Chapter 1

Retailing is a set of business activities that adds value to the products and services sold to
consumers for their personal or family use. It also involves the sale of service such as a haircut.
Retailers are key components in supply chain as they link manufactures to consumers.

Supply Chain is a set of firms that make and deliver goods and services to consumers.

Manufacturers typically design and make products and sell them to retailers or wholesalers.
Wholesalers engage in buying, taking title, storing and physically handling the goods in large
quantities and reselling the goods to retailers or other businesses. Wholesalers work on satisfying
the needs of the retailer and retailer in turn focuses on the needs of the consumers.

Vertical Integration means that a firm performs more than one set of activities in the channel
such as a retailer engages in wholesale activity. It comprises of forward and backward integration.
Forward Integration occurs when a manufacturer does some activities of retailers and wholesalers,
whereas Backward Integration occurs when retailer performs some activities of the manufacturer or
wholesaler.

Retailers Create Value

1. Providing Assortment – Enables the customers to choose from a wide selection as per
brands, price etc.
2. Breaking Bulk – To save transport cost, retailers buy from manufacturers and wholesalers in
bulk and sell to consumers in smaller quantities as per the needs of the consumer.
3. Holding Inventory – Holding the inventory to enable the consumers to buy the products
when they need more.
4. Providing Services – Provide value-added services like home delivery etc.

Social Responsibility
Corporate social responsibility involves an organizations voluntarily taking responsibility for the
impact of its activities on its employees, customers, community and environment. Stages of CSR are
as follows:

1. Stage 1 – Engage in CSR activities because it is required by the law.

2. Stage 2 – Engage in CSR activities for short term benefits.
3. Stage 3 – Engage in CSR activities because “it is the right thing to do”.
4. Stage 4 – Engage in CSR activities because they believe that these activities must be done for
well-being of everyone.
Competitors
The competition between the same types of retailers is called intratype competition. When retailers
offer merchandize not typically associated with their type of store, such as clothing in a drug store,
the result is scrambled merchandizing. Scrambled merchandizing increases intertype competition
i.e. between retailers that sell similar merchandize using different types of store, such as discount
and departmental store. Intensity of competition is intense between the retailers which are located
near one another and whose offerings are viewed very similar.

Retail Strategy
The retail strategy indicates how the retailer plans to focus its resources to accomplish its objectives.
It identifies:

1. Target Market – Market towards which the retailer will direct its efforts.
2. Nature of Merchandize – It is the goods and services the retailer will offer to satisfy the
needs of the target market.
3. Advantage over competitors – How the retailers will build a long term advantage over its
competitors.

Key Decision Areas

1. Target Market
2. Financial Objectives
3. Human Resource Management
4. Information and SCM (Supply Chain Management)
5. CRM (Customer Relationship Management)

Retail Mix
To implement a retail strategy, retailers develop a retail mix that satisfies the needs of its target
market better than its competitors. Retail Mix is a set of decisions retailers make to satisfy customer
needs and influence their purchase decisions.

Location

Customer Merchandise
Service Management
Elements
of Retail
Mix
Store Design
Pricing
and Display

Communication
Mix
Chapter 2
Variety is the number of merchandise categories a retailer offers. It is the breadth of merchandise.

Assortment is the number of different items offered in a merchandize category. It is the depth of
merchandise.

Each different item of merchandise is called a Stock Keeping Unit (SKU).

Retailers differ in the services they offer the customers. They provide service like displaying
merchandize, accepting credit cards, providing parking and being open at convenient hours. These
type of services attract customers to the retailers but they also are costly. More staff must be paid to
provide information and assist customers, alter products to meet customers’ needs and
demonstrate merchandize. To make profit, retailers that offer broader variety, deeper
assortments, and/or additional services need to charge higher prices.

