Storeoperations

SUBMITTEDBY: Vipin(53) PGDRM2A CenterforRetailManagement FDDI SUBMITTEDTO:

Mr.ShashankMehra FacultyofMarketing Research

Storeoperations
Theretailstoreistheplacewherethecustomerstakeadecisiononthepurchaseofthe productsofferedbytheretailer.Thestorealsoinfluencestheperceptionthatcustomers formintheirmindsaboutthestore,theproducts,servicesandstaff.Fromthe managementspointofview,operationsofthestoreandamajorelementofthecost.As aconsequence,thestoreitselfbecomesacriticalassetoftheretailbusinessanditis imperativethattheoperationsaremanagedwelltoachieveandsustaincustomer satisfactionandbecosteffective.Managingstoreoperationsforasmallretailbusinessof anysizeorcomplexityfromtheneighborhoodgrocertothenationalretailchainisa challengingtask.Itrequiresintegrationamongvariousfunctionswithinthestore.When allthefunctionsareperformedinanintegrationmanner,thestoreoperationsrun smoothly.

KEYROLESINSTOREENVIRONMENT
Theretailstoreisofprimeimportancetotheretailorigination,fortworeasons. Theretailstoreistheprimarysourceofrevenuefortheretailerand Itisthepointwherethecustomeractuallyinteractswiththeretailstoreandits offerings. Theprimaryresponsibilitywithintheenvironmentofaretailstorelieswiththestore manager.Thestoremanagerhastoplayadualroleinretailenvironment.Ononehand heisresponsibleforthevariousmembersofthestaffandteamwhoreporttohimand enablethesmoothfunctioningofthedaytodayoperationsofthestore.Ontheother handhealsohastoensurethatthepoliciesandtheguidelinesaslaiddownbythe management,areadheredtobythestoreandallemployeeswithinthestore.typically, thestoremanagerisresponsibleforalltheactivitiesthatareconductedwithinthe environsofthestoreandwouldincludetheopeningofthestoreontime,schedulingof

staff,cleanliness,ensuringadequatestockonthefloor,closingofthestoreandalso dealingwiththecustomergrievancesandcomplaints.Whilethestoremanagermaynot personallyperformallthesefunctions,hewouldberesponsibleforthetasksbeing performed.Thustheremaybeotherindividualswhohandlethesetasks,buttheoverall responsibilityofensuringthattheyareperformedaspertheguidelineslaiddownbythe company,restswiththestoremanager.Thus,ifoneweretoenliststheresponsibilitiesof thestoremanager,theywouldinclude:

BUDGETINGANDPLANNING
Ensurethatthegoalsaremetthroughappropriateplanningand organizationofstaff,inventoryandexpenses,forshortandlongterm success. Monitoralosspreventionproagramtoprotectthecompanysinventory andassets. Developandmonitorthecapitalexpensesbudgettoensurethatthestore isproperlymaintainedandupgradedsoastomeetthehighmaintenance standardsthatreflectstheprofitableimage.

COMMUNICATION
Communicationwiththeregionaloffice/headofficeasperthe requirementslaiddownbytheorganizationwithreferencetosales, targetcustomerservice,eventsandlocalissues. Holdstaffmeetingstoboostemployeemoraleanddriveforachievingthe resultsneeded. Ensurethecompanypolicyandproceduresarecommunicatedina mannerandadheredtostrictly. Motivateanddevelopstaffinordertoencouragetheirprofessional development.

CUSTOMERSERVICE
Instilltheemployees,themeaningandimportanceofcustomerserviceas outlinedintheretailphilosophy. Promoteandmonitorthequalityofserviceamongthestaffthrough trainingandbyactingaspositiverolemodel. Bepersonallyavailabletoallthecustomerstocommunicateandindentify theirneedsandtoaddresstheirquestionsorconcerns.

PERSONAL
Inspireemployeessothateachpersoncontributestotheproductivityof thestore. Delegatetheworkloadappropriatelyandeffective. WriteperformanceevaluationandgoalassessmentsfortheAssistant StoreManager.

LEGALCOMPLIANCE
Ensurethatthestoreisincompliancewithemploymentlaws,including thoseregardingwageandhour,humanrightsandequalemployment opportunities. Maintainsafeworkingconditionsfortheemployeesandcustomers cominginthestore,resolveanysafetyconcernsquickly. Ensurestoresecurityfrominternalandexternaltheftandgettoknowthe properapprehensionandprosecutionproceduresforyourstate.

