency of services to
be provided.
Quality measuring tools

The measuring tools for quality are:
Service Level Agreement (SLA)
Service Level Agreement is a very important tool to monitor work done or services provided to the utmost level
of satisfaction and comfort. The basic purpose of developing this Service Level Agreement is to set out certain
service standards which can hold good with certain modification globally. The ability to offer a consistency comes
from high quality service. well-established practice of working within Service Level Agreements (SLAs). These
are applied equally to service providers, management and employees. As a result; every member of the client team,
from management to sitebased customers can rely on an agreed level of service.
Key Performance Indicator (KPI)

The actual level of service delivered within each SLA should be determined using Key Performance Indicators
(KPIs), which provide an unambiguous measure such as the frequency, type or services provided. Within the KPI;
performance can refer equally to the speed and the reliability of service. Irrespective of services mentioned above
in scope of work or special services requested; client/occupants along with the property manager are the sole judges
of the said quality standards and required frequency of services to be provided.
Introduction to and importance of house keeping department

The first impression that a customer forms about a professionally managed property depends largely on the cleanliness
and order of the property’s public areas. This addresses the cleaning responsibilities of the house-keeping department
in relation to the public areas such as entrances, lobbies, staircases, elevators, restrooms, cinema halls and the facade
of the building.
Nothing more can be done to establish a good impression than the cleanliness and the condition of the Public Areas
which are a reflection on the standards of what people can expect in the offices and premises.
Given below are a few guidelines to be followed to be able to maintain specific standards:
Entrances and lobbies
The frequency with which lobbies are cleaned depends a lot on the weather and traffic. Mud tracked in during the
rains can deteriorate floors/floor coverings. Runners or mats kept at the entrances pick up dirt, saves carpets and
protects against slipping.
Cleaning duty performed in lobbies (hourly) includes wiping of smudges, finger prints on all glasses/mirrors and
other polished surfaces, sweeping/swabbing of floors,
The (daily) routine includes cleaning floors, ceilings, furniture, telephones and other fixtures and embellishments.
Weekly performed tasks typically include vacuuming of the furniture, scrubbing of floors, walls and other hard to
reach areas behind carpets.
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Corridors and staircases
Besides cleaning the floors, walls, cobwebs and railings, attention should also be paid to the trim around the doors,
light fixtures (even if it is the electrical department that is supposed to attend to all jobs connected with lights and
light fittings. It should be the duty and responsibility of the house-keeping department to see to it that the work gets
done) and fused bulbs, air supply vents and sprinklers, cameras. Spot clean the walls for smudges, finger prints and
skirting for the scuff marks.
Elevators
Hand rails. Control panels, Doors, Glass, Mirrors, Brass, Steel surfaces should be carefully cleaned, polished, shined
regularly and buffed repeatedly to be kept shining and free of finger prints, smudges, streaks, etc. Door tracks should
be carefully brushed to be dust-free. Floors should be swabbed/ vacuumed as and when needed depending on the
traffic.
Public restrooms
Should be cleaned and disinfected as often as possible, depending on traffic to these, in order to keep them clean
and maintain a pleasant appearance.
Back areas
Parking Lots, Floor area should be swept daily. Cobwebs should also be dealt with regularly as they tend to form
very quickly in these areas. The gates, gate closers and areas around these should be kept clean. People have a habit
of throwing Cigarette butts and wrappers into corners, so care should be taken to pick up litter more often. The pipes
going through the parking areas need to be dusted every ten days or so because there is a lot of dust in the parking
bays with cars going in and out all day long.
Plant room
All engineering plant rooms should be kept very clean. Grease and oil spills must be removed immediately, as dust
tends to settle and make it look filthy. Not only that. grease tends to seep into the flooring gradually over a period
of time and then nothing can be done to remove the stains.
Administrative offices
To be swept and swabbed daily. All desks, chairs, telephones, dustbins, blinds, fittings should be cleaned everyday.
Thorough cleaning should be done weekly.
Pantries
Clean weekly
Staff toilets
Should be cleaned and disinfected at least twice daily
Stores
Sweep and swab daily. Anti-fungal/bacterial treatment should be done bi-monthly or as and when required
Task of assistant managers in house keeping

• Position should be responsible for supervising/managing/overseeing the house-keeping, cleanliness, hygiene,
sanitation, maintenance and upkeep of the entire mall and the adjoining areas.
• Will manage the entire House-keeping Department with 50 house-keeping team members
• Establish service and quality standards
• Ensure cleanliness and guest service initiatives drive.
• Participate in all budget strategies for the house-keeping department
• Explore and implement avenues to enhance quality, cleanliness and service standards
• Execute departmental payroll forecasting and budgeting
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• Ensure compliance with all safety and sanitation standards

• Supervise the coaching and counselling sessions with house-keeping team members. Coach and establish clear
channels of communication
• Will train and develop House-keeping Executives and Supervisors to future Assistant Manager’s positions
• Participate on the Executive Committee of the mall
• Participate in mall
• Ambassador on Duty Programme (Manager on Duty)
• Area of responsibility would include amongst others the following:
The cinema halls
The retail outlets
Common areas
The public utilities
The night club
• In preparing for this position, candidate ideally should have worked in at least the following departments or
positions: Manager House-keeping/ Accommodations Operations Manager/Assistant Executive House-keeper/
Executive House-keeper in and at properties of similar size and quality.
• Approximate full-time staff under this position: 50
• Position is responsible for a budget approximating 12 million rupees.
• This position reports to: Corporate Executive House-keeper.
• The Incumbent should be groomed to become the Manager House-keeping of a Similar property and/or as the
Executive House-keeper of a larger unit.
• The future growth would be in and as the Corporate House-keeping Executive and thereafter as the Corporate
Executive House-keeper.
• A detailed position guideline may be sought from the office of the Corporate Executive House-keeper.
• The growth rate is performance-driven and on the basis of a quality approval of the work done by you.
• Your performance can take you places - Assistant Manager House-keeping, Manager House-keeping, Executive
House-keeper, Corporate House-keeping Executive, Corporate Executive House-keeper, Growth Unlimited/
Unlimited Options Available.
• Should be in the possession of basic practical and theoretical knowledge on the following:
Dry foam methodology
Injection execution methodology
Honing and crystallisation
Hazard analysis and critical control point
Budgeting and expense statement man management and manpower deployment fabrics and fabric care
Carpets and carpet care
8.6.2 Security Services

Security should be of prime consideration at any Mall. The purpose should be to provide round-the-clock effective
and efficient security to the Mall to ensure safety to the occupants and visitors and to prevent unauthorised entry,
Theft, vandalism and damage. This would be attained through manned guarding, mobile patrols, alarm systems,
CCTV’s and other security systems installed in the Mall. The security should be developed keeping in mind certain
factors namely:
• Providing an enhanced security and comfort level to the visitors and the occupants
• Guarding the property and people from natural and forced calamities such as earthquakes, fire, bomb threat or
external miscreants
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Design process
A well-connected security programme has three parts: personnel, policies and procedures and physical security.
• Personnel: Personnel are staff members, management and line personnel who enforce the policies and procedures,
administer and operate any security systems that may be present and respond as security-related events arise.
• Policies and procedures: Policies represent the rules that govern the use of the building. Procedures are developed
to support the policies. For example, hours of operation. Credentials, freight and material shipping and receiving.
Moves, property removal and visitor handling are but a few of the activities to be governed by policies.
• Physical security: Physical security includes both barriers (doors, windows, locks, key control, protective
lighting, etc.) and electronic systems. There are many electronic systems designed to deter crime, detect wrong-
doers, provide a means of seeking help simply and quickly, assist in assessing alarms, provide a means of
investigation in the aftermath of such occurrences and support policies and procedures.
• General categories of electronic security include access control, alarm monitoring, CCTV surveillance, audio
assessment and intercommunication devices. Within these broad categories fall many technologies, sensors
and systems that act as parts of an integrated system. Command and control may be centralised or distributed
among multiple control points.
Security deliverables
To cater to these needs the security team needs to achieve certain key deliverables as mentioned below.
Key Deliverables Specifications Monitoring

• Deployment of security guards in
Protect people and property from and around the property who should
Guarding Property
external miscreants work as eyes and ears of the Mall
Managers
• Appointment of security guards at
the entrance gate(s) and the important
Guarding Property Protect people and property locations of the Mall
• Security alarm system
• CCTV
• Security guards equipped with vehicle
checking instruments and trained in
Efficient flow of traffic from the diverting the traffic supported by
Traffic Movement entrance to the basement parking parking attendants
(vehicular/pedestrian) and ground floor parking besides
• Automatic parking system at entry
protection of the vehicles.
and exit
• CCTV in basement parking
Control and restrict the movement