FOOD RETAILERS

Food Retailers

Warehouse Convenience
Supermarkets Supercentres Hypermarkets
Clubs Store

Supermarket
 A conventional supermarket is a large, self-service retail food store offering groceries and
other perishables as well as some non-food such as health and beauty and general
merchandise.
 Instead of offering twenty brands of a good, it offers one or two brands one of which is a
store brand.
 Merchandize is shipped in cartons on crates that can serve as displays so that no unloading
is needed.
 By trimming costs, limited assortment supermarket can offer merchandize at prices 40%
lower than those of conventional supermarkets.
 They provide following services to lure the customers:
 Fresh Merchandize
 Health/Organic Merchandize
  Ethnic Merchandise
 Private-Label Merchandize
 Improving the Shopping Experience

Supercentre
 Large stores that combine a supermarket with a full line discount store.
 Provide one-stop shopping experience by offering broad assortments of grocery and general
merchandise products under one roof.
 General merchandise are often purchased on impulse when customers’ primary reason for
coming to the store was buying groceries. General Merchandize has higher margin which
enables the supercentres to price food items more aggressively.
 Since they are very large stores, it takes very long to find the items they want.

Hypermarket
 Large stores that combine a supermarket with a full line discount store.
 Provide one-stop shopping experience by offering broad assortments of grocery and general
merchandise products under one roof.
 General merchandise are often purchased on impulse when customers’ primary reason for
coming to the store was buying groceries. General Merchandize has higher margin which
enables the supercentres to price food items more aggressively.
 Since they are very large stores, it takes very long to find the items they want.
 Hypermarket carry a larger proportion of food items than do supercentres and have a
greater emphasis on perishables – produce, meat, fish and bakery items. Supercentres on
the other hand have a larger percentage of non-food items and focus more on dry groceries.

Warehouse Club
 These are retailers that offer a limited and irregular assortment of food and general
merchandise with little service and low price for ultimate consumers and small business.
 Customers are attracted to these stores because they can stock up on large packs of basics.
 These are large and typically located in low-cost districts. Interior is simple, hence cost of
designing the store is saved. Little service is offered.
 Due to low cost location, inexpensive store design and little customer service, they ate able
to offer low price.
 Most warehouse clubs have two types of members i.e. small business and ultimate
consumers.

Convenience Store
 Small store providing a limited variety and assortment of merchandise at a convenient
location with speedy checkout.
 Enable consumers to make purchases quickly, without having to search through a large store
and wait in a long checkout line.
 They offer limited assortment and variety, and they charge higher price than supermarkets.
 They are adding fast casual restaurants, kiosks to pay bills, option of drive through to
increase traffic in the store.
 Easy access, storefront parking and quick in-and-out access are key benefits.
 GENERAL MERCHANDISE RETAILERS

General
Merchadise
Retailers

Full-Line
Departmental Speciality Category Exxtreme- Off-Price
Discount Drugstores
Stores Stores Specialist Value Retailers Retailers
Stores

Department Store
 These retailers carry a broad variety and deep assortment, offer customer services, and
organize their stores into distinct departments for displaying the merchandise.
 Pleasing ambience, attentive service and a wide variety of merchandise under one roof are
the main attractions.
 They have both soft goods (apparel and bedding) and hard goods (appliances, furniture
etc.).
 Each department within the store has a space allocated to it, as well as a salesperson to
assist customers. The department store often resembles a collection of speciality shops.
 Department stores are categorized into three tiers, first being the costliest and third being
the cheapest.
 To deal with their eroding market share they are attempting to increase the amount of
exclusive products they sell, undertake marketing campaigns and increase their online
presence.
 Department stores are placing more emphasis on developing their own private label brands.

Full-Line Discount Store

 These are retailers that offer a broad variety of merchandise, limited service and low prices.
 They offer both private labels and national brands.
 These confront intense competition from supercentre that focus on single category of
merchandise.
 Supercentres are more efficient that full-line discount stores because of the economies of
scale that result from high traffic generated by the food offering.

Speciality Store
 These retailers concentrate on a limited number of complementary merchandise categories
and provide a high level of service.
 They tailor their retail strategy toward very specific market segments by offering deep but
narrow assortments and sales associate expertise.
 Merchandise is grouped by product category, with the brands displayed alphabetically so
that customers can locate them easily. Customers are free to shop on their own.
  Knowledgeable salespeople are available to assist the customers.

Drugstores
 These are speciality stores that concentrate on health and personal grooming merchandise.
 Prescription pharmaceuticals is the key merchandise they offer.
 Beside allopathic medicines, they also offer OTC and alternate medicines, surgical,
rehabilitation aids and body care products.
 They have started offering services like drive through, membership to lure the customers.