TheotherimportantpositionwithintheretailstoreenvironmentisthatofaCashier.The Cashierintheretailstoreisapersonwhobasically,isresponsibletransactingthe exchangeofthemoneyorcreditwiththecustomersinreturnformerchandiseor services.Thecashierinaretailstoreisresponsibleforbilling,collectionofcash,credit card,foreigncurrency,andtravelerschequesoragiftvoucher,asmaybeapplicable.

ELEMENTS/COMPONENTSOFRETAILOPERATIONS
Inordertoensureasmoothflowofoperationsatthestorelevel,itisnecessarythatthe managementdefinesprocessesandhasthepeopleandtheresourcestoimplement them. Thetaskstobeperformedandtheprocessesareusuallydefinedinastoreoperations manual.Thisdocumentliststhetaskswhichneedtobecarriedoutatthestorelevel;it statestheresponsibilityandthetimeperiodinwhichthesetasksneedtobeperformed. Awellpreparedoperationsmanualorblueprintisthestartingpointofefficientstore operations

Typicallyinaretailstore,thefollowingtasksneedtobeperformed. 1. Storeadministrationandmanagementofthepremises 2. Managinginventoryanddisplay 3. Managingreceipts 4. Customerservice 5. Managingpromotions,events,alliancesandpartnerships.

1. STOREADMINISTRATIONANDMANAGEMENTOFPREMISES
Managementofpremises Managingtheoperationsofaretailstorestartsbydetermininghowthetaskspertaining tothepremisesaretobeperformed.Firstly,thedurationofthehoursforbusinessneed tobedetermined.Itisalsonecessarytospecifywithwhomtheresponsibilityofopening andclosingthestorelieswith. Someconsiderationswhichneedtobetakenintoaccountwhiledeterminingthe businesshoursare:thetargetaudienceforthestoreandthekindofproductswhichare toberetailed.Forexample,asupermarketsellinggrocerieswillneedtohaveearly openinghoursascomparedtoalifestylesecondfactorwhichaffectstheworkinghours ofaretailstore,isthestorelocation.Afreestandingstorecanoperateathoursthatit choosesto,whilestorewhichisapartofashoppingcenterormallwillneedtofollow thehoursdecideduponbythemanagementofthemall. Securityofthestorepremisesandofthemerchandiseinthestoreisequallyimportant. Thesizeoftheretailstoreandthelevelofoperationsdeterminethelevelofsecurity required.Asmallindependentretailermaynotreallyneedsecurityforhispremises,but alargedepartmentstoremayconsideritnecessary.Securityofthepremisesisnecessary inordertoensurethatmiscreantsdonotspoiltheretailstore.Securityofmerchandiseis neededtoensurethatpilferageofmerchandiseorshrinkageasitiscommonlytermed,is minimal.Inventoryshrinkagemayariseduetotheftbyemployees,customersorbyerror onthepartofthestoreatthetimeofreceivingmerchandise.

Alargenumberofretaileracrosstheworldusespeciallydesignedtags,whichare attachedtoproducts.Thesetagsaresensedbytheelectronicdevicesspeciallydesigned todetectthemandareusuallyplacedatthestoreentrancesandexits.Ifanattemptis madetotaketheproductoutofthestorewithoutremovingthesetags,analarmgoes off,thusalertingthestorepersonnel.Theotherdeviceusedformonitoringthe movementofcustomersandstaffisvideocameras.Someretailstorealsoprovide separateentrancesandexitsforthestorestaff,sothattheycanbecheckedeachtime theyleaveandenterthestorepremises. Transactionperhour =numberoftransaction/numberofhours Thishelpretailertokeeptrackofthenumberoftransactionthattheyarecarrying outinanhour.Hourlyvariationinsalesactivitycouldbeimportantforsetting storehoursandforstaffschedule,particularlyforcashier.Theinformationcanbe gatheredwithcashregisters,whichkeeptrackofthetimeofthesalesorby havingperiodicallyrecordthenumberoftransactionatselectedperiodoftime. Salespertransaction =netsales/numberoftransactions Thismeasuregivestherupeevalueoftheaveragesales,netofreturnand allowancesthisisusedtostudysalestrendsovertime,incombinationwithother measures,decideahighvolumeofsalesismoreimportantthanahighrupee valueoneachsales.

 Hourlycustomertraffic =customertrafficin/numberofhours Aretailerusethismeasuretotracktotalnumberofcustomertrafficperhour, day,weekorseasonthiscanbeappliedtoaentirestoreortoasingle departmenttoschedulehoursandestablishstafflevel.Unlessthereare automaticcountingmechanisms,periodicsurveysofcustomerstrafficare requiredtoarriveatarepresentativefigure.