Material Movement- • Material incoming and outgoing
of materials such as diesel, stock
incoming and outgoing register
for shops, etc.
• Installation of fire detectors, sprinkler

Trained manpower to prevent system, fire hydrants inside and
fire from spreading, to evacuate outside the building
Fire-Fighting
people safely and coordinate with • Fire fighting training/drill logbook
fire brigade and police. • Fire extinguishers inspection
logbook
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• Emergency evacuation plans at

strategic locations and exits
• Signage’s showing the entry and
Emergency Procedure Zero casualty and safe evacuation exits, evacuation route, location of
( f i r e , b o m b t h r e a t , of all people and important fire extinguishers and fire hydrants
earthquake, etc;) materials. • Do’s and dont’s for emergency
situations
• Liaison with Government, law and
safety/emergency officials
To cater for minor ointment and
First-Aid • Keeping a log of all medicines
provide first aid.
Table 8.2 Security deliverables
Security organisation
Security agency shall at all times maintain good order and discipline among its employees. In addition to the
foregoing; security agency should perform the following functions and duties.
• Patrol assigned areas, Round-the-clock surveillance (Electronic/Manual)
• Operate radio-transmitting Equipment
• Provide information to retailers’ employees, the public and other users and visitors of the building
• Prevent loss, damage or misuse of property
• City violators of vehicle parking policies
• Survey security and safety of property, its premises, contents, supplies and Equipment
• Operate card access system/intruder alarm system, if installed
• Control removal of Equipment from premises
• Assist in the evacuation of personnel, if necessary
• Ensure after-hours activity
• Report any unusual incidents or hazardous conditions
• Assist in fire life safety training and evacuation drills as directed by client and property manager
• Assist in the updating of building evacuation and emergency disaster plans as directed by client and property
manager
• Assist fire department, medical services and police agencies. as necessary
• Maintain and update the security logbooks, incident reports and surprise check details. attendance books and
material movement and fire/life safety guidelines
• Any additional duties which client, workplace management and contractor may agree upon from time to
time.
Training
• Purposes and principles of the physical security system
• Guard duties and responsibilities
• Functions of the security force
• Patrol procedures
• Package and material control
• Security communication
• Company rules, policies and procedures
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• Report writing
• Lock and key procedure
• Fire and life safety policies and procedures
• Bombs, bomb threats, or other overt acts
• Public relations
• Records
Records and reports

• Security personnel shall observe and report any unusual or hazardous individual conditions or events by
means of immediate oral/written report to the Security Officer/ Property Manager designated by workplace
management.
• Such reports shall be submitted to workplace management’s representative, prior to the end of the reporting
security officer’s shift, during which the incident occurred, or not later than 0900 hours, the first regular work
day following the incident.
• Security agency shall submit weekly time-sheets showing date and time each guard worked. These weekly
sheets must be received and verified.
Responsibilities of security officer

• Security and safety of property and occupants of property by controlling and managing deployed security
manpower.
• Ensure proper functioning of security functions like visitor movement, car park, material movement, etc.
• Training and conducting drills to make security and employees ready for any emergency.
• To prepare budget for security department.
• Development and implementation of Emergency procedures for fire, bomb, threat, earthquakes. etc.
• Ensure quality of staff, developing them to ensure maximum continuation.
• Good connection with local authorities.
• Should be able to attend to all problems related to police, all occupants of property, viz., minor brawls, drunken
driving, accidents and limited follow with police for investigation.
• Should have capability to investigate incidences acting as a detective
• Operation and maintenance of access control, CCTV’s and other security Equipments.
• Parking Management.
8.6.3 Fire Management

For a fire to start, three things are needed:
• A source of ignition
• Fuel
• Oxygen
If anyone of these should be missing, a fire cannot start. Taking steps to avoid the three coming together should
therefore reduce the chances of a fire occurring. Once a fire starts it can grow very quickly and spread from one
source of fuel to another. As it grows, the amount of heat it gives off should increase and this can cause other fuels
to self-ignite.
Introduction to fire- fighting system

Mall by the nature of it, gets a lot of visitors, with an estimated average footfall of 5000 visitors every hour, hence
the safety of people should be a prime concern. To achieve this, aim elaborate measures have been taken into account
while designing the fire detection and fighting system for the mall.
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The mall internally should be supported with best system for fire-fighting with state-of-the-art technology. This
includes intelligent-type analog addressable fire detection cum-alarm system that consists of intelligent panel and
addressable detectors and devices with conventional detection system and beam detection for auditorium. Three
types of detectors have been provided (Photo-Electric type, Ionisation type, and Heat detectors) besides sprinklers;
fire hydrants supported by fire pumps connected to a fire tank of a capacity of 100,000 litres of water should be
supplemented with underground tank of a capacity of 90,000 litres.
Fire safety plan

Fire safety should be an important responsibility for everyone. Occupants depend on the knowledge, skills and
training of the supervisory staff should be providing and maintaining a fire-safe environment. Procedures contained
in a Fire Safety Plan must be designed specifically for each building. In a fire emergency, if followed properly, the
procedures should reduce the risk to life for all occupants, visitors and staff in the building. To be effective however,
a Fire Safety Plan requires the following:
• Commitment by management and supervisory staff to fire safety
• A willingness by management to promote fire safety
• Knowledge of the building
• Knowledge of the fire safety protection Equipment
• A clear understanding of the procedures and how to implement them properly
• Co-operation of supervisory staff to enhance the fire safety of occupants
Fire management team

• Supervisory staff
• Assistant Security Officer (Fire Safety Officer)
• Head Guard
• Guards
Responsibilities of fire supervisory staff

An effective Fire Safety Plan should depend upon the knowledge, experience and commitment of management
personnel. Every Supervisor/Manager must have a clearly defined role and the authority to respond appropriately.
All new staff must receive training in the Fire Safety Plan before responsibilities can be delegated. Training for all
staff members must be organised and should be conducted at least annually.
Responsibilities of fire safety officer

• Ensure a Fire Safety Plan should be developed and fully implemented. Ensure that the Fire Safety Plan should
be maintained, updated.
• Ensure a sufficient number of alternates are designed and trained to act in a supervisory capacity, in the event
that the appointed Supervisor/Manager is absent from the building.
• Ensure that all staff receives appropriate training in the use of existing fire protection Equipment and actions to
take when responding to a fire emergency.
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• Ensure that fire drills involving all staff are held at least monthly. It should be advantageous to have these drills
activated in various locations at different times. A sufficient number of fire drills must be held to ensure all shift
workers participate.
• Adequate records of all staff training and fire drills must be kept for future reference.
Responsibilities of supervisor
• Identify and establish a plan for occupants who require assistance to evacuate, due to physical or mental
disabilities.
• Ensure all hallways and stairways are kept clear of storage, debris and Equipment (such as appliances and tools
used by house-keeping and maintenance).
• Ensure stairwell doors and doors in other fire separations are kept closed except where approved hold-open
devices are provided. Do not allow anyone to interfere with the self-closing device or any door.
8.6.4 Parking Management

It is a generally accepted fact that the entertainment or shopping experience for the modern consumer begins long
before entering the stores. The first point of contact that a property has with the perspective client should be at the
entrance of parking garage. Almost no one comments or praises an ordinary or even above average experience in a
parking lot. However, poor standards, long queues, poorly-trained staff and congested parking areas always cause
a stir and can be a primary reason to shift to another complex.
The fact is that a properly planned and efficiently managed parking lot can add immense value to a development.
Firstly, by attracting consumers to the centre and generating commerce for the core business and secondly, by turning
parking revenues into profit centre for the property through effective controls and fraud traffic management.
Parking charges
The parking charges to be levied according to the policy of mall
Cleaning of parking facilities

The house-keeping department should maintain the cleaning of the facilities, both externally and internally
Traffic control
• Parking facility traffic control: The parking attendants under the ASO shall be responsible for maintaining
traffic flow within the parking facilities by directing patrons to available parking, preventing traffic delays and
directing patrons away from areas that are full. This control may include closing entire levels or sections of the
structures if necessary.
• Traffic direction: During very busy times, additional staff may be requisitioned to direct traffic within the
structures and shall ensure that all ramps and cashier stations are being fully utilised.
• Liable with local traffic police for assistance when required.
Benefits of parking management