Category Specialist
 These are big box stores that offer a narrow but deep assortment of merchandise.
 They predominantly use a self-service approach, but they offer assistance to customers in
some areas of the store.
 They are called “category killers. “
 Some category specialists are attempting to differentiate themselves with customer service.

Extreme-Value Retailers
 These are small discount stores that offer a limited merchandise assortment at very low
prices.
 They offer a broad variety but shallow assortment of household goods, health and beauty
aids.
 Extreme-value retailers primary target low-income consumers. These customers want well-
known brands but cannot afford to buy the large-size packages offered by full-line discount
stores or warehouse clubs.

Off-Price Retailers
 These offer inconsistent assortment of brand-name merchandise at significant discount off
the manufacturers’ suggested retail price.
 Off-price retailers are able to sell brand-name and even designer-label merchandise at 20 to
60 percent lower than MSRP. They are able to do so because of their opportunistic buying.
 Closeouts are end of season products that will not be used in following seasons.
 Irregulars are merchandise that has minor mistakes in construction.
 Factory Outlets also come under this category.

Properties of Services
 Intangibility
 Simultaneous production and consumption
 Perishability
 Inconsistency

Types of Ownership
 Independent, Single-Store establishments
 Corporate Retail Chains
 Franchising
Chapter 3
Multichannel Retailers are retailers that sell merchandise or services through more than one
channel. Many small, store-based retailers also use an Internet Channel as well as a store channel.

Retail Channels
A Retail Channel is the way a retailer sells and delivers merchandise and services to its customers.
The most common channel used by retailers is a store. Retailers also use a variety of non-store
channels including the internet, catalogues and direct mail, direct selling, television home shopping
and automated retailing.

Internet Channel
Internet Channel, also called online retailing, electronic retailing or e-tailing is a channel in which
the offering of products and services for sale is communicated through Internet. Nowadays,
everyone prefers online shopping. Stores have closed down due to lack of traffic, and paper
catalogues have become obsolete.

Catalogue Channel
 It is a non-store retail channel in which the retail offering is done through catalogues
communicated to customers over mail.
 The merchandise categories with greatest catalogue sales are drugs and beauty products,
computers and software, clothing and accessories and furniture.
 The use catalogue is now being discouraged by the customers on the account that they lead
to wastage of natural resources.
 Catalogue’s share of sales is declining at a relative to Internet.

Direct Selling
 It is a retail channel in which salespeople interact with customers face-to-face at a
convenient location.
 Salespeople demonstrate the benefits of the merchandise.
 Providing this level of information is costly.
 Largest categories of merchandise sold through direct selling are personal care products,
home and family care products, wellness products etc.
 Salespeople who work in direct selling are independent agents. They are not employed by
the direct sales firm, rather act as independent agents, buying merchandise from firms and
reselling it to customers.
 Two types of direct selling are as follows:
 Party Plan System – Salespeople encourage customers to act as host and invite friends for a
party. The host receives a commission for doing so. At that party, the merchandise is
demonstrated and attendees place orders.
 Multilevel System – In this system, independent business people serve as master
distributers, recruiting other people to become distributers in their network. These master
distributers buy from the frim and resell it to distributers or receive a commission on all
merchandise purchased by the distributors in their network.
 Pyramid Scheme develops when the firm instead of selling to end users, sell the
merchandise and services to other distributers.
Television Home Shopping
 It is a retail channel in which customers watch a television program that demonstrates
merchandise and place orders for that merchandise via telephone, Internet or via the TV
Remote.
 The three forms of TV Home Shopping retailing are as follows:
 Cable Channels dedicated to television shopping – HomeShop18
 Infomercials – Programs 30-60 minutes long that mix entertainment with product
demonstrations and solicit orders placed by the telephone.
 Direct-Response Advertisement – It is a one-to-two minute advertisement on TV and radio
that describe the products and provide an opportunity for customers to order it.

Automated Retailing
 It is a retail channel in which merchandise or services are stored in a machine and dispensed
to customers when they deposit cash or use credit cards.
 Also known as vending machines.

