1 Retailing

2 Defining Retailing Any business entity selling products and services to consumers is retailing The goods may be sold in a shop, in person, by mail, on the internet, telephone or a vending machine Retailing includes all activities involved in selling or renting consumer products and services directly to ultimate consumers for their personal or home consumption

3 Terminologies Variety : Different kinds of goods to be carried / services offered (men’s garments, ladies garments) Assortment : Decisions related to the range of choice (like brands,styles,models,sizes and colors) Example : Colourplus v/s Allensolly

4 Why does a consumer buy from a specific retailer ?Price Location Product selection Special services Helpful salespersons Fairness in dealings

5 Functions of retailingHelping create time, place and possession utility Adding form utility like cloth alterations Adding value and aiding sales by offering credit, delivery and extended store hours

6 Types of Retail OperationsCorporate chains : More outlets owned by one firm e.g. : Reliance Retail Voluntary chain : Wholesaler sponsored group of independent retailer Retailer co-ops : Independent retailer with central buying operations and common promotions Consumer co-ops : Co-operative societies of groups of consumers operating their own stores Franchise Organization : Contractual agreement between the producer and retailers – selling the producers products exclusively

7 The Information Flow The information flow at the retailer point is 2 way. While the retailer is the source of all information about the company products to the consumers , he is also an important touch point of feedback from the consumers to the company The retailer is also an important source of feedback for competitor’s strategies

8 Theories in Retail Wheel of retailing : This theory focuses on the way a retail chain changes during life time. At the onset a retailer starts with low prices, margins. With time he adds services which up the operational cost In the second stage , the outlet can command higher prices and maintain a better image through better services Then the retailer pushes to a premium image , creating a gap for low margin and price shop

9 Theories in Retail Retail accordion theory : This theory posits that an outlet which starts as a general retailer “grows” into a specialized retailer and in course of time becomes an even bigger retailer Theory of natural selection : The evolution of retail stores is influenced by environmental factors like economic, demographic, legal, political and technological. A retailer has to adapt to these factors to be successful

10 Types of retailers Store retail Non store retail

11 Store retail Specialty Store :Narrow Product Line like the Body Shop , Raymond Shop, Wills Lifestyle, Allen solly store , Woodlands, Fitness One, Organic India Sony World, LG Electronics store , Mobile World Specialty stores concentrate on a limited number of complementary merchandise categories and provide high level of service Domino’s , sub way, Vadilal, KFC etc are food retailers / category specialists

12 Store retail Department Store :Department stores are retailers that carry a broad variety and deep assortment , offer customer services and organize their stores in to distinct departments for displaying merchandise A department store is generally going to emphasize clothing and household items Pantaloons, Shoppers Stop, Marks and Spensers, Lifestyle, Reliance Trends are example of departmental store

13 Store retail Supermarket :Large, Low cost, low margin, high volume self service store designed to meet total needs for food and house hold products A super market emphasizes food but may sell other items (think of your local grocery store) Examples are Food Bazzar , Nilgiri’s , subhiksha, spenser’s

14 Store retail Convenience Store :Small Store in residential area, often open 24*7, limited number of high turn over convenience products Convenience stores enable consumers to make quick purchases without long queues The near by kirana store is also a convenience store

15 Store retail Drug Store :Prescription, pharmacies and OTC medicines , health and beauty aids, personal care products Planet Health, Apollo Pharmacy, Walgreen in USA , near by pharmacy store etc

16 Store retail Discount store :Standard or specialty merchandise , low price, low margin, high volume stores like Vmart ,Brand Factory etc Extreme Value Retailers : Small Discount stores are stores offering a limited merchandise at very low prices Patloons, Megamart etc

17 STORE RETAIL Off Price Retail :Eg: Factory OutletsLeftover Goods , irregular ( minor mistakes in making) merchandise sold at less than retail Mainly owned by manufacturers these stores are aimed at improving earnings from left overs and production over runs

18 Store retail Superstore (Hypermarket)The superstore may carry items such as clothes, shoes, stationary, or seasonal merchandise with less focus on grocery and food. Warehouse Clubs : - Are retailers that offer a limited service at lower price for ultimate consumers and small businesses (Metro, Best Price)

19 Service retailing Airlines, Movies, Automobile service , Education, Fitness centers, banks etc are the service retail examples Examples :

20 Differences between services and merchandisingIntangibility Simultaneous production and consumption Perishability Inconsistency

21 New trends in retailingNew Retail forms and Combinations Growing Intertype competition Increasing strength of non store based selling Growth of Giant retailers Growth of shopper marketing Growing investment in technology

22 How does a consumer select a retailerPrice Location Product selection Special services Helpful sales person Fairness in dealings

23 Functions of RetailingPerforming marketing functions that enable them to make available a wide variety of products to the consumers Helping create time, place and possession utilities Adding form utility ( garment altering) A retailers service also helps create an image for the product he sells

24 Retailers add value to productBy the services they offer such as credit, delivery, extended store hours The personnel they hire to solve consumer problems The store’s location

25 Retail Firm ClassificationForm of ownership : sole ownership, partnership, corporation, consumer co- operative Operational structure : Independent, chain, franchise Service and price orientation : full service, limited service, normal margin, off-price, self-service Merchandise : general or specialty

26 Private Labels Retailers develop their own brands to compete with other national brands Private labels offer consumers good quality at affordable price, higher margins to retailers, better bargaining powers to retailers and the task of merchandising becomes simpler

27 Categories

28 Retail focus on categoriesUnderstanding the term category Category management focuses on three parameters : Efficient introduction of new products in the stores Running product promotions effectively Optimum store assortment

