UNIT – IV RETAIL SHOP MANAGEMENT9

Visual Merchandise Management – Space Management – Retail Inventory Management – Retail accounting and audits - Retail store brands – Retail advertising and promotions – Retail Management Information Systems - Online retail – Emerging trends .

VISUAL MERCHANDISE MANAGEMENT

Visual merchandisation is the presentation of a store and its merchandise in a way that will attract the attention of potential customer.

Visual merchandising includes various aspects as store floor plan, store windows, signs, merchandise display, space design, fixtures and hardwares. When a retailer or supplier arranges his goods in such a way to be more attractive to the customer, this is visual merchandising. Given below are some of the ways generally used for presentation of materials.

1. Materials used for presentation

FixturesThe primary purpose of the fixtures is to hold the merchandise efficiently and effectively and display to the customers. They will also form a path way for the customers to move around. Fixtures must work in concert with other elements like floorings, lighting etc so that they do not stand out separately from the ambience. If a store is displaying items of historical or traditional importance like brassware or copperware, there should be more of wooden fixtures rather than steel or plastic ones. Thus it should blend with the image of the stores and the merchandise displayed.

Fixtures come in several varieties, sizes and shapes. Apparels are normally exhibited in straight rack, round rack or 4-way rack. Most of the other merchandise is kept in gondolas.

1. Straight rack: It consists of a long pipe suspended from supports going to the floor or attached to the wall. Although the straight rack can hold a lot of apparel, it is hard to feature many colours or styles.

2. ‘A rounder’ or a ‘Bulk fixture’ or ‘Capacity fixture’ is a round fixture that sits on a pedestal. It is smaller than straight rack but is designed to hold larger number of apparels.hey are easy to move and they can store efficiently store apparels, rounders are most used in apparel stores. Here also customers can not get a frontal view

3. A four-way-fixture, also known as ‘feature fixture’ has two cross bars that sit perpendicular to each other on a pedestal. This fixture holds large quantities of merchandise and allows the customers to view the entire garment. This is harder to maintain compared to the other types. Due to their superior display characteristics, these are used extensively by fashion garment retailers

4. Gondolas: Gondola shelving, is great for grocery stores, and convenience stores. Works great in pawn shops, and beauty supply and most retail locations. Retail shelving comes in several colors, heights, and depths. This display shelving comes in many colors, but the most common is almond (off white, light beige, tan). Height is another issue. Gondolas are used for displaying towels, sheets and housewares in departmental stores. Folded apparel can be effectively displayed in gondolas but because the items are folded, it is even more difficult for the customers to see it fully.

2. Presentation techniques

a. Idea-oriented presentation: This is a method of presenting merchandise based on a specific idea or the image of the store.

Furniture like office table, office chair etc is presented like how they are in the office.

Furniture like cots, cupboards, dressing table etc are stored like they are in a bedroom setting.

A store selling kitchen items arranges stoves, chimneys etc like how they are arranged in a kitchen

b. Item-oriented or style-oriented: This is the most common form of presentation of materials. Grocery stores, hardware stores, drug stores etc follow this.

In a supermarket s, milk products, beverages, household items etc are arranged in separate sections.When the customers look to buy tea or coffee, all varieties are stored in the same area.

In an apparel showroom all T-Shirts are stored together. The formal dress and casual dress are separately kept.

c. Price Lining – oriented : There are stores which offer all items at fixed price lines like shirts at Rs 450, Rs 650 and Rs 850. In such cases the items which fall on the same price line are kept together

d. Brand-oriented – The brands are kept separately. In Croma store, all Samsung TVs are kept together, all LG TVs are kept together etc

e. Vertical display: Here the merchandise is presented vertically using walls and gondolas. Customers view the merchandise just as they read newspapers, from left to right and from top to bottom. Retailers take advantage of this and place the national brands at higher level and the store brands at the lower level because the customers scan from eye level down.

f. Tonnage merchandising: This is a display technique in which large quantities of merchandise are displayed together. Customers have a feeling that larger quantities mean lower prices. The retailer hopes that the customer will notice the merchandise and will be drawn to it.

g. Frontal presentation: Often it is not possible to create effective displays and efficiently store items at the same time. But it is also important to show as much merchandise as possible to customer. One solution is the frontal presentation. This is a method of

displaying merchandise in which the retailer exposes as much as possible of the product to catch the customer’s eye.

h. Sales-promotion oriented : All items on which there is an offer are kept together

i. In alphabetical order: In pharmaceutical stores, the medicines are arranged in alphabetical order

Visual merchandising is also referred to as displays and has several benefits as below

Entertains, informs and educates the customer about the product / service in an effective and creative way

Encourages the customer to wander about and to discover the novelties

Arranges the merchandise for easy access Highlights merchandise to promote its sale Introduces and explains the new products

The various types of display are as below: Wall displays refer to wall panels , wall fixtures, shelves etc Floor displays or a dump display is merchandise dumped on the ground

or heaped in a pile usually in a bin or on a table Display products also refer to mannequins and jewelry displays Promotional items include window signs, banners, sign holders etc

which are used to enhance the product for sale

Design tools employed to attract attention in visual merchandise management:

1. Colour is the first element that attracts attention in a display. It is important to choose the combinations carefully considering the colour of the product and the lighting environment

2. Angles deflect the customer’s eyes to where the retailer wants them to go. Varying heights of props, angles of mannequins, plants etc create angles

3. Motion always creates interest and can be achieved by a moving signage or blinking lights

4. Simplicity of the display sends a strong message of higher cost. Similarly a large window filled to the brim suggests low prices

5. Repetition of an item has a strong influence on the customer.

SPACE MANAGEMENT

The key objectives of retail space management are: To obtain a high return on investment by increasing the productivity of

retail space, which requires effective utilization of space for merchandise display and customer movement