BENEFITS OFFERED BY THE RETAIL CHANNELS

Store Retail
 Touching and Feeling the product.
 Personal Service
 Risk Reduction
 Immediate Gratification
 Entertainment and Social Experience
 Browsing
 Cash Payment

Catalogue Channel
 Safety
 Convenience

Internet Channel
 Broader and Deep Assortments
 More Timely Information for Evaluating Merchandise
 Personalization
 It is not risk free

Benefits of Multi-Channel Retailing

 Electronic retail gives the opportunity to overcome the limitations of primary existing
channels.
 Increasing Customer Satisfaction and Loyalty
 Gaining Insights into Consumer Shopping Behaviour
 Expanding Marketing Presence
 Building Strategic Advantage
Multichannel Retailing Issues
 Which Channel has the Lowest Cost?
 Disintermediation – When manufacturer sells directly to the consumers, bypassing retailers.

Challenges of Effective Multichannel Retailing

 Providing an Integrated Shopping Experience
 Supporting M-Commerce
 Organizing for Multichannel Retailing
 Centralized Customer Database
 Brand Image
 Merchandise Assortment
 Pricing
 Reduction of Channel Migration
Chapter 7
Location Location Location
First location - Typically is one of the most influential considerations in a customer’s store choice
decision. Customers usually prefer those stores, which are closest to their home or work.

Second location - Implies strategic advantage over competitors. If a retailer has the best location,
competitors cannot easily copy this advantage.

Third location - When retailers select a location, they either must make a substantial investment to
buy and develop the real estate or must commit to a long term lease with the developers.

Choosing a particular location types requires a series of trade-offs.

 Size of the trade area

 The occupancy cost of the location
 The pedestrian and vehicle customer traffic generated in association with the location
 The restrictions placed on store operations by the property managers
 Convenience of the location for customers.

Unplanned Retail Stores

Some retailers put their stores in unplanned locations for which there is no centralized management
to determine where the specific stores are and how they will be operated.

Freestanding Sites
 These are retail locations for an individual, isolated and unconnected to other retailers,
however may be connected to other freestanding retailers.
 Convenience for customers – easy access
 High vehicular traffic and visibility to attract customers driving by.
 Modest occupancy cost
 Fewer restrictions on signs, hours or merchandise.

Outparcels are stores that are not connected to other stores in a shopping centre but are located in
the premises, typically in a parking area.

 Freestanding locations have a limited trade area

 Freestanding locations have a higher occupancy cost – all cost to be borne by the retailer.

City or Town Locations

 These have lower occupancy costs than enclosed malls.
 Locations in CBD often have high pedestrian traffic during the day.
 Parking problems reduce customer convenience.
 Urban areas go through gentrification (renovation)

Central Business District is the traditional downtown business area in a city or town.

Advantages –

1. Draws many people and employees in the area during business hours
 2. Transport hub
3. High pedestrian traffic
4. Large number of residents living in the area
5. They have become gentrified, drawing in new retailers and residents that crave an urban
experience.

Disadvantages –

1. Limited parking
2. Longer drive
3. Shoplifting
4. Lack of planning

Main Street refers to the traditional shopping area in smaller towns or a secondary business district
in a larger city.

Compared to CBD –

1. Occupancy cost are lower.

2. These locations do not draw much people towards them because less people work in that
area
3. Fewer stores, fewer selection
4. They do not offer recreational and entertainment activities like CBDs.

Planned Retail Stores – Shopping Centres

A shopping centre is a group of retail and other commercial establishments that are planned,
developed, owned and managed as a single property. By combining many stores at one location, the
development attracts more consumers to the shopping centre than would be the case if the stores
were at separate locations.

 Comprehensive Shopping Experience

 Common Area Maintenance
 They at least one or two anchors – they attract significant number of consumers and
consequently make the centre more appealing for retailers. (Shoppers Stop at GIP)

Neighbourhood and Community Shopping Centres (Sector 18)

 These are attached rows of non-closed stores

 Have onsite parking, usually in front of stores
 Anchored by a supermarket or a drug store
 Convenient location, easy parking and low cost of occupancy
 Limited trade area due to their size
 Lack restaurants
 No protection from weather

Shopping Malls are enclosed climate-controlled, lighted shopping centres with retail stores on one
or both sides of an enclosed walkway.