The benefits are:
• Facility cost savings: Reduces costs to governments, businesses, developers and consumers.
• Improved quality of service: Many strategies improve user quality of service by providing better information,
increasing consumer options, reducing congestion and creating more attractive facilities.
• More flexible facility location and design: Parking management gives architects, designers and planners more
ways to address parking requirements.
• Revenue generation-Some management strategies generate revenues that can fund parking facilities, transportation
improvements, or other important projects.
• Reduces land consumption: Parking management can reduce land requirements and so helps to preserve
greenspace and other valuable ecological, historic and cultural resources.
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• Supports mobility management: Parking management is an important component of efforts to encourage more
efficient transportation patterns, which helps reduce problems such as traffic congestion, roadway costs, pollution
emissions, energy consumption and traffic accidents.
• Supports smart growth: Parking management helps create more accessible and efficient land use patterns, and
support other land use planning objectives.
• Improved walkability: By allowing more clustered development and buildings located closer to sidewalks and
streets, parking management helps create more walkable communities.
• Supports transit: Parking management supports transit oriented development and transit use.
• Reduced stormwater management costs, water pollution and heat island effects: Parking management can reduce
total pavement area and incorporate design features such as landscaping and shading that reduce stormwater
flow, water pollution and solar heat gain.
• Supports equity objectives: Management strategies can reduce the need for parking subsidies, improve
travel options for non-drivers, provide financial savings to lower-income households, and increase housing
affordability.
• More livable communities: Parking management can help create more attractive and efficient urban environments
by reducing total paved areas, allowing more flexible building design, increasing walkability and improving
parking facility design.
8.6.5 HR Policies
The HR policies include:
Staff identity card

Upon commencement of employment, all employees are required to provide four recent passport photographs,
one photo for issuance of staff identity card and the other for the HR file. This identity card, consisting of a staff
number, card holder’s name, designation and department that he/she is working for, should be worn by staff during
office hours at office premises.
Leave
All staff should fill in the Leave Application Form when applying for any of the following leaves. The leave
application form has to be approved by the respective Head of the Department and it has to be handed over to
HR before 23rd of every month. Mall management must recognise the importance of providing certain amount of
flexibility to the employees to take care of their personnel, domestic and social necessities. The leave entitlement
of an employee for the annual year should be:
• Earned Leave-30 days
• Declared Leave -11 days
Casual leave
All staff must be entitled for 8 days casual leave per calendar year. All unavailed casual leaves shall lapse at the
year-end. Maximum number of Casual leaves which can be taken at a time must be 3 days.
Leave encashment
Encashment of leave should be permitted only on separation. Maximum of 60 days of unavailed leave must be
permitted for carry forward. Any leave beyond this should lapse automatically.
Sick leave
All staff should be entitled for 12 days sick leave in a calendar year. All unavailed sick leaves must lapse at the
year-end.
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Maternity leave
Full time female staffs should have completed one year of continuous service and they are entitled for paid maternity
leave. If the length of service is less than 1 year, maternity leave without pay should be granted. Maternity leave shall
be a continuous period of 10 weeks from the date of commencement of the leave. Under normal circumstances, the
company would advise that the maternity leave be taken four weeks prior to confinement date and six weeks after
the birth of the child. However, with the agreement of the company, staff can apply for alternative combination of
the ten weeks’ leave in such a way that leave commencement should not be less than two weeks before the date of
confinement. Staff should provide a certificate from a registered dOctoberor giving the expected date of confinement
at least two months prior to commencing the leave. However, staffs are advised to inform their department head
as soon as they know they are on a family way. A registered DOctoberor’s certificate specifying the actual date of
confinement should be submitted to the Human Resources/Administration Department within five working days
of return.
Leave without pay

Leave without pay must be granted only in exceptional circumstances,endorsed and approved by the Department
Head. Leave without pay shall be granted only at the sole discretion of the Management and Leave without pay
shall result in breakin-service.
Leave must be calculated in half-day unit from the first morning/ afternoon of absence until the morning/ afternoon
of return to work (sundays and national holidays are included in the calculation of number of days absent).
Staff communication - grievance procedure

If any of the staff have any grievance, they should raise it with their immediate senior. If the matter is not resolved,
the grievance may be referred to the next higher level of supervision.
If at any time, staff has not received full satisfaction by following the procedure set forth above, they should seek
advice from the human resources department for further guidance.
Corporate policy statement

Corporate Policy Statement should be updated from time to time to keep all members of staff informed of the
Company’s general policies on finance, human resources and administration.
The Corporate Policy Statements, once issued are to be complied with by all staff without exception. The company
reserves the right to modify, add or amend any of the provisions mentioned in Corporate Policy Statement from
time to time. The Company reserves the right to suspend or cancel the scheme at any time.
Protection of secrecy
Staff must keep confidential and not disclose, exploit or use directly or indirectly, during and subsequent to their
employment with the company, any information obtained by virtue of the employment or during their work with the
company or any of its subsidiaries, holding or associated companies. Any breach or failure to observe this condition
should make staff liable to immediate dismissal without compensation and the company reserves the right to take
appropriate action for losses suffered arisen out of such misconduct.
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Summary
• The Cambridge dctionary defines a “mall” as a large, usually enclosed shopping area.
• “Shopping centre” is commonly referred to open-air retail or a number of stores situated close to each other in
an unenclosed (open) area.
• Mall management broadly includes positioning a mall, zoning – formulating the right tenant mix and its placement
in a mall, promotions and marketing, facility management –infrastructure, traffic and ambience management
and finance management
• Regional mall is a larger mall with 4.00.000 sq. ft. to 8.00.000 sq. Ft. gross leasable area with at least 2
anchors.
• Super regional mall is over 8.00,000 sq. ft. and serves as dominant shopping venue for the region in which it
is located.
• Retail districts mall is a combination of big box at one place, one is the latest trend in the retail market.
• Vertical malls are in the form of buildings and are created where the land price is high.
• Loading docks are an integral feature of shopping centres that create specific issues such as noise, odour, visual
appearance, light spill and hours of use.
• Shopping mall management can be defined as operation and maintenance of the entire building infrastructure,
including the services and utilities, ensuring that they are used in a way that are consistent with the purpose for
which it was acquired.
• The purpose of shopping mall management quality model is to familiarise the property manager and all other
team members with the various processes required to successfully manage a property for their clients
• The Manual is an ever-changing document that should be improved by on-site Shopping Mall Management
staff to incorporate any required changes or improvements.
• House-keeping services is an important aspect of facilities and Shopping Mall Management services, dealing
with the health and the hygiene of the occupants and needs due deliberation.
• The basic purpose of developing the Service Level Agreement is to set out certain service standards which can
hold good with certain modification globally.
• The actual level of service delivered within each SLA should be determined using key performance indicators
(KPIs), which provide an unambiguous measure such as the frequency, type or services provided.
• The security should be developed keeping in mind certain factors which include providing an enhanced security
and comfort level to the visitors and the occupants and guarding the property and people from natural and forced
calamities such as earthquakes, fire, bomb threat or external miscreants.
• Security personnel shall observe and report any unusual or hazardous individual conditions or events by
means of immediate oral/written report to the security officer/ property manager designated by workplace
management.
• Photo-electric type, ionisation type, and heat detectors are the three types of detectors provided besides sprinklers
and fire hydrants
• Upon commencement of employment, all employees are required to provide four recent passport photographs,
one photo for issuance of staff identity card and the other for the HR file.
• Corporate policy statement should be updated from time to time to keep all members of staff informed of the
company’s general policies on finance, human resources and administration.
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References
• Lang, J. & Meghraj, Lasalle. Mall Management – A Growing Phenomenon in Indian Retail Industry. [Online]
Available at: <http://property.magicbricks.com/newproperty/img/MallMgt-low.pdf>. [Accessed 5 October
2011].
• Pradhan, S., 2010. Retailing Management, 2nd ed., [Online] Available at: <http://books.google.co.in/books
?id=G4eQybE28qwC&pg=PA147&dq=mall+management&hl=en&ei=IjGMTuKYCcfSrQfvpMScDQ&sa=
X&oi=book_result&ct=result&resnum=8&ved=0CF8Q6AEwBw#v=onepage&q=mall%20&f=false pg 451
>.[Accessed 5 October 2011].
• Sheikh, Arlf I. & Fatima, Kaneez, 2008. Mall Management, Global Media.
• Litman, T., 2011. Parking Management [ pdf] Available at: <http://www.vtpi.org/park_man.pdf>.[Accessed 5
October 2011 ].
• Shopping centre fire safety, 2009. [Video Online] Available at: <http://www.youtube.com/watch?v=rX3UhasZCjY>.
[Accessed 5 October 2011].
• Jaro Education., 2011. What is Mall Management [Video Online] Available at: <http://www.youtube.com/
watch?v=JBiI0fGFfzA>. [Accessed 5 October 2011].
Recommended Reading
• Das, A. Mall Management With Case Studies, 2nd ed., Taxmann Publications Pvt. Ltd
• Dennis, C., Merrilees, B & Fenech, T., 2004. E-retailing., Routledge Publication
• Levy, M. & Weitz, B., 2008. Retailing Management, 4th ed., McGraw-Hill Higher Education.
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Self Assessment
1. Match the following.
1. Regional mall A. A combination of big box at one place
2. Super regional mall B. Are in the form of buildings