To ensure a compatible ,exciting and rational interface between the customer, merchandise and sales people

Space, as a retail input , is fixed in supply with retailer and he can not increase the same at his will. If he has to expand the same, he can do it only at a great cost. Therefore the allocation of space is a challenging task for him. He has to allot the available space for selliong, merchandise, sales personnel and for customer

Effective management of space requires a sound understanding of the following factors:

The nature of offerings, suppliers and departments within the store The quantity of the merchandise wants to store and display The location and proportion of space allotted to different types of

merchandise

The space within the stores is a scarce and expensive commodity and so it should be used judiciously. Space management involves two decisions as below:

1. Allocation of space to merchandise categories and brands ( How much space to allocate to various merchandise categories like food, apparels, electronics etc)

2. Location of various departments or merchandise categories ( where to locate groceries, cosmetics, apparels etc within the stores)

\1. Space allocated to merchandise categories : Some factors that the

retailers consider while deciding how much floor or shelf space to allocate to various merchandise categories are:

a) The productivity of the allocated space:

Sales productivity: A simple rule of thumb for allocating space is to allocate on the basis of the sale of the merchandise. For example if food items will constitute 75% of the store sales, then 75% of the space should be allocated to food items. This is only a rough thumb rule and it can change for high value items

Profitability : Retailers should allocate space on the basis of the effect that it will have on the profitability of the store. Suppose if imported fruits offer higher margins, it would be wiser to allocate more space for this item. However you can allocate more space only upto a point after which the store profitability will not go up by increasing the space for fruits

b) Inventory Turnover: Merchandise categories with high inventory turnover needs to be given more space than the ones with lower turnover.

Secondly, the merchandise for fast moving items are depleted faster and so more space has to be allocated for the same.

c) Impact on store sales as a whole: The retailers should also consider the effect that the allocation of space to certain merchandise will have on the entire store. For example, the retailer may allocate more space for milk and milk-related products ( even though they are not very productive in terms of sale or profit) and this may tempt the customers to visit the store and then buy other items

d) Display considerations: The physical limitation of the stores and its fixtures affect space allocation.

2. Location of various departments or merchandise categories

a) By strategically placing the demand/destination merchandise throughout the stores, retailers increase the chance that the customers will go through the entire stores and will shop more items. ( Demand / destination merchandise are those that the customers have decided to buy before entering the store, like daily used items like bread, eggs etc)

b) The entry area is referred as ‘decompression zone’ because the customers are making an adjustment to the new environment; here they take a good look of the entire stores. Introductory displays are kept here.

c) The ‘impulse’ products that are purchased without prior plan like fragrances and cosmetics in supermarkets or newspapers / magazines are almost located near the front or near the billing counters

d) In some stores, the ‘demand merchandises’ are kept at the back of the stores so that the customers go through the entire length of the stores . Items like bread, eggs, milk etc which are always on demand are thus kept at the back of the stores

RETAIL INVENTORY MANAGEMENT

Retail inventory management is probably one of the most complex of all inventory management departments. In retail management, you’ll have a greater variety of products to store and a great deal more of each product. In fact, your warehouse may never be big enough to hold all the merchandise that you need to keep in stock, and it can be difficult to maintain the right number of any particular item at any given time. How can you solve the problem, or at least address it, before it becomes too much to handle?

Elements of an inventory management system

1. Retail Inventory information System

At the heart of every good retail software package lies a powerful inventory management system. An inventory management system lets you know what you have, what you need, and when you need it.

2. More Accurate Inventory

With an inventory management system, you can get up-to-the-minute reports on what you have in stock, on order, and in transit. No more "assuming" that you have enough of a particular item. No more "thinking" that you have placed the order to replenish your supply. Retail software with an inventory management system eliminates the guesswork from running your retail business.

3. Timelier OrderingSome inventory management systems can be set up to automatically notify you when it's time to order more inventory, such as when stock falls below a pre-determined level. By always having your hottest items in stock, you'll be sure to not miss sales due to out-of-stock items. Many retail software packages will even generate purchase orders, further streamlining your inventory management. In addition to increasing your sales, retail software with an inventory management system can drastically reduce your operating costs by reducing the time spent manually counting inventory and creating purchase orders.

4. Identify What's Hot (And What's Not)An inventory management system tracks which items are selling and which aren't. This is a great way to identify your hottest and coldest items so you can make better business decisions. By identifying your slowest moving items, you can adjust their placement, pricing, or other issues sooner. You can also see which items are frequently purchased in pairs, so you can group them accordingly in the store. For example, you can place batteries in the same aisle as your flashlights. (Do ABC analysis to find the hot items and handle them differently)

Group

Qty(% of items)

Value(% of Rs)

Safety stk

Ordering procedure

A 20% 80% Low Careful, accurate, frequent review

B 30% 15% Medium Normal ordering C 50% 5% Large Order periodically, keep even

1 year stk

The inventory management in retail is very complicated due to the reasons given below:

Varieties are too much. An average size supermarket has more than 15000 SKUs

There are too many vendors or suppliers to handle Uncertainties in supply from different vendors Limited available space in the store Very difficult to forecast demands of many products Logistical issues. Transport availability may be a problem

Terms used in inventory management

Inventory Turnover ratio

This ratio shows how many times the inventory of a firm is sold and replaced over a specific period.

Generally calculated as:              Sales                                                            Inventory

But, may also be calculated as:      Cost of Goods Sold                                                               Average Inventory

Although the first calculation is more frequently used, COGS may be substituted because sales are recorded at market value while inventories are

usually recorded at cost. Also, average inventory may be used instead of the ending inventory to help minimize seasonal factors. This ratio should be compared against similar retail companies or the industry average. A low turnover might imply poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying from suppliers.