STOREADMINISTRATION
Storeadministrationdealswithvariousaspectslikethecleanlinessofthestorepremises, maintenanceofthestorefaadeandthedisplaywindowsetc.Administrationisalsobe responsibleforutilizingthestorepersonneleffectively.Timekeepingforthestorestaffis important.Itisalsonecessarytokeeptrackofholidaysandtheshiftsthatthestaffmay berequiredtoworkfor. Thepremisesofthestoreneedtobemaintainedasperthestandardsdecideduponby themanagement.Thisinvolvesthetaskofcleaningthestoreandarrangingthe merchandisebeforethefirstcustomercanwalkintothestore. Asimportanttaskofadministrationinvolvesensuringthatalltherequiredpermissions andlicensestorunaretailestablishmentareprocuredfromtherightauthorities.Itis alsonecessarythatthehealthandsafetynormsasrequiredbythelawoftheland,are metwithandsatisfied.

 Stock
Inordertodeterminethestrengthofyourstockholdingyouneedanswerstothis questionwhatistheaveragesellingprice(averagesellingpriceiscalculatedbydividing thetotalvaluesoldduringadayoraperiodbythetotalquantitysoldduringthesame dayorperiod)comparedtotheaverageprice(averagestockpriceiscalculateddividing thevalueofthetotalmerchandiseinstockbythetotalquantityinstock).Itsanideal situationifbothhappenstobearoundthesamevaluethismeasurehelpretailersfind outiftherestoreisoverstockedorunderstockedinanycategoryoreveninanSKU. Averagesellingprice =totalvaluesofgoodssold/totalquantitysold Averagestockprice =totalvalueofgoodsandstock/totalquantityinstock Turningstockaroundefficientlyyieldsbetterprofits:themoretimestheretailers turnhisstockthemorehismarginsare.Thiscanbefoundforanycategoryorany SKUanytimebycheckingthepercentagesoldfromthestockofaspecified categoryorSKU.

2. MANAGINGINVENTORYANDDISPLAY
Thetaskofallocatingthemerchandisetothevariousstores,usuallyrestswiththe merchandisemanagementteamorthecategorymanagerasthecasemaybe.Asthe store,thestorestaffmanagesthisinventory.Toenablethemtoworkefficiently,the completeprocedureforthehandlingofmerchandiseatthestorelevelneedstobe documented. Responsibilitywithrespecttomerchandiseatthestorelevelinvolvereceivingandin wardingthegoods.Oncethemerchandiseisreceivedatthestore,thequantityand otherdetailslikecolor,style Andsizeshavetobecheckedwiththedocumentaccompanyingthegoods,todetect anydiscrepancies.Inthecaseofmostlargeretailers,usingahandheldscanner,the merchandiseisscannedandthesystemupdatedforthestocksreceived.Proper documentationalsoneedstobedonewhenreturninggoodstothevariouslocations asandwhenrequired. Astheintegralpartofmanaginginventoryatthestorelevelisdisplayingitcorrectly. Thebestmerchandisemaylieunsoldifitisnotdisplayedinamannerthatisappealing andconvenientforthecustomer.Forexinasupermarket,if15ltrpacksofvegetable oilareplacedonthetopmostshelf,itmaybeinconvenientforthecustomertopick oneupandcarry,consideringthefactthatmostofthecustomeratasupermarket wouldbewomen.Incasetheretailerisrunninganythemepromotionorcampaign, theproductsonofferneedtobedisplayedcorrectly,andreplenishedoncesold.

Stockturnover/inventoryturnoverrate =netsales/averageretailvalueofinventory Expressedasnumberoftimes,thisrationindicateshowoftenthe inventoryissoldandreplacedinagivenperiodoftime.Someretailers alsousetheratiocostofgoodssolddividedbyaveragevalueofinventory atcost.Bothcanbecalculatedforanytimeperiod.Wheneitherofthese ratiodeclinesthereisapossibilitythatinventoryisexcessive. Percentinventorycarryingcost =(inventorycarryingcost/netsales)*100 Theimportanceofthismeasurehasincreasedinrecentyearswiththerise ininventorycarryingcostduetohighinterestrates.Thismeasureisalso importanttoreducestockobsolescenceandtopreventblockageof workingcapital.Retailersusethismeasuretotrackthepercentageoftheir netsalesrepresentedbythefixedcostofmaintaininginventory. Grossmarginreturnoninventory =Grossmargin/averagevalueofinventory Expressinrupeeterms,thegrossmarginreturnoninventory(GMROI) comparesthemarginonsalesontheoriginalcostvalueofmerchandiseto yieldareturnonmerchandiseinvestment.Inventorycanbevaluedat retailoratcostbutformanyretailersinventoryvaluedatretailismore accessiblethatthevalueatcost.However,usinginventoryvaluedatretail maynotgiveanaccurateindicationofinvestmentcost.GMROIcanbe dramaticallyalteredbychangesininventoryturnoverandgrossmargin.