C. Is a larger mall with 4.00.000 sq. ft. To
3. Retail districts mall
8.00.000 sq. ft. gross leasable area
4. Vertical malls D. Is over 8.00,000 sq. ft.
a. 1-B,2-C,3-D,4-A
b. 1-C,2-A,3-B,4-D
c. 1-C,2-D,3-A,4-B
d. 1-D,2-A,3-D,4-C
2. The ________ is an ever-changing document that should be improved by on-site shopping mall management
staff to incorporate any required changes or improvements.
a. manual
b. design
c. tenant mix
d. corporate policy statement
3. ___________ should be updated from time to time to keep all members of staff informed of the Company’s
general policies on finance, human resources and administration.
a. Manual
b. Design
c. Tenant mix
d. Corporate policy statement
4. The basic purpose of developing the _____________ is to set out certain service standards which can hold good
with certain modification globally.
a. Shopping mall management
b. Service level agreement(SLA)
c. HR policies
d. Key performance indicators (KPIs)
5. __________ are an integral feature of shopping centres that create specific issues such as noise, odour, visual
appearance, light spill and hours of use.
a. Loading docks
b. Community enhancement
c. Public/private space
d. Design process
6. ___________ deals with the health and hygiene of occupants and needs due deliberation.
a. Fire safety
b. HR team
c. House-keeping
d. Security-services
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a. The purpose of shopping mall management quality model is to familiarise the property manager and all other
team members with the various processes required to successfully manage a property for their clients
b. The actual level of service delivered within each kpi should be determined using slas (service level
agreement).
c. The house-keeping department should maintain the cleaning of the facilities, both externally and
internally.
d. Shopping mall management involves operation and maintenance of the entire building infrastructure,
including the services and utilities.

a. The Cambridge dictionary defines a “shopping centre” as a large, usually enclosed shopping area.
b. Shopping mall is commonly referred to open-air retail or simply, a series of stores situated close to each
other in an unenclosed (open) area.
c. Retail galleries are characterised by low margin and high volume.
d. The service centre should be the primary link between the client personnel and workplace management.

a. The need for shopping centres to provide large, unrestricted spaces for major tenants is a significant element
in the design of a centre.
b. Photo-electric type, ionisation type, and heat detectors are the three major detectors provided besides
sprinklers and fire hydrants to a fire-fighting team.
c. The staff is permitted to disclose, exploit or use directly or indirectly, during and subsequent to their
employment with the company, any information obtained by virtue of the employment or during their work
with the company.
d. The responsibilities of the security also include guarding the property and people from natural and forced
calamities such as earthquakes, fire, bomb threat or external miscreants.
10. The earned leaves entitlement of an employee for the annual year should be upto __________ .
a. 30 days
b. 60 days
c. 8 days
d. 11 days
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Case Study I
Mall Management – A Growing Phenomenon in Indian Retail Industry
Executive summary
The Indian retail market is expected to continue its growth trajectory into 2010.
Mall management has been identified as a critical factor for the success of malls and the retail industry across the
world. Mall management broadly includes mall positioning, zoning, tenant mix, promotions/ marketing and facility/
finance management. Currently, the Indian retail market lacks designated mall management firms. Large real estate
developers and retail chains either have their own mall management arms operating as subsidiaries or have contractual
agreements with international property consultants.
Till recently, mall management was limited to facility management by a majority of developers in India, leading to
gaps in mall management practices. Given the high future supply of malls and increasing competitiveness within
the Indian retail market, developers must correctly address these gaps to ensure success.
Introduction
Organised retailing in India witnessed a gross turnover of USD 320 billion1 in 2006. Although this figure is low
compared with other developed economies, industry experts expect the growth rate of this sector at 35%2 until
2010. At present, about 100 malls are operational at a Pan-India level with a total area of 19 million sq ft. As per the
current estimates, about 3003 additional malls are expected to be constructed across the country by 2010.
According to the Jones Lang LaSalle Retailer Sentiment Survey 2006, 95% of the respondents expect their gross
turnover to improve and have plans for expansion in 2007. About 70% of those who have expansion plans said they
prefer malls over high streets for their expansion, indicating the rising demand for malls as the preferred destination
of organised retail in India. Moreover, about 65% of those who preferred malls over high streets also said that mall
management is expected to become the deciding factor for a mall’s success in the future.
However, a sense of concern was expressed over the following challenges to the Indian retail market: lack of quality
locations shortage of trained staff rising rental values mall management. The first three concerns can be classified
as external factors, whereas mall management is internal.
External factors are common to all players in the Indian retail industry, whereas mall management is specific to
individual malls. We anticipate that the success of Indian malls will not only be achieved by housing the biggest and
the best mix of retailers, but also by setting up new standards and procedures in mall management that will provide
a platform to differentiate its products and services from competitors.
In the current market scenario, both consumers and retailers have limited choice in terms of mall shopping
experience.
As organised retail grows, we expect the market to be more competitive by providing more choices to consumers
and retailers. At this point, developers will have to work harder to create a differentiation for their product. We
believe consumers and retailers will be attracted to malls that are professionally managed, making effective mall
management a critical factor behind the success of a mall.
This white paper focuses on the internal factor: effective mall management as a growing phenomenon in the Indian
retail industry today. The prime objective of landlords as well as of investors is to attract shoppers and persuade
them to purchase goods and services. This will in turn boost retailers’ turnover and benefit their bottom line. Efficient
mall management can help landlords achieve this goal.
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What is mall management?
Globally, mall management broadly includes:
• positioning a mall
• zoning – formulating the right tenant mix and its placement in a mall
• promotions and marketing facility management – infrastructure, traffic and ambience management
• finance management
Positioning a mall
Positioning a mall refers to defining the category of services offered based on demographics, psychographics, income
levels, competition in neighbouring areas and extensive market research of the catchment. For example, if the market
research indicates that the average number of households living in a particular area belongs to the upper middle
class, then a high-end retail mall would suit the location. An example of this practice can be seen in the upcoming
malls, Select City Walk in Saket and DLF’s Emporio in Vasant Kunj. We believe that these retail developments are
prime examples of good mall positioning. These malls have been specifically designed after an extensive market
research, based on the catchment area of South Delhi. The malls provide high-end luxury products catering to the
elite class (socio-economic classification A and B consumers) residing in South Delhi.
Positioning also refers to the location of the shopping mall. A good location defined in terms of factors like ease
of access via roads, good visibility, etc is considered as one of the prime prerequisites for a mall. Although other
activities such as trade/tenant mix can be revisited or redefined, the location remains fixed, making it an imperative
factor for a mall.
Zoning – formulating the right tenant mix and its placement in a mall
Tenant mix refers to the combination of retail shops occupying space in a mall. A right tenant mix would form an
assemblage that produces optimum sales, rents, service to the community and financiability of the shopping mall
venture.
Zoning refers to the division of mall space into zones for the placement of various retailers. A mall is dependent on
the success of its tenants, which translates to the financial feasibility of the tenant in the mall. Generally, there are
two types of consumers visiting malls – focused and impulse buyers. The time spent by focused buyers in malls is
relatively lower compared with impulse buyers who also enjoy window shopping. There is little that retailers can
do to attract focused buyers as they usually know what they require and from where. However, right tenant mix
and optimum retailer placement after a diligent zoning exercise can help retailers attract both types of consumers,
especially the impulse buyers.
Formulating the right tenant mix based on zoning not only helps attract and retain shoppers by offering them
multiple choices and satisfying multiple needs, but also facilitates the smooth movement of shoppers within the
mall, avoiding clusters and bottlenecks. This helps influence shoppers’ mall preference and frequency of visits. It
also helps in building a distinct image in the minds of shoppers, which is critical considering the robust upcoming
supply of malls.
The selection of the right anchor tenant plays a crucial role in establishing a good tenant mix. The anchor tenant is
defined as the largest occupier in a mall in terms of square feet. Vanilla retailers5 cluster around the anchor and feed
off the shopping traffic it generates. The successful execution of the zoning exercise for a mall is carried forward
through lease management on an ongoing basis. Forging good leases with retailers is an essential part of ensuring the
presence of the right retailers in a mall. The Forum Mall in Koramangalam, Bangalore is an example of a successful
mall led by good zoning and tenant-mix mall management practices.
Promotions and marketing