Stock days

This gives an idea of how many days the existing stocks will last at the current level of sales

Generally calculated as:              Current stock                                                            Average current sales

Reorder point is the inventory level at which the orders will be placed for any item. The existing stocks will be sufficient to cover the period of Lead time + review time.

Gross Margin Return on Inventory Investment (GMROI): This is another ratio that is used in the retail business and takes care of margin as well as the inventory turnover of various merchandise categories

GMROI = Gross Margin X Inventory Turnover

= (Gross Margin / Net Sales) X (Net Sales / Average Inventory)

= Gross margin / Average Inventory

GMROI is a ratio that tells us about

Profitability of various merchandise and How effectively the inventory is used

Take Milk products for example. It has low margin but has a high turnover. On the other hand, items like jewellery have high margin and low inventory turnover.

Let us consider a supermarket with the following daily sales / margin on bread and on instant foods

Bread Instant FoodsGross Margin Rs 2,000 Rs 1,50,000Sales Rs 1,50,000 Rs 3,00,000Avg Inventory Rs 1,000 Rs 1,00,000

GMROI for bread = (2000 / 1000 ) = 2GMROI for Inst food = 1,50,000 / 1,00,000 = 1.5

Bread offers a better GMROI. This means that gross margin return on inventory investments is better on bread

The retail industry can be extremely competitive and one of the biggest challenges is managing a store’s retail inventory. Businesses need to have space to store a wide number of products along with a wide variety. If a retail store does not carry enough of a product, then they are losing potential customers who will shop elsewhere.

Retail inventory is different from other forms of inventory because of the quantities needed. Retail chains need warehouses to keep all of their stock and the means to transport it to their stores. Keeping up with such large quantities can be difficult for anyone, even with the help of an automated system. To track a company’s products, a retail inventory management system needs to be successfully implemented.

Retail Inventory Management should provide the following functions for a retail business:

Track and manage all of the inventory for the business Evaluate how well some groups of products do in sales Provides analysis for comparison shopping with competitors Collect data on the sales and inventory of individual stores using SKU Allows you to accurately review your inventory

How To Manage InventoryMost businesses use some form of computer software to manage their inventory. Unless the retail business is very small, doing it manually would

be very impractical, especially for large companies that deal in thousands of individual products.A business that has a successful system for retail management will allow the business to keep a sufficient amount of stock to meet customer demand. If a business does not have enough inventory, then it can slow down cash flow. Too much inventory can cost a business money and take up more room. When dealing with retail inventory management, companies will utilize one of these systems:

Point-of-sale terminals – These are check-out points that automatically update a company’s inventory levels.

Barcodes and readers – Every product these days contains a barcode with the items information. Barcodes makes it easy and quick track stock.

Electronic Supplier Product catalogs – This system can update inventory levels automatically through either the internet or media disk.

Steps in managing inventory

Managing retail inventory involves several characteristics and steps. One of the most important steps is to make sure that you always remove products from the system as soon as they are sold. The same is true for receiving shipments of new stock. Make sure you record it as quickly as possible.

Physical inspections should be regularly performed to make sure the computerized system is accurate with what is actually in stock. A physical inspection involves manually looking over the stock to see that they numbers match.

Review sales reports weekly. You want to do this to see what is selling and what is not. Products that spend more time on the shelf should be re-evaluated or discounted to get rid of them.

Another step is to research to find the right products to sell. Businesses should come up with a target market and try to carry the right type of inventory to meet that target. To make sure that you have the right product in your stores, you need to know what type of products to order and how much, when to order, and when the products should arrive.

Keeping up with retail inventory management should be delegated to several individuals or a department. Supermarkets that have both grocery and non-grocery items have separate departments for each. By delegating inventory into smaller groups, it allows the individuals in charge of their group to have a better understanding of what stock is available and how well it sells.

Prevention of Inventory Theft and Loss

One of the biggest problems to plague retail inventory is theft and loss of retail products. Every time this happens, it costs a business money. Preventing inventory theft can be difficult. But with the right system, you can definitely reduce it. Here are some tips:

Do not share or hand out the same password for every cashier. Having separate passwords and log-ins tells who was manning the register at certain times.

Always check out any transactions that were voided or canceled. This is a common way for inventory to disappear from a store.

Set up a password-protected security on all computers and systems. Only when employees absolutely must have access should it be granted.

Go over inventory reports every day to make sure sales figures match with the current quantities.

Make sure the back door has a security alarm system that is activated every time the door is opened without authorization. If employees know the door should not be opened without permission, they shouldn’t open it.

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

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

RETAIL STORE BRANDS or PRIVATE LABELS

Private label brands are also called store brands or house brands or own brands. These are products designed, developed and managed by the retailers. Retailers typically develop the specifications for their private label products and then contact the manufacturers who may be located in areas where the cost of production is cheaper. It could be a different state or even a different country.

Private label products or services are typically those manufactured or provided by one company for offer under another company's brand. Private label goods and services are available in a wide range of industries from food to cosmetics to web hosting. They are often positioned as lower cost alternatives to regional, national or international brands, although recently some private label brands have been positioned as "premium" brands to compete with existing "name" brands.

For example, Heritage supermarkets offer their own brands of atta or pickles as compared to the national bands like ‘Ashirwad atta’ or ‘Priya pickles’

Private label brands are beneficial to both the retailers and customers. The benefits to customers are as below:

The customer has more choices of merchandise in addition to regional, national and international brands of items having the same ingredients as those brands

Reliability of the product as the retailer has a reputation to keep Normally cheaper than the national brands Private label brands are available on a wide variety of products

The benefits to retailers are as below: Creates increased store loyalty if the quality of the product matches

customer’s expectation Offers the retailer the competitive advantage as compared to other

retailers Minimal promotional costs Higher gross margins as compared to the national brands

National brands Vs Private-label brands

Economy of scale; In the past, Sale of Private label brands constituted only a very small percentage of the total sale of the store. But of late, this proportion has become higher. National brands are developed and maintained by the leading manufacturers through heavy advertisements and sales promotion efforts. It was difficult for the smaller local and regional retailers to gain the economy of scale in design, production and promotion needed to develop successful brands.