 More anchors
 Larger trade area
 Shopping plus entertainment
  Weather control
 Consistency is maintained
 High Cost
 Strict Management
 Parking is far away

Lifestyle Centres (Delhi Haat) are shopping centres that have open air configuration of speciality
stores, entertainment, and restaurants, with design and ambience such as fountains and street
furniture.

 Apart from shops and restaurants they have other outdoor attractions like magic shows,
tattoo parlours etc.
 Weather is uncontrollable
 Ease of traffic but congested at times
 Less retail space
 High cost
 Located near higher income areas

Mixed-Use Developments (Gaur City) combine several different uses into one complex including
retail, office, residential, hotel, recreation and other functions.

 Live, work and play environment

 Appeal to people who have had enough of long commuting

Other Planned Retail Locations are as follows

 Outlet Centres
 Theme/Festival Centres
 Larger Multifunction Developments – Omni centres

Other Location Opportunities

 Pop-Up Stores and other Temporary Locations
 Store within a store
 Merchandise Kiosks
 Airports

FACTORS AFFECTING CHOICE OF LOCATION

Shopping Behaviour of Consumers
Convenience Shopping –

1. Concerned with minimizing their efforts to get the product or service they want
2. They are insensitive to price and indifferent about the brand
3. They don’t spend much time evaluating
4. Retailers usually locate the stores which is near by the residential area
5. Ease of access – Parking and drive through
6. Shoppers at these stores are not store/brand loyal.
Comparison Shopping –

1. Shoppers have a general idea about the type pf product/service they want, do not have any
particular preference for a brand.
2. Willing to put extra efforts to know about the different offerings of the product at different
stores.
3. Enclosed mall offer the same benefits to consumers interested in comparison shopping for
fashionable model

Speciality Shopping –

1. Consumers know what they want and will not accept a substitute.
2. They are brand/store loyal and are willing to pay extra or premium amount for the product
they want.
3. Shoppers are willing to travel to inconvenient locations to get what they want.

Density of Target Market

The location should be consistent with the type of retail store. A good location has many people in
the target market who are drawn to it.

Uniqueness of Retail Offering

The convenience of location is less important for retailers whose offerings are unique and
differentiated than other retailers who offer similar products to other retailers.

Legal Considerations
 Environmental and Sustainability Issues
 Zoning – It determines how a particular site can be used
 Building Codes – These are similar to legal restrictions that specify the type of building, size,
signs etc.
 Signs – Restrictions on the use of signs can affect a particular site’s desirability.
 Licensing Requirements and Permissibility
Chapter 8
Factors Affecting the Demand for a Retail or Trade Area
 Economic Conditions –
 Area’s level of growth – More growth, higher level of retail sales
 Employment – High employment rate, high purchasing power
 Sustenance of growth
 Determine which areas are growing and why
 Competition – If the type of merchandise offered by you is also offered by a big box retail
who is your competitor, because he is in the same area, your sales will never go high.
 Strategic Fit – The area needs to have consumers who are in the retailer’s target market i.e.
they are to the retailer’s offerings.
 Operating Cost

Number of Stores in an Area

 Economies of Scale from Multiple Stores –
 Promotional and distribution economies of scale
 Management can have greater span of control over the regional market
 Cannibalization – Retailers should continue to open stores only as long as profits continue to
increase or MR = MC.

Evaluating a Site for Locating a Retail Store

 Characteristics of the site –
 Traffic Flow and Accessibility – Greater traffic leads to greater impulse buying, but
on the other hand congestion proves to be detrimental to sales. Natural and
Artificial Barriers should be minimum so that the store is Accessible.
 Characteristics of Location –
 Parking
 Store Visibility
 Adjacent Retailers
 Restrictions and Cost
 Locations with a Shopping Centre –
 Higher sales means higher occupancy cost
 Location closer to anchors are comparatively costlier
 Trade Area Characteristics – Trade area is a contiguous geographic area that accounts for
the majority of a store’s sales and customers.
 Primary Trade Area – Area from which store derives 50 to 70 percent of their
customers. It should be with 5-10 minutes driving time.
 Secondary Trade Area - Area from which store derives 20 to 30 percent of their
customers. It should be with 10-15 minutes driving time.
 Tertiary Trading Area – Customers who come from widely dispersed areas. 1 hour of
driving time.
 Size of Trade Area – Determined by the nature of merchandise sold, he assortment
offered, and the location of alternate sources of merchandise.
 Parasite Store – Store that does not create its own traffic and whose trade area is
determined by the dominant retailer in the shopping centre or retail area.
  Measuring the Trade Area for a Retail Store – Customer Spotting can be done in
two ways i.e. manually plotting the location collected from the customer or using
census information.
 Competition in Trade Area