Promotional activities and events in a mall form an integral part of mall management. Activities like food festivals,
handicraft exhibitions and celebrity visits increase foot traffic and in turn sales volumes. Organising cultural events
has time and again proved vital in attracting consumers to a mall. Such activities may also act as a differentiator
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for a mall. Developers can work on drafting marketing strategies for individual malls to meet the needs of the local
consumer base and the challenges of local, and in some cases, regional competitors.
Ansal Plaza, the first mall in Delhi, is an example of a successful mall led by good promotions and marketing mall
management practices.
Facility management
Facility management refers to the integration of people, place, process and technology in a building.
It also means optimal utilisation of resources to meet organisational needs. It broadly includes infrastructure,
ambience and traffic management.
Infrastructure Management – Infrastructure management refers to the management of facilities provided to the
tenants within the mall. This includes provision of adequate power supply, safety issues in case of emergency and
miscellaneous issues related to signage, water supply, sanitation, etc. as shown in Figure 1. These form an integral
part of mall management as they are the basic amenities that any tenant would look for in a mall. Infrastructure
management also includes risk management issues such as essential safety measure asset liability and environmental
audits as well as emergency and evacuation training.
Ambience management – The overall shopping experience provided for consumers becomes an important factor
for the success of any mall. Ambience management includes management of parks, fountains and overall look of the
mall. A mall is not just a place for shopping but is also a place where people spend their leisure time. In favourable,
lush green landscaping with seating facilities and the presence of food and beverage inside or outside the mall can
increase foot traffic.
Traffic management – Traffic management includes managing foot traffic into the mall and parking facilities. Foot
traffic management involves crowd management inside the operational area of a mall. The flow of people is related
to the design of the mall and the spatial distribution of its tenants. For example, a star-shaped mall tends to have a
problem of crowding in the centre of the mall, as everyone has to pass through the centre while moving from one
side to the other.
Circular malls, on the other hand, would not have this problem. They tend to have better pedestrian flow and less
congestion. Managing parking facilities includes provision of ample parking and manoeuvring of cars in the parking
lot.
Inorbit Mall in Malad, Mumbai is an example of a successful mall led by good facility management practices.
Finance management
Professional financial management of a mall as a business venture is a must. Mall management also covers financial
management, which involves monitoring and controlling of various issues such as:
• cash receipts and collection of income including rentals, service charges, car park receipts, electricity and other
utility income
• developing accounting systems to track the ageing of debts, payment delay patterns, bad debts and payment of
all invoices and expenses
• developing standard financial templates so that a detailed annual property budget is prepared
• at times, organising resources to deliver an efficient and effective annual external audit
Indian scenario for mall management

The partial foreign direct investment (FDI) relaxation in 2006 allowed 51% ownership in joint ventures by single-
brand companies in the retail market. This triggered high international singlebrand retailer interest in the Indian
retail market.
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Additionally, large Indian conglomerates such as Reliance Industries and Aditya Birla Group are commencing their
foray into retailing across the country. This prompts the Indian retail industry to undoubtedly move on a high growth
curve. However, at this juncture, retailing is still faced with one major challenge: systematic mall management.
Currently, there are very few designated mall management companies in India. However, big retail chains such as
Future Group and some large developers have set up their own mall management divisions that operate as their
subsidiary companies.
Some developers such as DLF have also recently entered into contractual arrangements with international property
consultancy firms to manage their malls. Historically, developers were managing their malls in-house, which are
expected to change going forward.
Earlier in the decade, mall developers were more inclined towards exiting the project early by selling retail mall units
to investors at the pre-completion and post-completion stages and booked profits. As the ownership of individual
retail spaces were with different entities, there was no central authority managing the malls. There was no control
over the various facets of mall management mentioned earlier in the paper. Even though there have been some
examples of professionally managed malls in recent years, organised retail in Indian malls have a long way to go
to achieve optimum mall management. The current Indian scenario is plagued by various issues, some of which
are discussed below.
Issues related to mall management in the Indian retail market

Lacks of Feasibility/Market Research Prior to the Development of a Mall – In the past, some malls were constructed
without carrying out a rigorous due diligence exercise on their feasibility. The market scene is gradually changing
wherein more and more developers are approaching property consultancy firms to conduct feasibility and positioning
studies for their projects.
• Zoning – Landlords/developers tend to lease out retail space on a first-come-first-served basis. This creates a
sub-optimal tenant mix like a food and beverage outlet next to a designer apparel shop instead of an accessories
or a footwear shop.
• Design Issues – At present, most of the popular malls have long queues and congestion outside their main entry
points during weekends and festive seasons. Having only one entry and exit points also leads to overcrowding.
Similarly, the visibility of retail units from all vantage points is poor in many malls.
• Few Promotional Activities – There are very few promotional activities organised in the majority of malls at
present. Developers perceive that these events only help increase foot traffic and not revenues.
• Facility Management – Good infrastructure/facility management of common areas becomes a problem in malls
where retail outlets are sold as strata title.
• Parking – Many malls in India do not have adequate parking. Since most malls are being built in the city,
developers typically provide basement parking facilities. However, these parking spaces are inefficient due to
low ceiling heights, bad lighting and single entry and exit points.
The way ahead