Faster growth now : In recent years, as the size of the retail firm has increased, private labels have assumed greater importance because of their ability to establish distinctive identities. Private label products now constitute 25% of the purchases in USA and 45% in Europe. Private label brand sales are growing twice as fast as the national brand sales.

Quality perception: Traditionally, the customer felt that the quality of the national brands were superior than the store brands. But this perception is slowly changing. In the ‘Double blind’ tests conducted in USA, 51% of the customers felt that the taste of private label brand items were better.

National manufacturers make for specific stores: There is also the trend on national level manufacturers to make merchandise for certain stores. For example, Levi’s has developed Signature brand jeans for sale in Wal-Mart

Retailers use their own name for brands : Popular retailers use their own name and create a private label or store brand for merchandise in different categories or category-specific brands. For example, the Heritage Super Market has developed products under the brand name ‘Heritage’ in the following categories

- Atta- Moong Dal- Tasty Nuts- Corn Flakes- Pure Honey- Pickles , etc

The following with respect to private brands are worth-noting:

National brands spent a lot of efforts and money to build brands. For example Sony has built up a brand image for quality and reliability. Retailer need not spend anything on promotion on his own to build the brand. They also pay the dealers for relevant sales promotion efforts

Retailers’ margin on these branded products is low generally as compared to the store brands.

Competition will be high for national brands as that is sold by all retailers. Therefore the retailer has to offer some discounts to tempt the buyers to buy from their store. This further reduces the margin

Some national brands like Canon offer different prices to different stores in USA.They give different model numbers for their cameras offered in different stores in USA. This will ensure that the customers are not able to compare prices

Stocking national brands may increase or decrease store loyalty. If the national brands are exclusive and are not available in all stores, then it does not increase the store loyalty. If teh manufacturer’s item is easily available everywhere , then no extra loyalty is developed for the store

Private Label as a Marketing and Business Tool

Several corporations source an extremely wide range of products from specialized manufacturers, which may or may not own their brand. The reasons for this business practice are several. A company, having identified a business opportunity in a new product or groups of products, may assess that setting up their own production line or facility may require a substantial investment in equipment, human resources, patents and so forth. In many cases, a viable alternative is to source from a specialized company that has already made such investments and that has spare production capacity. If the two companies find that the market situation allows to avoid or minimize direct competition without stealing each other's market share (cannibalization), then both companies may find an agreement whereby the specialized manufacturer supplies the goods to the other.

It is said that one of the reasons of ‘Subhiksha’s failure is that it did not have a store brand to boost up its profitability

Retail advertising and sales promotion

Promotion and sales promotionPromotion refers to any activity that is primarily intended to create demand and awareness for the product and for the company. Different types of promotions are :

1. Advertising2. Publicity3. Public relations4. Personal selling5. Sales promotion

Except personal selling, all others given above are non-direct selling. Sales promotion refers to product demonstrations, displays, shows etc. The sales promotion adds value to the selling efforts.

1. Advertising

Advertising is non-personal presentation of goods and services by an identified sponsor. The advertisements are resorted to for creating awareness of the product, demand creation, corporate image etc. Advertising moves the buyer towards the stores whereas the sales promotion moves the product towards the buyer.

2. Publicity (Non-paid form of advertising)

Publicity refers to the news item which is generally not paid for, whereas the advertisements are paid for.

. A news item regarding collaboration between Wal-Mart and Bharti A news item about Vivek completing 25 years is publicity

3. Public relationsEvery store or chain of supermarkets tries to build good relations with the society in which it operates. The society includes the customers, suppliers, bankers and public at large.

4. Personal selling

While the advertising is a non-personal selling, the personal selling is a face-to-face presentation of goods and services to the prospective buyers. The salesman approaches, convinces and overcomes the objections and then sells the product.

5. Sales promotion

Sales promotion activities are those that are undertaken by the seller other than advertising and personal selling. Some examples are : Product demonstrations, window display of goods, participation in fairs, exhibitions, exchange offers etc.

Sales promotion is defined as those selling activities that supplement both personal selling and advertising and coordinate and help them to make effective sales efforts , such as displays, shows, expositions demonstrations and other non-recurrent activities

Merits of promotion 1. Helps to create awareness among the potential customers of the stores

and serves as a reminder media for the existing customers. 2. Serves as a medium to reach the market3. Helps in building a good image for the stores4. Continuous promotion builds brand loyalty5. Able to demonstrate the superiority of one store over the other

Criticism against the promotion

1. It makes people to buy things that they do not really need.2. It makes them buy things that they can not really afford to pay. Because

of catchy promotional efforts, they tempt people to buy goods with financial assistance.

3. People tend to spend their money rather than save and invest4. It tempts them to buy goods that are not good for their health. Even

though the promotion of Cigarettes prohibited, companies tend to promote in a surrogate way.

5. All promotions cost money and ultimately it is the customer who has to pay for all this.

6. Some companies have started to feel that even if their product quality is not good, they will be able to market the same effectively by extensive promotional efforts. As a result of such thinking, customers may receive goods of sub-standard quality.

Sales Promotion done at the retail stores

1. Free samples :Free samples are given to the customers so that they would definitely use the product and if satisfied, would become a regular customer for the product. These samples are distributed by the dealers or by the manufacturers. Some samples are distributed by sticking them to the newspapers or magazines. Detergent powders, shampoo, etc are items normally given like this.