Estimating Potential Sales for a Store Site

 Huff Gravity Model
 Regression Analysis
 The Analogue Method

Type of Lease Stores

 Percentage Lease – Rent is based on a percentage of sales. In addition to percentage of
sales, retailers typically pay a maintenance fee based on the percentage of squared footage
of leased space.
 Percentage lease with a specified maximum – Lease that pays landlord a
percentage of sales up to a maximum amount.
 Percentage lease with a specified minimum – Lease that specifies the retailer to pay
certain amount of rent no matter how low sales are.
 Sliding scale lease – Percentage of sales paid as rent decreases as the sales go up.

 Fixed Rate Lease – A retailer pays fixed amount per month over the life of the lease.
 Graduated Lease – Rent increases by a fixed amount over a specified time.
 Maintenance-Increase-Recoupment Lease – Allows the landlord to increase rent if
utility prices (electricity, insurance etc.) increase with time.

Terms of Lease
 Cotenancy Clause
 Prohibited-Use Clause
 Exclusive-Use Clause
Chapter 17
The environment in a store, the design of the store, and the presentation and location of the
merchandise in the store have significant impact on shopping behaviour.

Store Design Objectives

 Implement of retailer’s strategy
 Build Loyalty by providing a rewarding shopping experience
 Utilitarian Benefits – enables the customers to locate and purchase products very
conveniently
 Hedonic Benefits – Offering customers enjoyable and entertaining shopping
experience
 Increase sales on a visit
 Control Costs
 Meet legal requirements – For Differently abled
 Design Trade-Offs – Retailers often make trade-offs between stimulating impulse purchases
and making it easy to buy products. For example, milk kept at the end of the store so that
the customer walk through the entire store for it and indulge in impulse buying during that
process.

Store Design Elements

 Layout
 Signage
 Feature Areas

Layouts
Grid Layout
The Grid Layout has parallel aisles with merchandise on shelves on both sides of the aisles. Cash
registers are located at the entrances/exits of the stores.

Advantages:

 Provides utilitarian benefits

 Products are easily located and purchases are quick
 Cost efficient
 Less wasted space
 Use of high shelves enables more merchandise on sales floor

Disadvantages

 Customers aren’t exposed to all the merchandise in the store, due to height of the shelves,
they see only products displayed in the aisle they are in.
 Does not stimulate impulse buying
 Decreased traffic in the centre of the store

Measures

 Altering straight lines to form a zig-zag pattern

 The power brands are displayed from top to bottom shelves creating a swath of colour that
captures the attention as they peek down the aisle.

Racetrack Layout

The racetrack layout, also known as the loop is a store layout that provides a major aisle that loops
around the store to guide customer traffic around different departments with the store. Cash
register stations are typically located in each department bordering the racetrack.

Features and Advantages

 Facilitates customers in getting to see the whole store

  Encourages impulse buying
 Store has multiple entrances
 Racetrack is wider than other aisles and is defined by a change in flooring
 Provide hedonic benefits
 Since customers spend more time, they buy more

Freeform Layout

A freeform store layout also known as a boutique layout, arranges fixtures and aisles in an
asymmetric pattern.

Advantages

 Intimate an relaxing environment

 Facilitates shopping and browsing
 Butt-brush effect is avoided

Disadvantages

 Costly
 No well-defined traffic pattern – customers aren’t naturally drawn towards these stores
 Personal selling becomes imperative
 Reduces the amount of merchandise that can be displayed.

Spine Layout

 Based on single main aisle running from the front to the back of the
store (transporting customers in both directions)
 On either side of spine, merchandise departments branch off
toward the back or side walls
 Heavily used by medium-sized specialty stores ranging from 2,000 –
10,000 square feet
 In fashion stores the spine is often subtly offset by a change in floor
coloring or surface and is not perceived as an aisle
Signage and Graphics
Signage and graphics help customers locate specific products and departments, provide product
information and suggest items or special purposes. Signage is used to identify the location of
merchandise categories within a store and the types of products offered in the category.