Until very recently, mall management was synonymous with facility management in the mind of most Indian
developers. The realisation that they are different and that professional mall management will affect the long-term
viability and success of a mall is sinking in gradually and is being accepted across developers, landlords and retailers.
The shortcomings pertaining to issues of mall management in India have been discussed in the previous section.
To overcome these shortcomings, developers must conduct professional mall management practices starting from
rigorous feasibility exercise or market research to facilities, ambience and finance management of a mall.
In most of the developed markets, mall management is an established independent service line. The retail sector
in these developed economies is mature in terms of end-consumer demand, number of retailers and experienced
developers. In India, retail is an emerging market having immense potential in terms of opportunities.
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A common practice in developed markets such as the United States and Europe is the use of the revenue share
model in determining rent. Under this arrangement, the tenant will either pay a fixed monthly base rent as minimum
guarantee and/or a ‘percentage of sales’ rent, whichever is higher.
This is beneficial for both landlords and retailers as landlords are encouraged to organise promotional activities that
would increase retailers’ revenues because they may have a percentage share in it. The model works successfully in
bullish and bearish market conditions. When the market is weak, retailers are protected from rising rental costs. This
unique approach is being adopted by Select City Walk, Delhi. The use of the revenue share model is expected to gain
momentum in the future as more and more Indian developers become corporatised. To ensure that a mall attracts
retailers and consumers, professional mall management is a necessity. The mall market is an extremely competitive
one, having a high degree of internal and external competition, the latter being from established high-street locations
across all cities. To lure retailers and consumers to its mall, a developer has to ensure that their property follows the
best practices in the market especially in terms of mall management.
Examples
Ansal plaza
Regular promotional activities at Ansal Plaza, including cultural events have ensured a steady foot traffic in the mall
since its inception in 1999. The mall also has an amphitheatre dedicated to these promotional activities.
This has been one of the driving factors behind the success of the mall, despite having a less optimal mall design
and tenant mix compared with some recent malls in the NCR.
Forum mall
The Forum Mall is designed in a ‘dog bone’ fashion, an anchor tenant at each end and vanilla retailers in the middle.
Landmark and Westside are the anchor tenants of this mall, and the food court is positioned on the top floor to attract
consumers vertically up.
Forum Mall was built in 2003 and was the first mall in Bangalore City. Since then, six new malls have been constructed
in the city and yet the Forum Mall continues to command the highest foot traffic, continuing to be one of the most
successful malls in the city in terms of annual revenues. It is also widely believed that one of the driving factors
behind the success of this mall is its zoning and superior tenant mix compared to competition.
Inorbit mall
Inorbit Mall in Mumbai by K Raheja Corp is a good example of facility management in a mall. It has two anchor
stores placed at the two corners of the mall. There are three entry points, one each from the two anchor stores and
another entry directly to the mall atrium. With three entry points, traffic management within the mall is better
organised. The mall also provides ample parking space and superior infrastructure management. The Inorbit Mall
commands higher rental values of INR 175 per sq ft per month compared with other malls in the north-western
suburbs of Mumbai with average rental values of INR 135 per sq ft per month in 4Q06, indicating it’s success story.
The low vacancy rates at Inorbit Mall are about 2% compared with an average of 10–15% in other north-western
suburban malls during the same period. This indicates the popularity of this mall over its competitors.
Questions
1. Discuss the promotions and marketing strategy and activites involved in the Indian mall management
process.
Answer
Promotional activities and events in a mall form an integral part of mall management. Activities like food
festivals, handicraft exhibitions and celebrity visits increase foot traffic and in turn sales volumes. Organising
cultural events has time and again proved vital in attracting consumers to a mall. Such activities may also act
as a differentiator for a mall. Developers can work on drafting marketing strategies for individual malls to meet
the needs of the local consumer base and the challenges of local, and in some cases, regional competitors. Ansal
Plaza, the first mall in Delhi, is an example of a successful mall led by good promotions and marketing mall
management practices.
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2. What is a Forum Mall? Explain with an example.
Answer
The Forum Mall is designed in a ‘dog bone’ fashion, an anchor tenant at each end and vanilla retailers in the
middle. Landmark and Westside are the anchor tenants of this mall, and the food court is positioned on the top
floor to attract consumers vertically up.
Forum Mall was built in 2003 and was the first mall in Bangalore City. Since then, six new malls have been
constructed in the city and yet the Forum Mall continues to command the highest foot traffic, continuing to be
one of the most successful malls in the city in terms of annual revenues. It is also widely believed that one of the
driving factors behind the success of this mall is its zoning and superior tenant mix compared to competition.
3. Discuss the Issues Related to Mall Management in the Indian Retail Market in the last few years.
Answer
Lack of Feasibility/Market Research Prior to the Development of a Mall – In the past, some malls was constructed
without carrying out a rigorous due diligence exercise on their feasibility. The market scene is gradually changing
wherein more and more developers are approaching property consultancy firms to conduct feasibility and
positioning studies for their projects.
Zoning – Landlords/developers tend to lease out retail space on a first-come-first-served basis. This creates
a sub-optimal tenant mix like a food and beverage outlet next to a designer apparel shop instead of an
accessories or a footwear shop.
Design Issues – At present, most of the popular malls have long queues and congestion outside their main
entry points during weekends and festive seasons. Having only one entry and exit points also leads to
overcrowding. Similarly, the visibility of retail units from all vantage points is poor in many malls.
Few Promotional Activities – There are very few promotional activities organised in the majority of malls
at present. Developers perceive that these events only help increase foot traffic and not revenues.
Facility Management – Good infrastructure/facility management of common areas becomes a problem in
malls where retail outlets are sold as strata title.
Parking – Many malls in India do not have adequate parking. Since most malls are being built in the city,
developers typically provide basement parking facilities. However, these parking spaces are inefficient due
to low ceiling heights, bad lighting and single entry and exit points.
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Case Study II
Pantaloon: ERP in Retail
With the need an organisation-wide IT solution to help it perform better, Pantaloon decided to implement an ERP
system from SAP.
Introduction
More than eight years after it forayed into the retail business, Pantaloon Retail decided to implement SAP to keep itself
competitive in the rapidly growing Indian retail market. Store operations have never been as important to retailers
as they are now. Successful retailers are those who know that the battle for customers is only won at the frontline,
which in the case of a retail chain is at its stores. Pantaloon was regularly opening stores in the metros and there was
an urgent need for a reliable enterprise wide application to help run its business effectively. “The basic need was to
have a robust transaction management system and an enterprise wide platform to run the operations,” says Rakesh
Biyani, Director, Pantaloon. The company was looking for a solution that would bring all of its businesses and
processes together. After a comprehensive evaluation of different options and software companies, the management
at Pantaloon decided to go in for SAP.
The solution
Some of the qualities of SAP retail solutions are that it supports product development, which includes ideation,
trend analysis, and collaboration with partners in the supply chain; sourcing and procurement, which involves
working with manufacturers to fulfil orders according to strategic merchandising plans and optimise cost, quality,
and speed–variables that must be weighted differently as business needs, buying plans, and market demand patterns
change; managing the supply chain, which involves handling the logistics of moving finished goods from the source
into stores and overseeing global trade and procurement requirements; selling goods across a variety of channels
to customers, which requires marketing and brand management; managing mark-downs and capturing customer
reactions, analysing data, and using it to optimise the next phase of the design process.
In a Nutshell
Aim
:
To deploy a robust transaction management system and an enter-
prise-wide platform to run its operations.
Solution
:
SAP retail solution
Implemented by
:
SAP team with the help of Novasoft, Singapore
Number of users
:
Around 1,200
Time taken
:
About six months
Cost of implementation
:
About $10 million
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The implementation
“The implementation was outsourced to a third party. The implementation was done by the SAP team with help of
Novasoft which is based out of Singapore,” says Biyani. Some people from Pantaloon also assisted in the project.
About 24 qualified people worked on this SAP implementation. SAP was chosen as the outsourcing party on a
turnkey basis. This project was headed by Pantaloon’s Chief Information Technology Officer, Chinar Deshpande.
Three phases
SAP implementation is not a single phase process. The project was divided into three phases.
The first phase involved blueprinting existing processes and mapping them to the desired state. In this phase, the
entire project team worked on current processes within the structure of the organisation, analysed and drafted them.
This blueprint was later used in the formation of new states of the solution. Since the SAP would combine all the
processes, each and every one of these had to be evaluated.
In the second phase, the SAP platform was developed with the help of Novasoft’s template which was predefined
by SAP after evaluation of Pantaloon’s needs and expertise in retail solutions.
The last phase in this project was for stores to switch over to the new system and for current data to be ported. Before
the SAP implementation, all the data was unorganised. This data had to be migrated to the new SAP application.
The project was flagged off on 15th June 2005 and took about six months to finish. It went live at the head office
on 1st January 2006. The stores went live on SAP from 1st January 2006 to 30th June 2006.
About the Company
Pantaloon Retail is the flagship enterprise of the Future Group, with

a presence across multiple lines of business. The company owns and
manages multiple retail formats that cater to a wide cross-section of
Indian society. Headquartered in Mumbai (Bombay), the company
operates through four million square feet of retail space, has over 140
stores across 32 cities in India and employs over 14,000 people. The
company registered a turnover of Rs 2,019 crore for FY 2005-06.
Pantaloon Retail forayed into retail in 1997 with the launching of
its fashion retail chain, Pantaloons in Kolkata. In 2001, it launched
Big Bazaar, a hypermarket chain. This was followed by Food
Bazaar, a food and grocery chain. Next up was Central, a first of its
kind located in the heart of major Indian cities. Some of its other
formats include, Collection i (home improvement products), E-Zone
(consumer electronics), Depot (books, music, gifts and stationary),
aLL (a Little Larger, fashion apparel for plus-size individuals),
Shoe Factory (footwear) and Blue Sky (fashion accessories). It has
recently launched its e-business venture, futurebazaar.com. The
group’s subsidiary companies include, Home Solutions Retail India
Ltd, Pantaloon Industries Ltd, Galaxy Entertainment and Indus
League Clothing. The group also has joint venture companies with
a number of partners including French retailer Etam group, Lee
Cooper, Manipal Healthcare, Talwalkar’s, Gini & Jony and Liberty
Shoes. Planet Retail, a group company owns the franchisee of
international brands like Marks & Spencer, Debenhams, Next and
Guess in India.
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Benefits and challenges

The key challenges in this project were not in the implementation. Rather, the difficulties were faced during the
data migration and in managing the interim period when the project was underway for about six months. Migrating
unorganised data to an organised format is a challenging task.
Pantaloon has not been able to see immediate benefits from this implementation. This application certainly has
long term benefits which will be seen when the performance of various aspects will be analysed. “It is too early to
calculate RoI. We have already started working on MAP (Merchandise Assortment Planning), Auto-Replenishment
and Purchase Orders. We hope to use these systems to optimise our inventory and cut it by about two to four weeks
(depending on the line of business),” says Biyani.
Maintenance and hardware

This application is currently being used by around 1,200 employees across the organisation. For maintaining this
implementation and its related applications, Pantaloon has an in-house team and it has outsourced ABAP resources.
They are also in the process of setting up a SAP Competency Centre. The system runs on a HP Superdome server
on HP UNIX 11i and the database is from Oracle. The cost of this project was about $10 million.
Future projects
After the successful implementation of SAP for its retail chain, Pantaloon plans to go ahead with IT projects such
as implementation of WMS with RFID, Customer Intelligence and CRM. Inventory and Promotions Optimisation
will be pursued later this year.
Source: Shah, K., 2007. Pantaloon: ERP in Retail [Online] Available at: http://www.networkmagazineindia.
com/200703/casestudy02.shtml [Accessed 11 Octoberober 2011].
Questions
1. What are the benefits and challenges faced by Pantaloons while implementing the ERP system?
2. How many phases is the SAP implementation process divided into? Explain all the phases in brief?
3. What are the future IT projects that Pantaloons plans to implement ,following the successful implementation
of SAP process?
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Case Study III
Wal-Mart
Introduction
The retail industry is making news everywhere with not only the traditional industries increasing their outlets but
some major corporate industries also intruding into this industry like Fresh @ Reliance of Reliance Industries,
More of Aditya Birla Group in India. Wal-Mart, a US based retail industry, which is known as the giant in the retail
industry has survived and is still the huge enterprise in the world which deals with almost all the F&B products,
apparels, etc. It is not only the largest company in world but also the largest company in the history of world. Here,
we will see what makes Wal-Mart the best in the industry based on following categories:
• Retailing industry at the time of Wal-Mart’s innings
• Wal-Mart’s competitive advantage and key components
• Wal-Mart’s strategy
• Sustainable growth of Wal-Mart
Retail Industry – Wal-Mart says Hello!