Offering samples is quite expensive. Not only the cost of the product is involved but also the cost of distribution. Also if the final product is not of the same quality as the free sample, it may create customer resentment.

2. Price cut by the manufacturers :A price cut in the printed price list is announced for a small period of time in order to boost the sales.

Many experts feel that this is not very desirable as this may affect the dealer morale as they will get reduced commission. Also the brand value may be affected. The customers also may start feeling that the company was making undue profits earlier.

3. Money Refund offer :The retail chain ‘Pizza corner’ supplies the Pizza free if the delivery is not made within 40 minutes

4. Gifts to customers ;Gifts are directly offered to the customers with the purchase of an item. Examples are :

Buyers of Kellogg corn flakes get a bowl as the gift . Buyers of Cinthol soap may get some small biscuit packets. These things attract the customers even though the value of the gift item is small.

5. Off-season discounts:

Manufacturers of air conditioners offer their products with good discounts during the winter months. This is because the natural demand during the period is low and they are creating demands.

All the textile companies offer discounts after all the festival seasons are over. The months of October, November and January are festival months with festivals like Pooja, Deepavali, Christmas, new year and Pongal. The stores find that the demand drops after this season and in order to keep their stores selling, they have to resort to these.

6. Festival discounts

During festival season also, the stores offer attractive schemes in order to counter the competition.

7. Coupons

The coupon are given to the customers against purchases and can be used for subsequent purchases. The consumers will receive a certain price reduction as stated in the coupon.

Some Pizza companies distribute leaflets and they contain discount coupons which can be used later.

Some advertisements in the press says that discounts will be offered if you cut the ads and give them to the dealer.

Coupons act as short-run stimulas to the sales.Since they are directly tied to the purchase, the retailers stock these. It is not easy to calculate the effectiveness of the scheme as we do not know how many would have bought the product without the benefit. However the sales with the previous month

without the scheme can be compared. Also coupons do not spoil the normal prices for the product.

8. Exchange offer :The customers can return their old used item and a certain price will be fixed for the old item and the same will be deducted from the price of the new item.

Dealers of TV manufacturers like Sony, Samsung, Onida, LG etc are resorting to this regularly. All car dealers of leading companies like, Maruti, Ford, GM, Tatas advertise that the customers can trade-in their old cars for the newer ones. Many other customer durables dealers ( Fridge, air conditioners, music systems) resort to this.

9 Free delivery and installation:Some dealers do not charge for transporting the goods to the households if they are within certain distance. They also do not charge for installation. Computer dealers, TV dealers etc do this.

10. Lucky draw :

The buyers are given a coupon which they should fill and drop in a box in the dealer’s place. At a pre-determined time and place, a lucky draw will be conducted and the winner will get attractive prizes.

In some cases like industrial exhibitions, the visitors are asked to drop their visiting cards and a lucky draw is conducted. This also helps the sellers to get database.

11. Slogan contest

Customers are given a coupon where they should also write a slogan for the product or the company. Best slogans are selected and rewarded.

RETAIL ADVERTISINGAdvertisement does not only provide the information about the product and services and availability at various retail locations but also provides an important link in the retail segment between the retailer and the customer.

Benefits of retail advertising; It helps in creating awareness about its existence, price, different retail

locations etc It educates the customer about the new products and services and their

diverse use It conveys details of sales promotion currently available at retail stores It also highlights the superiority of the products / retail storesThe two major types of advertising campaigns relevant to the retail sector are discussed below:

1. Vertical Co-operative advertising : This type is planned when the retailers and other channel members

(usually manufacturers) share the advertising budget in a pre-determined way. In many instances the cost is shared equally.

If Lanson Toyota advertises about the Toyota cars and its showrooms in Chennai, the cost is shared as 50% each between the dealer (Lanson Toyota) and the manufacturer (Toyota Kirloskar Motors). Here we can understand that the manufacturer subsidizes some of the retailer’s advertising budget if it features the manufacturer’s brand.

Samsung may have a special sales promotion for their LCD TV and the retailer Vivek may advertise under the co-op budget and half the cost of the ad will be borne by the manufacturer i.e Samsung

In the case of FMCG products that are sold by several outlets, large and small, manufacturer extensively support the mom-and-pop stores and the independent retailer since they lack the financial resources and also the professional expertise.

In addition to lowering the costs, co-op advertising enables the small retailer to associate his name with the well-known national brands and use attractive ad copy developed by the national brand

Some manufacturers do not want to discount their products ( example is Mercedes – Benz). Some such manufacturers bear a percentage of the ad cost of the retailer if they do not discount the product

Co-op advertising has drawbacks also. Suppliers want prominence to be given to their products in the ad whereas the retailers want prominence for their retail stores in the ad. This creates a clash of interest.

Ads developed by the suppliers or manufacturers will have the names of all the retailers and so the retailer will feel that there is no focus on his store.

2. Horizontal co-operative advertising: This type is launched when two or more retailers come together

and advertise together thereby sharing the cost of advertising of a particular product

There are about four retail dealers for ‘Hyundai’ cars in Chennai. Sometimes all of them advertise together about certain sales promotion undertaken.

Various media available for retail advertising In the past, retailers used newspaper advertisements extensively.

Newspapers also distribute free-standing leaflets which are inserted into the newspapers. For example, the retailer in Annanagar can arrange to insert leaflets or flyers into newspapers distributed in Annanagar. Newspapers offer opportunities to small retailers by developing different editiond for different localities. The Hindu , on Sundays, has different supplements to different parts of the Chennai city even though the main newspaper is common for all.