Space
Spaceproductivityiscriticaltosuccessfulretailing,henceitisimperativetohave parametersthatmeasurespaceproductivity.Thetopoftheminddipstickmeasuresare salespersquarefootperdayandmarginspersquarefootperday.Theperformanceof thestoredependsonthegrossmarginreturnonfootage(GMROF). Asretailingisallaboutoperatingwithinagivenspace,itsproductivitycanbemeasures accordingtoanyofthevariousretailelements,beitemployees,stocks,customersor eventhestoresfacilities,besidessales. Occupancycostpersquarefootsellingspace =occupancycost/squarefeetofsellingspace Expressedinrupees,thismeasuretranslatesoccupancycostintorupee valueperunitofsellingspace.Itgivesanestimateoftheamountofthe grossmarginrupeeeachunitofspaceemployedforretailsellingmust generatetocoveroccupancycosts.Foramultiunitretaileritisahelpful measureforcomparingtheperformanceofunitsatdifferentlocations.It canbecalculatedforanytimeperiod,suchasayearoramonth. Salespersquarefoot =netsales/squarefeetofsellingspace Stockpersquarefoot =netstock/squarefeetofsellingspace

Expressedinquantityorvalue,thismeasurecanbeusedtocompare alternativeusesofspaceinvolvingdifferentproductlines,ortocompare theperformanceofdifferentdepartmentsorstoresusingacommon standard.Thisratiowillvaryaccordingtothetypeofmerchandiseand merchandisingmethodsused. Percentageofsellingspace =(sellingspaceinsquarefeet/totalspaceinsquarefeet)*100 Retailersusethismeasuretocalculatethepercentageoftotalspaceused forsales.Thisratiovariesaccordingtothetypeofmerchandiseand merchandisingmethods.

3. MANAGINGRECEIPTS
Managingreceiptsinvolvesdefiningthemannerinwhichtheretailerisgoingto receivepaymentforthesales.Themostcommonmethodforreceivingpaymentsfor goodssoldinIndiaisbycashorbycreditcard.Whilemostofthelargeretailstores wouldaccepteitheroftheaboveformsofpayment,asmalllocalretailstoremay acceptonlycashpayments.Othermodesofreceivingpaymentarebywayofcheque oradebitcard.Somestoresalsohaveacobrandedcard,whichcanbeusedfor payment. TheuseofcreditcardsinIndiaislargelyanurbanphenomenon.Mostlarge departmentstoreshavestartedacceptingcreditcardsasamodeofpayment.The creditcardchargespaidbytheretailerdependonthevolumeofbusinesstransacted bytheretailerandtheratenegotiatedonthebasisofthefuturebusinesstransacted

bytheretailer.Theprocedureforacceptingpaymentbywayofcreditcardsand collectingpaymentfromthebankneedstobeclearlyunderstoodbythestaff responsibleforthisfunction.

4. CUSTOMERSERVICE
Thecustomerservicepolicytobeadoptedbytheretailerisdecideduponthetop management.Thisisactuallyputintopracticebyeverypersonworkingwithinthe retailstore.Customerservicedoesnothavetobeginandendatthecustomerservice counterintheretailstore.Eachpersonontheflooroftheretailstorecanensurethat thecustomercomesincontactwithhimorheriscomfortableandhasapleasant shoppingexperience.Thisissomethingwhichhastobeimbibedinthem,andthishas tobeatopdownapproach. Animportantaspectwhichaffectsacustomersperceptionoftheretailstore,itsthe experiencethathehaswhilebillingtheproductspurchasedbyhim.Whileacustomer mayspendhourschoosingtheproductthathelikes,hedoesnotlikewaitingforalong timeatthetimeatthetimeofpayment.Longqueuesmayresultinsomedisgruntled customers.Storeoperationsneedtobegearedtohandlesuchasituation.Many stores,infact,traineachmemberofthestafftohandlethecashcounter.Many supermarketsandotherretailershavealsointroducedexpresscheckoutsfor customerswhohaveboughtalimitednumberofproducts.Thisensuresthata customerwhoneedstobuyonlyoneortwoproductsdoesnothavetowaitinthe samequeueasapersonbuyingalargenumberofitems. RetailersinIndianeedtobesensitivetotheissueofefficiencyofbillingattimeswhen thenumberofpeoplebuyingfromthestoreincreasessubstantially.Specificdaysof