Strategic decisions are ones that are aimed at differentiating an organisation from its competitors in a way that is
sustainable in the future. (Porter, 2002) Porter strongly advocates that decisions in business can be classified as
strategic if they involve some innovation and difference that results in sustainable advantage. According to Patrick
Hayden et al (2002) the retailing industry adopted the style of discounting on its merchandise after the Second World
War. It is learnt that discount retailing was not the strategy at the time Kmart, Target and Wal-Mart first started
operating their business.
Frank (2006) states that when Sam Walton was franchising for Ben Franklin’s variety store, invented an idea of
passing on the savings to his customers and earning his profits through volume. Prior to Wal-Mart’s entry into the
market, Sidney and Hebert from Harrison founded Two Guys discount store in the year 1946 which dealt in hardware,
automotive parts and later on groceries. Two Guys was the forerunner as compared to today’s retailers like Super
Target, Wal-Mart which succumbed to the economic recession. Another discount store set up by Eugene as E.J.
Korvette, which is often cited as first discount store which did not raise from 5 & 10 cents roots and eventually
declared bankruptcy due to inability to compete with the new entrants.
Porter (2002) states that combination of operational effectiveness and strategy is essential for superior performance
which is the primary goal of any organisation. He also says that a company can perform its rivals only if it can operate
in different ways which are not in practice. Much emphasis had been laid on strategic positioning like variety based
positioning, needs – based positioning and access based positioning.
Along with Wal-Mart, other stores that started operating were Target, Woolworth (Woolco) and K-Mart. However,
Target has been functioning successfully, courtesy Wal-Mart, but other two failed in their operations and filed
bankruptcy.( Michael Bergdahl, 2004) Porters five forces model explains what strategic decisions should be made
and on what basis. The model explains the basic strategies to be considered while starting a business like bargaining
power of suppliers.
While franchising of Franklin, he always looked for cheaper deals and thought of passing his savings to the customers
and earning through the margin on volume of bulk purchases. Through the way of discount stores, shoppers were
given the cheapest price as compared to any other store. In regard to threats of new entrants, Wal-Mart has been
constantly in the news for acquisition of other small retail shops in view of its expansion. But nevertheless it has
stiff competition from likes of Super Target, Tesco, etc. it is the world’s biggest retail industry.
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Key components of Wal-Mart business model

Wal-Mart is the leader in retailing industry with fiscal revenue of $244.52 billion in 2003 making it the world’s largest
corporation. Mike reports that Wal-Mart as of 2002 had 1,283,000 employees growing at 11.2%. The above data
explains that strategy of Wal-Mart is extraordinary which manages and operates over 4150 retail facilities globally.
The key components of Wal-Mart (The Value Chain), which offers cheap prices than its competitors includes firm
infrastructure like frugal culture, no regional offices and pleasant environment to work. Managements take lots of
visits and it is learnt there are no rehearsals before any meeting which is usually scheduled on every Saturday. In
any organisation, human resource is the key to development and Wal-Mart efficiently manages its sources. Wal-
Mart terms its employees as associates. Manager compensation is linked to the profit of store operated by him,
within promotions, compensation offered to associates depending on company’s profits and also offered some
incentives on their performances. The workforce at Wal-Mart is not unionised as the company takes all the measures
of their benefits and provides them training on related issues. Technology plays a vital role in development of the
organisation and Wal-Mart is well equipped with technological innovations like POS, store performance tracking,
real time market research, satellite system and UPC. Wal-Mart procurement measures like hard-nosed negotiations,
partnerships with some vendors, centralised buying, planning packets, etc. helps at large the cause of providing the
goods and services on cheap prices. The other factors that increase the margin of profit for Wal-Mart are inbound
logistics with frequent replenishment, automated DCs cross docking, pick to flight, EDI, hub and spoke system. Wal-
Mart strategy of operation is innovative with big stores in small towns with monopoly in the market at low rental
costs, local prices, concentric expansion, merchandising in brand name, private labels, little space for inventory, store
within store, etc. In relation to marketing and sales, merchandising is tailored from locals, spent less on advertising
and the prices are fixed low and it depends on the store manager to fix the latitude of pricing. All the above factors
combined together form the key components of Wal-Mart which not only increase the margin of profits through
bulk sales but also boost the confidence of the customers with services like point of sale information system and
everyday low prices.
Wal-Mart strategy
Wal-Mart dominates the American retailing industry due to number of factors like its business model which is still
a mystery and its effectiveness in not letting the rivals let know about the weaknesses. Wal-Mart made strategic
attempts in the its formulation to dominate the retail market where it has its presence, growth by expansion in the
US and Internationally, create widespread name recognition and customer satisfaction in relation to brand name Wal-
Mart and branching into new sectors of retailing.
It is learnt that Wal-Mart strives on three generic strategies consisting of Focus Strategy, the Differentiation Strategy
and overall cost leadership. Managers strive hard to make their organisations unique, distinctive and identify key
success factors that will drive the customers to buy their products. Thus, firm specific resources and capabilities are
crucial in explaining the firm’s performance. The Resource Based View (RBV) explains competitive heterogeneity
based on the premise that close competitors differ in their resources and capabilities in important and durable ways.
The company’s capability can be found through its functionality, reliable performance, like Wal-Mart superior
logistics. (Helfat, 2002) Wal-Mart has firm infrastructure, well equipped in human resource with management
professionals and technologically too.
Any organisations thrive hard to be successful for which it needs to have better resources and superior capabilities.
Wal-Mart has strong RBV with economically and financially very strong enough to stand still in the time of crisis.
Pereira states that dominating the retail market is its key strategy. Wal-Mart operates on low price strategy which is
operated as every day low prices (EDLP) which builds trust among the customers.(Brunn, 2006)The strategy lies in
purchasing the goods at lower prices and selling the goods to customer at much lower prices, cutting the price as far
as possible and increasing the profit by increasing the number of sales. This ferociously increases the competition
in the market and Wal-Mart competes with all its competitors till it is dominant it the market.
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Wal-Mart is expanding seriously and rapidly which is also its strategic goal. Wal-Mart employs over 1.3 associates,
owns over 4000 stores out of which 3000 are in US and serves around 100 million customers weekly. Wal-Mart
has acquired many international stores and merged with some super stores like ASDA in UK. Wal-Mart far flung
network of retail outlets has ensured that Wal-Mart interacts with and has impact on virtually every locality within
US. (Helfat, 2002) The expanded strategy has led the hunger of Wal-Mart to many European Countries.
It is learnt that three countries with no Wal-Mart stores became part of corporation’s international presence wherein
the domestic retail chains were taken over by Wal-Mart including 122 Woolco stores in Canada, 21 Wertkauf stores
in Germany and 229 ASDA units in United Kingdom. The takeover strategy by Wal-Mart keeps the company at
forefront when entering into the new market and the number of competitors is also minimised. The strategies have
helped the Wal-Mart to rein in number one position in international countries making it the largest retailer in the
world.
It is seen that Wal-Mart has significantly the Porters five force model wherein through proper strategic planning
and strategic implementation has led to removal of barrier entry, rivalry from competitors and pricing norms. In
regard to substitutes, Wal-Mart in order to achieve its aim of customer satisfaction has selling goods under its own
legal brand. Wal-Mart’s big box phenomenon has changed the retailing industry in the United States which is often
considered as discount stores and makes profit through high volume of purchases and low markup on profits.(Parnell,
2008)Wal-Mart with its low cost and ever expanding strategy has made a dramatic impact since 1962 when Sam
Walton first started his business. With this strategy, Wal-Mart has now over 4000 stores and outlets in US and other
countries through acquisition and mergers.
Sustainability in discount retailing – Wal-Mart