 Category Signage
 Promotional Signage
 Point-of-sale Signage

Digital Signage includes signs whose visual content is delivered digitally through a centrally managed
and controlled network, distributed to servers in stores, and displayed on a flat-panel screen.

 More effective
 Enhances the store’s environment
 Overcomes time-to-measure hurdles associated with print signage
 Changes can be incorporated very easily
 Easy and speedy content development and sharing among stores
 Saves printing cost, although setting up cost is high

Feature Areas
Feature areas are the areas within a store that are designed to get
customers’ attention.

 Windows
 Entrances
 Freestanding Displays – Mannequins
 End caps (Please see the figure)
 Promotional Aisle
 Walls
 Dressing Rooms
 Cash Wraps – OTC products

Space Management
 Space Allocated to Merchandise Categories
 Space Productivity – Space should be allocated as per the sales of the merchandise.
Merchandise category generating higher profits should be allocated more space.
 Inventory Turnover – Higher the inventory turnover, more should be space
allocated to that merchandise.
 Display Considerations
 Location of merchandise Categories and Design Elements
 Impulse Merchandise – Should be kept near the cash counters i.e. always located
near the front of the store.
 Demand Merchandise – To buy this product, customer will walk through the whole
store hence promoting more impulse buying.
 Special Merchandise – To be kept in a place where traffic is minimum. Fragile items
(Glass/breakable) or ladies’ innerwear can come in this category.
  Category Adjacencies – Complement the usage of the product. For example, shirt
and tie. They should be kept adjacent to each other. The sale of one will initiate the
sale of other.
 Location of Merchandise within a Category
 Planograms
 Virtual-Store Simulation
 Videotaping Consumers (Shopping Carts)

Visual Merchandising
Visual Merchandising is the presentation of a store and its merchandise in ways that will attract the
attention of potential customers.

 Fixtures – The primary purpose of fixtures are to efficiently hold and display merchandise. At
the same time, they define area of a store and direct traffic flow.

Straight Rack Rounder Four-Way Fixture Gandola

Creating an Appealing Store Atmosphere

 Lighting
 Highlighting Merchandise – Customer should be able to notice the merchandise
 Mood Creation – Lit fountains and candles
 Energy-Efficient Lighting
 Colour
 Music
 Scent
 How exciting should a store be

Web Site Design

 Simplicity matters
 Getting Around
 Let them see it
 Blend the website with the store
 Prioritize
 Type of Layout
 Checkout
Chapter 10
Supply Chain Management is a set of activities and techniques form employ to efficiently and
effectively manage the flow of merchandize from vendors to retailer’s customers. These activities
ensure that the customers are able to purchase merchandise in the desired quantities at a preferred
location and appropriate time.

Efficient SCM is important to retailers because it can provide a strategic advantage that increases
product availability and an inventory turnover that produces higher return on assets.

Benefits of SCM
 Fewer Stockouts – Stockout occurs when an SKU that a customer wants is not available. In
general, stockouts have a significant short-term and long-term effects on sales and profits.
 Tailored Assortments – Efficient SCM makes sure that right merchandise is available at the
right store and on the right time.
 Higher Return on Assets – An efficient SCM can improve its ROA because the system
increases sales and net profits margins without increasing inventory. Net sales increase
because customers are offered better assortment of products. Because the net sales
increased, the Gross profit Margin also increased, ultimately leading to increase in net profit.

Data Warehouse: Purchase data collected at the point of sale goes into a database known as Data
Warehouse. Data Warehouse also contain detailed information regarding the customers which is
used to target promotions and group products together in stores.

Electronic Data Interchange: EDI is the computer-to-computer exchange of business documents in a

standardized format. Information like purchase order changes, order status etc is shared. The
development and use of standards is critical to the use of EDI because they enable all retailers to use
the same format when transmitting data to their vendors.

EDI transmissions between retailers and vendors occur over the internet. Because the internet is a
publically accessed network, its use to communicate internally and externally with vendors and
customers raise securities issues.