theweekmayshowatrendofincreasedbilling.Thismayalsohappenduringa discountsale,diwali,Durgapuja,Christmas,NewYearandothersuchoccasions. Customerconversionratio =(numberoftransactions/customertraffic)*100 Thispercentagereflectstheretailersabilitytoturnapotentialcustomerintoa buyer.Itisalsoknownasthepercentageyieldrateorthewalktobuyratio.A lowfiguremeansthatpromotionalactivitiesarenotbeingconvertedintosales, orthattheoverallsaleseffortsneedtobeaccessedafresh.Unlessautomatic countingmechanismsarerecordingcustomertraffic,periodicsurveysof customertrafficarerequiredtoarriveatarepresentativefigure.Informationon transactionscanbegatheredfromcashregistertapeswhichkeeptrackofthe timeofthesale,orbyhavingstaffrecordsthenumberoftransactionsfor selectedoftime.

Employees
Employeeproductivityisusuallymeasuredintermsofsales.Measurement parametersincludetotalsalesperdaypersalesperson.Totalnumberofcash memos/customershandledbyasalespersoninthecaseoffreeaccessretailing(the criteriaappliedforoverthecounterretailingisdifferent).Itisagainthegrossmargin returnonlabouremployed(GMROL)thatmatters. Netsalesperfulltimeemployee =netsales/totalfulltimeemployees Expresseitherinquantityorrupeevalueterms,thismeasurerepresentsthe averagesalesgeneratedbyeachfulltimeemployee.Itisusedtosetperformance targetsforsalespersonnel.

 Spacecovered/customersservedperfulltimeemployee =totalretailingspace/numberofcustomersserved/totalfulltimeemployees Expressedinsquarefeet,thismeasurementrepresentsthespacecovered/ numberofcustomersservedbyeachfulltimeemployee.Thisisextensivelyused bylargefreeaccessformatretailerslikedepartmentstores. Labourproductivity =(totallabourcosts/netsales)*100 Thispercentagemeasurelabourproductivitybytrackingthelabourcostsincurred toachieveagivensalesvolume.Thismeasurecanalsobeappliedsolelytosales employees. Grossmarginperfulltimeemployee =grossmargin/totalfulltimeemployees Expressedinrupeevalue,thisratioindicatesthegrossprofitgeneratedper employee,andcanbeusedtogaugeasalesemployeesperformance.Though thisshouldntbetheonlymeasureofanemployeesperformance,itcanprovide astartingpointforcloserexamination.Thismeasurecanbeadaptedtoapplyto allemployeesorsolelytobuyers. Suppliers/quantityorvaluepurchasedperbuyer =totalsuppliers/quantityorvaluepurchased/totalbuyers Thismeasuregivesanaverageofthenumberofsuppliersorthequantityor rupeevalueforeachbuyerinastore.Thereisnoidealnumber,butby comparingtheworkloadofindividualbuyersthroughthismeasure,management canseehowwellthebuyingloadisbeingdistributedamongpurchasingstaff. Researchindicatesthatanaveragebuyersabilitytomakeappropriatedecisions aboutbuyingdeclinesasthenumberofsuppliersincrease.Thismeasureshould belookedatinconjunctionwiththenumberofSKUstheaveragebuyerhandles, aswellaswiththereplenishmentcyclesinvolved.

5. Managingpromotions,events,andpartnership
Eventsandpromotionsareverymuchpartofretailmarketingscene.Inorderto enablethesuccessofaneventorapromotion,itisnecessarythatthestorewherethe actionistotakeplacebegearedforthesame.Thismayrequirehiringofadditional staff,workingexistingstaffinshiftsandrunningshorttrainingprogrammeonthe featuresofthepromotion,thehoursandthespecialityofthemerchandise. Thecomplexityofmanagingaretailstorealsodependsonthetypeofretailstoreand theproductsretailed.Whilethemerchandisesoldinadepartmentstoreorahigh fashionboutiquechangesfromseasontoseason,theexpertiserequireforthe operationsofthesupermarketisverydifferent.Andintegralpartofmanaginga supermarketcomprisesofunderstandingthetemperaturesatwhichmeatneedstobe frozen,storedanddisplayed.Therequirementsofabakeryanddairyproductsare againdifferentandneedtobeunderstood.Controlofperishableandsanitationare twoimportantaspectsoftheoperationsofasupermarket.