The cost of developing newspaper ads are lower as compared to for other media as it can be developed by less experienced persons

Retail ads in magazines which are weekly or fortnightly is done by major retailers like Big Bazaar, Croma, Reliance Fresh etc

Direct Mail is also used by retailers. RmKV, a leading textile retailer sends communication to their clients through mail. The addresses are collected by them at the time of the customers’ visit to their showroom or through the contests conducted by them

Television commercials can be used by the retailers. Retailers use TV for building image for their stores. Television ads can also demonstrate the product usage. In addition to the high production costs, bradcast time is also very expensive.

FM Radio is a major medium today. With increasing popularity, it is very suitable for retailers because of its relatively low cost, low cost of production etc.

Internet and outdoor bill boards are also used to promote retail stores and their merchandise.

RETAIL MANAGEMENT INFORMATION SYSTEMS (RMIS)

For running a store profitably on a sustained basis, the manager needs to take good decisions on various areas of retail business as below:

Supply chain ( Ordering, logistics, inventory, vendor development etc) Sales / marketing ( Show room traffic, conversion, transaction details

etc) HR ( Performance monitoring, manpower needs etc)

In order to take decisions , some of the ratios that he needs to monitor are given as below:

1. Footfalls : Number of customers visiting the showroom or supermarket on the day, up to the day in the month, comparisons with the previous month or previous year etc (This ratio will tell the manager how effectively the stores is able to attract the customers)

2. Customer conversion ratio: (Number of transactions / Total customer traffic) X 100(This ratio will indicate the ability of the stores to convert the potential customers into buyers. This is also called ‘walk-to-buy ratio’)

3. Returns to net sales: (Total returns in value / Net sales in value) X 100

(This ratio indicates the customer satisfaction level mainly with respect to quality of merchandise)

4. Transactions per hour : (Total number of transactions / Number of hours). Can be calculated for a day, month etc. This will help the manager to understand the number of cashiers needed. This will also help in staff scheduliong

5. Stock days of various merchandise groups6. Inventory turnover ratio7. GMROI

In order to get these data, we need to develop a retail management information system

Retail management information systems include the use of hardware, software and procedures to manage activities such as planning, inventory control, financial management, logistics and point of sale transactions. Use a retail management information system in your business when you need to manage your store, finances and inventory from one office. Features

Retail management information systems support distributed stores by linking them. By allowing the instant exchange of information, store managers can stay in contact to more effectively control profits for the whole company. ( Landmark book store can refer to their RMIS and find whether the book is available in any other outlet)

The system should support product management. It should also enable detailed analysis of customer data. (customer

profile in terms of locality, buying pattern, income level etc) A flexible system allows managers to set prices for variable time

periods based on the store location. To meet the needs of sales and inventory managers, retail management

information systems include a mobile user interface.

Function

Supporting the basic functions of procurement, storage and delivery, a retail management information system allows a manager to manage customers, inventory, suppliers and product sales.

The system allows the manager to track purchase orders and update inventory records dynamically. You can analyze cash, check and credit card transactions to reconcile information.

Improve efficiency by examining overage and shortages to reveal trends that can be rectified.

Types

Retail management information systems can be customized for each industry, including, for example, fashion, department store, supermarket, furniture or prescription drugs.

Some systems support multiple languages, currencies, tax systems and cost structures. In addition, some retail management information systems can support different business models such as franchise, consignment, direct sales or online.

Benefits

Integration between payments, inventory and transactions improves operations and reduces costs by preventing duplicate entries.

By tracking inventory effectively you can more quickly respond to customer requests. By being able to respond expediently you can also improve service, expand your customer base and increase profits.

Accessing data easily allows you to identify opportunities to improve waste reduction, recycling materials and choosing environmentally friendly packaging. These strategies enable a profitable business. System safeguards ensure adherence to legal restrictions on pricing, promotion and other policies.

ONLINE RETAIL

The distribution channels normally contain wholesalers, distributors, dealers and retailers. Direct marketing is one where there is no intermediary between the buyer and seller.

Some companies use direct marketing as a supplementary channel or medium in addition to the existing retail channels for marketing their goods or services. Lexus is a division of the famous Toyota Motor Corporation and sells the top end of the cars. Besides being marketed by Toyota dealers, this car is marketed directly also and CDs and other promotional materials are directly couriered to the potential customers.

Benefits to buyers

1. On-line retailing is the most convenient method of buying as minimum efforts are required

2. Traveling to the stores in the congested traffic is avoided and there is no parking problem.

3. The customer can do this at a time most suited to him and the facility is available for all 24 hours on all 365 days

4. This offers unlimited varieties of products to the customers and the choice is mind-boggling

5. Competitor information is available readily and products can be easily compared

6. Direct marketing is interactive as customers can interact with sellers continuously

Dell Computers make computers against specific orders and as required by the customers. Dell computers can offer thousands of different configurations where as the competitors who sell through conventional channels can only offer pre-configured computers.

Benefits of on-line retailing to sellers

1. It is a powerful tool for sellers to build customer relationships2. By building database, the sellers are able to identify the customer needs

quickly and accurately 3. The communication with customer is instantaneous and so the chances

of keeping the customers on hold is minimized4. This channel offers a speedy and efficient alternative to the existing

ones.

5. It is a very cost effective media and cost per contact is considerably lower than the cost of meeting the customers through sales force.

6. The cost of renting a store, electricity and other related costs are avoided

Online retailing is the fastest growing form of direct marketing in this era of computers. Widespread use of internets on various needs in day-today life has made this medium very important. Various technological developments like animations, link-up pages etc have made this very a very effective medium having dramatic effect on buyers and sellers.

Many airline tickets can be bought over the internet these days availing discounts as and when they are offered.

Train tickets in India are now purchased by many people through internet these days.

There are many travel portals in India like yatra.com where you can browse and plan your travel.

There are also portals like ‘Bharath Matrimony’ where people can choose their spouses.