According to Porter, (2002) operational effectiveness and efficiency are the key elements of success in any
organisation. A company can outperform its rivals or competitors in the market only with superior management
and efficient control creating a difference from the others which eventually attracts customers. Porter defines
operational effectiveness as performance of similar activities as its rivals but better than them. In a study, it is stated
the Wal-Mart is expert in manipulating perceptions. It is termed that low price is not the strategy of Wal-Mart but
the advertisement manipulates the consumer perceptions by making them think that its prices are lower than its
competitors’ price using ‘price spin’.
Wal-Mart makes the consumer addicted coming to its stores by convincing them the prices are lower than in the other
stores by selling itself cheaper by advertising that ‘we have lower prices than anyone else’ and placing a ‘opening
price point’. The ‘opening price point’ is the lowest price in the store which is kept at high visibility which makes
consumer believes that the products in this store are really cheaper. (Race Cowgill, 2005)
The SWOT analysis of Wal-Mart reveals that it is most powerful retail brand, reputation for money, value,
commitment, and provides wide range of products. It is growing at a brisk pace with expanding its horison to other
parts of world through acquisition and merger. Wal-Mart has good opportunities in markets of Europe and China and
focuses on acquiring the market through acquisition of smaller stores and merger with leaders in the specific markets.
Wal-Mart is always under threat to sustain its top position in market nationally and internationally. Global leader in
the industry leaves the organisation vulnerable to many socioeconomic and political problems of the country.
Sustainability at the top place is the most important job that makes its managers strives hard to frame the policies and
strategy to compete with its rivals in the market. Slack, Imitation, Substitution and Hold-up are some of the threats
to any organisation in retail industry. However, Wal-Mart with its visionary goal of attaining zero waste status and
reaching 100% renewable energy has planned to launch number of sustainability initiatives. (GreenBiz, 2008)
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Imitation increase profits by increasing the supply. But imitation puts reputation, relationship at stake. James Hall
reports that Wal-Mart is planning to open convenience stores as Tesco has started and operating in US called Fresh
& Easy Neighborhood Markets. (James, 2008) Such tactics will create mixed response among the consumers
while degrading the reputation of the leader in market. Substitution reduces the demand for what a firm uniquely
provides by shifting the demand elsewhere due to changes in technology. The threats of substitution can be subtle
and unexpected like minimising expenses through videoconferencing instead of air flights to long distance meetings
with its managers of other stores, etc.
Therefore, substation is an especially effective way of attacking dominant rivals in the market. Substitution offers
mixed responses after identifying and understanding the threats. The organisation should fight the threat and merging
with them, switching to different options of substitution to be in the market. Hold-up diverts the value to customers,
suppliers or complementors who have some bargaining leverage which results in tough negotiations, contractual
agreements and vertical integration.
Wal-Mart is having great network with almost over 7800 stores and Sam’s Club locations in 16 markets worldwide.
It employs more than 2 million associates and serves more than 100 million customers every year. According to
Fishman (2006) Americans spend $26 million every hour at Wal-Mart which makes it believable that Wal-Mart
is financially very strong and is capable of combating any threat from its rivals in the market. Wal-Mart is ever
expanding its boundaries by way of acquisition and mergers. Thus Wal-Mart with such a vast network of stores and
alliances in the forms of ASDA, Target and many other stores is well protected enough to sustain its top position
in the retail industry.
(Source: articlebase.com, Strategic Management: A case study of Wal Mart [Online] Available at: <http://
www.articlesbase.com/strategic-planning-articles/strategic-management-a-case-study-of-walmart-inc-945260.
html#ixzz1dOHHt6gK> [Accessed 11 November 2011]).
Questions
1. Explain the key components of Wal-Mart’s business model.
2. What is the Wal-Mart’s strategy of success?
3. What do you understand by ‘Sustainability in discount retailing’? Explain in detail.
174/JNU OLE
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Verlag.
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Retail_Site_Selection_for_Small_Business.pdf>. [Accessed 5th October 2011].
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watch?v=ccBtaCL6LlE>. [Accessed 5 Octoberober 2011].
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nformation+Technology++in++Retailing&hl=en&ei=OeaKTq3VCJDsrQeW1MyNAg&sa=X&oi=book_
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• Pradhan, S., 2010. Retailing Management, 2nd ed., [Online] Available at: <http://books.google.co.in/books?i
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Recommended Reading
• Bennett, A. G., 2009. The Big Book of Marketing., McGraw-Hill Professional.
• Berman., 2007. Retail Management: A Strategic Approach, 10/E. Pearson Education India
Bhatia, S. C., 2008. Retail Management , Atlantic Publishers & Dist.
• Bromley, D. F & Thomas, V. J. Retail change: contemporary issues. Publisher Taylor & Francis.
• Chakrabarti., 2002. The Asian manager’s handbook of e-commerce., Tata Mcgraw-Hill Education.
• Das, A. Mall Management With Case Studies 2Nd/ Ed., Taxmann Publications Pvt. Ltd.
• Dawson, J. A. Retail geography. Taylor & Francis.
• Dennis, C., Merrilees, B & Fenech, T., 2004. E-retailing., Routledge Publication.
• Dunne, P. M., Lusch, R .F & Carver. J., 2010. Retailing., Cengage Learning.
• Harris, L. & Dennis, C., 2007. Marketing the e-business., Taylor & Francis.
• Joshi, G., 2008. Information Technology for Retail, Oxford University Press.
• Khurana., 2010. Information Technology For Retailing, Tata McGraw-Hill Education, Krafft, M. & Mantrala,
M. K., 2008. Retailing in the 21st Century:Current and Future Trends., Springer.
• Levy, M. & Weitz, B., 2008Retailing Management, 4th Edition., McGraw-Hill Higher Education.
• Madaan. Fundamentals Of Retailing, Tata McGraw-Hill Education.
• Mathur, C. U., 2010. Retail Management: Text and Cases, I. K. International Pvt Ltd.
• Pradhan., 2009. Retailing Management, Tata McGraw-Hill Education.
• Schniederjans, J. M., 2002. E-Commerce operations management.,World Scientific.
177/JNU OLE
Self Assessment Answers

Chapter I
1. c
2. b
3. a
4. c
5. c
6. a
7. a
8. c
9. d
10. c
Chapter II
1. b
2. a
3. d
4. c
5. b
6. c
7. d
8. c
9. d
10. d
Chapter III
1. d
2. d
3. c
4. b
5. a
6. b
7. a
8. b
9. c
10. d
Chapter IV
1. a
2. b
3. a
4. d
5. a
6. c
7. d
8. c
9. c
10. a
178/JNU OLE
Chapter V
1. a
2. b
3. d
4. c
5. a
6. d
7. a
8. c
9. c
10. c
Chapter VI
1. a
2. d
3. b
4. c
5. a
6. b
7. b
8. a
9. d
10. c
Chapter VII
1. c
2. a
3. b
4. c
5. a
6. b
7. d
8. a
9. a
10. b
Chapter VIII
1. c
2. a
3. d
4. b
5. a
6. c
7. b
8. d
9. c
10. a
179/JNU OLE

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Strategic Retail Management

This book is a part of the course by Jaipur National University, Jaipur.

The content in the book is copyright of JNU. All rights reserved.

II. List of Figures........................................................VIII

III. List of Tables...........................................................IX

V. Case Study.............................................................. 162

VI. Bibliography.......................................................... 175

VII. Self Assessment Answers................................... 178

Chapter VIII . ........................................................................................................................................... 132

• define the term ‘retail’

• highlight the importance of retailing

• identify various types of retail operations

• discuss the scope of ‘retail’

• explain the retail life cycle

• enlist the formats in food retailing

• understand the meaning of ‘retail’

• differentiate between retailing and wholesaling

• identify the parameters of retailing

1.1 Introduction to Retailing

Let us understand the concept with the help of an example.

1.2 Key Concepts Related to Retailing

The supply chain

Fig. 1.1 Components of supply chain

Components of supply chain

1.3 The Importance of Retailing

1.4 Types of Retail Operations

Fig. 1.2 Types of retail operations

Retail management system

1.5 Difference between Retailing and Wholesaling

1.6 Parameters of Retailing

1.7 Theories of Retail Evolution

The rise of the web

Fig. 1.3 Theories of retail

1.7.1 Environmental Theory

1.7.2 Cyclical Theory

Fig. 1.4 Cyclical theory

1.7.3 Conflict Theory

1.8 Retail Life Cycle

1.8.2 Accelerated Growth

Development Introduction Growth Maturity Decline

Fig. 1.5 Retail life cycle

1.9 Retail Pricing

1.10 Food Retail Industry

1.10.1 Conventional Supermarkets

1.10.3 Large Retail Formats

1.10.4 Convenience Stores

1.10.5 Hard Discounters

1.10.6 Warehouse Clubs

1.10.7 Non-Store Formats in Food Retailing

Conclusion and outlook

7. __________ are usually situated at locations that are easy to access.

10. Which of the following statements is false?

• enlist the steps of strategic retail planning process

• define retail market strategy

• discuss the importance of cost effective delivery of planning

• identify the areas of influence determining strategic planning

• understand the meaning of retail strategy

• enumerate steps involved in a situation audit

• specify the steps involved in strategic retail planning process

• identify various factors involved in carrying out a situation audit

• understand the strategic planning process in real world

2.1.1 What is a Retail Strategy?

2.1.2 Definition of Retail Market Strategy