Logistics: Logistics is the aspect of the SCM that refers to the planning, implementation and control
of the efficient flow and storage of goods, services, and related information from the point of origin
to the point of consumption to meet customers’ needs.

Merchandise flows from Vendors to distributors and from distributors to retailers. Alternatively, it
can flow from vendor to retail directly.

Functions of a Distribution Centre

 Management of Inbound Transportation
 Receiving and Checking – Receiving is the process of recording the receipt of the
merchandise as it arrives at a distribution centre. Checking is the process of going through
the goods on receipt to make sure that they arrived undamaged and that merchandise
ordered was the merchandise received.
 Storing and Cross-Docking – Cross-docking refers to cartons pre-packaged by the
manufacturer for a specific store.
  Getting Merchandise Floor-Ready – Floor-ready merchandise is the merchandise that is
ready to be placed on the selling floor. Ticketing and marking refer to affixing price and
identification labels to the merchandise.
 Preparing to Ship Merchandise to a Store – The pick ticket is a document or display on a
screen in a forklift that indicates how much of each item to get from specific store areas.
 Management of Outbound Transportations – Sophisticated routing and the cheapest mode
of transport is used.

Factors Affecting the Decisions Made by Retailers Concerning their Supply

Chains
 Outsourcing Logistics
 Public Warehouse
 Freight Forwarders
 Pull and Push Supply Chain
 Pull Supply Chain – a supply chain in which requests for merchandise are generated
at the store level on the basis of sales data captured by POS terminals.
 Push Supply Chain – Merchandise is allocated to stores on the basis of forecasted
demand.
 Direct Store Delivery – Vendors distribute directly to stores
 Reverse Logistics – Process of capturing value from and/or properly disposing of
merchandise returned by customers and/or stores.
 Supply Chain for Fulfilling Catalogue and Internet Orders
 Drop Shipping or consumer direct fulfilment is the system in which retailers receive
orders from customers and relay these orders to vendors and then the vendors ship
the merchandise ordered directly to the customer.

Collaboration between Retailers and Vendors in Supply Chain Management

 Benefits of Coordination – Vendors can make sure that the merchandise is available “just-in-
time.”
 Using EDI
 Sharing Information – Sales data
 Vendor Managed Inventory – It is an approach for improving supply chain efficiency in
which the vendor is responsible for maintaining the retailer’s inventory levels.
 Collaborative Planning, Forecasting and Replenishment – Sharing information like strategic
and promotional plans on the basis of which forecast can be made.

Radio Frequency Identification

It is the technology that allows an object or person to be identified at a distance by means of radio
waves.

 Reduces Warehouse and distribution labour costs

 Reduces point-of-sale labour cost
 Inventory savings
 Elimination of counterfeit merchandise
 Reduced theft
 Reduced out-of-stock conditions
Chapter 12
Merchandise Management Process
1. Forecast Category Sales
a. Staple Merchandise
i. Historical Data
ii. Adjustments for Controllable factors
b. Fashion Merchandise
i. Past Data
ii. Vendors
iii. Fashion and Trend Services
iv. Market Research
c. Service Retailers
i. Match supply for the demand by taking reservations or making
appointments
2. Developing an assortment plan – It is a set of SKUs that a retailer will offer in a merchandize
category in each of its stores.
a. Determining Variety and Assortment
i. Retail Strategy
ii. Assortments and GMROI
iii. Complementary Merchandise
iv. Effects of Assortments on Buying Behaviour
v. Physical Characteristics of the store
3. Setting Inventory and Product Availability Levels
a. Model Stock Plan – It is the number of each SKU in the assortment plan that the
buyer wants to have available for purchase in its store
b. Product Availability – Buffer Stock
4. Establishing a control system for managing Inventory
a. Staple Merchandise
i. Determining the level of backup stock
ii. Lead time – Time between the recognition that the order needs to be placed
and at the point at which merchandise arrives at the store.
iii. Order Point – The amount of inventory below which the quantity available
shouldn’t go or the item will go out of stock before the next item arrives.
b. Fashion Merchandise
i. Merchandise Budgeting Plan
ii. Evaluating the Budgeting Plan
5. Allocating Merchandise to the Store
a. How much to allocate – As per Sales
b. What type of Merchandise to be Allocated – As per consumer preference in the
area
c. When to allocate – Pay check cycle