Dell computer products are marketed on line and you can order any configuration that suits your personal requirement and they will assemble the same and deliver to you.

Many countries like Singapore, Malaysia, etc give details of their countries tourist spots and also different offers available for visiting them

Online shopping or online retailing is a form of electronic commerce whereby consumers directly buy goods or services from a seller over the Internet without an intermediary service. An online shop, eshop, e-store, Internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-

mortar retailer or shopping centre. The process is called business-to-consumer (B2C) online shopping. When a business buys from another business it is called business-to-business (B2B) online shopping. The largest online retailing corporations are EBay and Amazon.com, both are US-based.

On-line Customers

Online customers must have access to a computer and a method of payment.

In general, higher levels of education, income, and occupation of the head of the household correspond to more favorable perceptions of shopping online. Also, increased exposure to technology increases the probability of developing favorable attitudes towards new shopping channels.

In a December 2011 study Equation Research found that 87% of tablet users made an online transaction with their tablet device during the early holiday shopping season.

On-line Logistics

Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine.

Once a particular product has been found on the web site of the seller, most online retailers use shopping cart software to allow the consumer to accumulate multiple items and to adjust quantities, like filling a physical shopping cart or basket in a conventional store. A "checkout" process follows (continuing the physical-store analogy) in which payment and delivery information is collected, if necessary. Some stores allow consumers to sign up for a permanent online account so that some or all of this information only needs to be entered once. The consumer often receives an e-mail confirmation once the transaction is complete. Less sophisticated stores may rely on consumers to phone or e-mail their orders

On-line Payment

Online shoppers commonly use a credit card to make payments, however some systems enable users to create accounts and pay by alternative means, such as:

Cash on delivery (C.O.D., offered by very few online stores) Cheque

Debit card Credit card

Product delivery in on-line shopping

Once a payment has been accepted the goods or services can be delivered in the following ways.

Downloading: This is the method often used for digital media products such as software, music, movies, or images.

In-store pickup: The customer orders online, finds a local store using locator software and picks the product up at the closest store. This is the method often used in the bricks and clicks business model.

Shipping: The product is shipped to the customer's address or that of a customer-designated third party

On-line shopping - Information load

Designers of online shops are concerned with the effects of information load - whether consumers can be given too much information in virtual shopping environments. Compared with conventional retail shopping, the information environment of virtual shopping is enhanced by providing additional product information such as comparative products and services as well as various alternatives and attributes of each alternative, etc.

Two major dimensions of information load are complexity and novelty. Complexity refers to the number of different elements or features of a site, often the result of increased information diversity. Novelty involves the unexpected, suppressed, new, or unfamiliar aspects of the site. The novelty dimension may keep consumers exploring a shopping site, whereas the complexity dimension may induce impulse purchases.

EMERGING TRENDS1. Rural Retailing

ITC - E-CHOUPAL

Before ITC introduced e-Choupal, the farmers were restricted to selling our produce in the local mandi. They had to go through middlemen and prices were low. ITC trained the farmers to manage the Internet kiosk in the village. Today they are a community of e-farmers with access to daily prices of a

variety of crops in India and abroad – this helps them to get the best price. They can also find out about many other important things – weather forecasts, the latest farming techniques, crop insurance, etc. e-Choupal has not only changed the quality of their lives, but their entire outlook

A powerful illustration of corporate strategy linking business purpose to larger societal purpose, e-Choupal leverages the Internet to empower small and marginal farmers – who constitute a majority of the 75% of the population below the poverty line.

By providing them with farming know-how and services, timely and relevant weather information, transparent price discovery and access to wider markets, e-Choupal enabled economic capacity to proliferate at the base of the rural economy.

ITC – Chaupal Sagar

Chaupal Sagar cannot be shoehorned into any of the retailing categories we are familiar with. At 7,000 square feet, it is too small to be a mall. And while it has opted for self service, stocking its merchandise on shelves lining the neat aisles, it stocks a breadth of products no supermarket can. It offers almost everything - from toothpastes to televisions, hair oils to motorcycles, mixer-grinders to water pumps, shirts to fertilisers...It is just a very sharply thought-out rural store.

Most of the brands it sells are national. You see Marico, LG, Philips, torches from Eveready, shirts from ITC's apparel business, bikes from TVS, and tractors from Eicher. We will look at this part of the equation in greater detail later. ITC is offering a very compelling proposition to these companies. But first, a look at how this place came up next to the warehouse.

It works like this. With its network of e-chaupals , ITC communicates its latest commodity prices to the farmers via the Internet or VSAT lines. If they find these attractive, they sell their produce to ITC. Now, by setting up the mall next to the warehouse, ITC is trying to monetise the footfalls from farmers.

ITC realised that the farmers had just got money, that they would spend it anyway, and that they had an empty vehicle with which they could lug the stuff back.

Thus Choupal Sagar retails products and also acts as a procurement hub for for ITC’s E-Choupal where farmers are offered better prices for their produce, as compared to the prevalent Mandi rates for the same

2. Indian Oil Corporation’s KISAN SEVA KENDRA

Kisan Seva Kendra is an award-winning retail outlet model pioneered by IndianOil to cater to the needs of customers in the rural segment. Today, KSK outlets have emerged as dominant players in the rural markets, riding on the rapid growth of upcoming second and third tier roads in the rural areas. The KSK come with a fresh perspective enabling dealers to tap the huge demand driven in by consumers there. In addition, non-fuel retail facilities like convenience stores have been added to the KSK to sell pesticides, vegetables, banking products and stationery items. Indian Oil has tied up with Indo-Gulf for fertilizers, National Seeds Corporation for marketing seeds and agricultural inputs as well as alliances with Nabard, Oriental Bank of Commerce and Bank of Baroda for banking products. Some KSK have installed internet kiosks, communication facilities, etc. Business alliances have been signed to market products from Dabur, Airtel, Tata Chemicals, Godavari Fertilisers, Gokulam Fertilisers, Hindustan Unilever and Godrej Agrovet. Other alliance partners are Emami for personal care products, Money Gram for money transfer, MILMA and OMFED for milk products, and Supplyco for convenience stores.

3. Leisure and entertainment

Entertainment retail is redefining the Indian lifestyle with multiplexes, gaming zones etc coming up as much as malls

There are only 10 screens in India per population of one million in India as against 40 screens in Europe and 117 in USA

4. Transit channels like airports

Fast paced infrastructural development , including development of international airports and metro rails is opening up additional opportunities for retail development

The Airport Authority of India is embarking on the upgradation of 9 metro airports and 15 non-metro airports with plans to spruce up the retail space. Chennai airport today has retail operations of Sangeetha restaurant, Krishna Sweets, Apollo Pharmacy, Café Coffee Day, etc etc

The joint venture between Shoppers’ Stop and The Nuance Group AG has set up duty-free and duty-paid retailing outlets in the Bangalore and Hyderabad international airports

Mass Rapid Transit System, currently in operation in Delhi, and in upcoming locations like Bangalore, Hyderabad and Chennai will open additional space for retail

Some other trends in retailing

The emerging trends in the Indian organized retail sector are also adding up to the development of the Indian organized retail sector. The relaxation by the government on regulatory controls on foreign direct investments has added to the process of the growth of the Indian organized retail sector.

The infrastructure of the retail sector will evolve radically in the near future. The emergence of shopping malls are increasing at a steady pace in the metros and there are further plans of expansion . As the count of super markets is going up much faster than rate of growth in retail sector, it is taking the lions share in food trade.

The growth of the Indian organized retail sector is anticipated to be heavier than the growth of the gross domestic product. Alterations in people's lifestyle, growth in income levels, and encouraging conventions of demography are proving favorable for the new emerging trends in the Indian organized retail sector.

The success of this retail sector would also lie in the degree of penetration into the lower income strata to tap the possible customers in the lowest levels of society. The demands of the buyers would also be enhanced by more access to credit facilities.

With the arrival of the Transnational Companies (TNC), the Indian retail sector will undergo a transformation. At present the Foreign Direct Investments(FDI) is encouraged in the Indian organized retail sector and once the TNC'S get in they inevitably try to oust their Indian counterparts. This would be challenging to the retail sector in India.

The trends to follow in the future: The Indian Organized retail sector will grow up to 12% of total

retailing by end 2020. No one single format can be assumed as there is a huge difference in

cultures regionally. The most encouraging format now would be the hypermarts. The hypermart format would be further encouraged with the entry of the

TNCs.

What should the retyailers understand to exploit the trends?1. Spread of ‘retailisation’ across all industries

Businesses across several sectors like banking, hospitality, airlines, health services etc are realizing the importance of being close to the customers. They pursue a path of developing intimacy with customer and so follow the approach of the retailer in the way they engage with the customers.

With the great success of i-POD, Apple has proved that it is able to understand the minds of the customers and offer what they want. The sales per square foot at Apple have surpassed all records. Apple has achieved it even though it is not a retailing company basically

Studies have proved that the defection rate of loyal customers is very high if another retailer offered a combination of better prices, high quality customer experiences and a broader selection of merchandise. Retailers need to focus on these to stay and grow in business

2. Retailers must understand the opportunities and challenges of globalization Every new market has its own set of rules, regulations etc with respect to retailing. There are heavy restrictions on foreign ownerships in many

countries. Approaching new markets requires enormous efforts and different approaches. Despite the challenges, the globalization will go on.

3. Retailers need to build their talents to deliver superior customer experiences

Increasing the interaction with the customers and offering them superior customer delights will need tremendous talents on the parts of the retailer. The talent alone can build competitiveness in the long run. They must build analytical capabilities in merchandising, supply chain and customer handling

4. Customers will move towards products and services that are customized or personalized.

Customers are looking for customization increasingly. Retailer will have to analyse the potential customers in depth and build products for them.

In places like Bangkok or Hong Kong , customers get tailor-made suits stitched for them. Even in purchase of cars, the individual customers ask for special fittings like radio, CD player, seat material/ cover, etc as per their liking

5. Every retailer will have to create green programs

The retail industry , which occupies a pivotal position , between the customer and the manufacturer , is being forced to create a value proposition around being environmentally conscious. By making green a core value, significant competitive advantage can be derived

6. Demographic shift in spending power

Retailer will have to consider the dramatic shift in spending power from the 30 – 50 age group to ‘younger than 30’ and ‘older than 50’ groups. These shifts indicate the traditional spending base is changing and will continue to change.

QUESTIONSPART A

1. What is visual merchandising? What are its two components?2. Name four varieties of fixtures used in visual merchandising.3. Explain any two types of presentation techniques4. What is tonnage merchandising5. What are the two major decisions to be taken with respect to space

management6. Where will you locate the ‘impulse products’ and the ‘demand

products’ inside the stores?7. What would you do to prevent theft and loss of inventory in a

retail store?8. What are the benefits that accrue to the retailer because of offering

private labels?9. Name any four types of sales promotion employed in a retail store.10. Explain horizontal co-op advertising with example11. Why do you think the on-line retailing is becoming very

popular with customers12. What is spread of ‘retailisation’ across all industries ?

PART B

1. Explain in details the visual merchandising in terms of the fixtures, presentation techniques and its benefits

2. How will you manage the available store space in an effective way? Give details of stores inventory management

3. Comment on store brands Vs national brands with examples . What are the benefits of each?

4. What are various avenues and media open to promote retail stores. What promotional methods are employed at the store level?

5. Elaborate the on-line retail and also the emerging trends in retailing