29 Category Lifecycles Fad and Trend Category Types :Routine categories : Customers use the retailer as the preferred vendor for these items – milk, bread, soft drinks etc Destination Category : This is customers first choice for specific products Season categories : The retailer is well known for selling seasonal merchandise Convenience categories : Nearby panshop

30 Category Management In major retail organizations, individual category managers are responsible for their business and its profitability The survey of the trading area is a crucial determinant of offer categories The classification should reflect consumer preference The categories in store have to be made available and visible to ensure multiple purchases and impulse buying

31 Category Management The decisions on category management needs to be dynamic and change as per customer needs The major goal of category management is to create a unique customer value and ensure stickiness

32 Merchandising

33 Merchandising The definition of merchandising is a set of activities in acquiring goods and services and making them available at the places, times, prices, quantity and quality that enables retailers to reach his goals The focus is on acquiring the goods and storing them so that nay customer can access them at a time, place and quantity convenient to her

34 Merchandising Merchandising directly effects the revenue and profitability of the store Merchandising also takes into account the assortment of the goods and quality There are multiple factors which influence the merchandising policy viz. the objectives of the retailer, demographic of the trading area, the level of the customer service, competitive pressures, service proposition (home delivery of bottled water)

35 Merchandise Buying RolesSelection of Vendor : Price, quality, reliability, time for processing orders, time for delivery from time of order placement, terms and conditions, advertising and promotion support, ethics in doing business and any other exclusive rights provided to the buyer Selection of merchandise : Quality inspection by sampling, negotiated terms, order and delivery times, inventory holding rules, re- ordering costs

36 Merchandising StrategyWide Strategy : This strategy is appropriate for mass based consumer products. This strategy requires more space. It also provides for cross sales opportunities. It induces more impulse purchase. Building a loyal customer base is easier. It depends on volume sales. The retailer has to focus on increasing the number of products a customer buys.

37 Merchandising StrategyDeep Strategy : This strategy works for niche products. This type of strategy takes a longer time to build a base but lasts longer. It depends more on planned buying. The retailer tries to sell more upgraded versions of the product for higher margins This strategy requires less space

38 Key Decisions by Merchandising ManagersProducts to be sold Variety of each category Pack sizes of each SKU’s Price points of each products Quantity of each product, SKU to be carried at any point of time

39 Customer Service Some of the factors affecting the customer service are : The location of store and its working hours The assortment of goods and services The prices at which the goods are made available Help and assistance within the store to support the selection of the goods by the customer

40 Augmented Customer ServiceFree demo and installation assistance Additional facilities like coffee shop, ATM machine or even a salon Additional services like easy payments, home delivery, loyalty scheme or credit cards

41 Type of Shopper and Trade FormatTask focused shopper : Task focused shopper looks for convenient location, proximity to similar stores, correct merchandise selection, high availability, competitive price and good product visibility

42 Type of Shopper and Trade FormatLeisure Shopper : Leisure shopper focuses on wide choice, good ambience, additional facilities, theme displays, customer service and some exclusive goods

43 Retail Performance MetricsGross margin return on inventory investment (GMROI) Formula = gross margin % * sales to inventory ratio GMV (online retail) : The total value of all goods sold without accounting for discounts offered on the goods Of late , retailers are questioning the use of this method

44 Franchising The franchisor is the firm which wants to sell its products or service and the franchisee is the firm or group of individuals who are willing to sell the products or services on behalf of the franchisor The franchisor helps the franchisee find a good location, blueprints for the shop or store , financial, marketing and management assistance

45 Benefits to franchiseeQuick recognition among potential customers Management training provided by the franchisor Franchisor may buy ingredients, supplies and parts and sell to the franchisee at lower prices than the market Financial assistance where required Promotional aids, in store details and the like

46 Benefits to the franchisorFaster expansion Local franchisee pays lower rates for advertising than a national firm Owners of the franchisee are motivated to work more than just employees All local taxes and licenses are responsibility of the franchisees

47 STORE LAYOUT,DESIGN,AND VISUAL MERCHANDISING

48 IMPORTANCE OF PRESENTATIONThe environment in the store , the design of the store, and the presentation and location of merchandise in the store have a significant impact on shopping behaviour These factors lead to increased time spent by customers and also increase the money they spend

49 IMPORTANCE OF PRESENTATIONStore design also enhances retailers image and improves his ROA A “good design” concept also includes a retail website

50 STORE DESIGN OBJECTIVESSome store objectives are to Implement the retailer’s strategy Build loyalty by providing a rewarding shopping experience Increase sales per visit Control costs Meet legal requirements

51 Store – Retailer’s Brand Strategy

52 Implement retail strategyThe store design must be consistent with the retailer's strategy. Example : Mc Donald’s strategy around kids ensure a lot of fun for kids in a McD store Examples from class

53 Build loyalty When customer’s have a good experience visiting a store , they develop a loyalty for that store Shopping experience has been divided into 2 parts viz. utilitarian shopping and hedonic shopping Customers engaged in utilitarian shopping also appreciate a good store design as they have less time to find out merchandise. At the same time customers engaged in hedonic shopping also appreciate a store design full of entertainment Example : Visit Hamleys store

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55 Increase sales on visitStore design has a substantial effect on which products customers buy, how much time they spend and on how much they spend per visit The retailer’s attempt to design their stores in a manner which induces expensive and unplanned purchases Example: baby diaper and beer case

56 Control cost The store design also affect labour and inventory shrinkage The design can significantly reduce costs as observed in the starbucks video In case of starbucks select water fixtures saves water bills, glass made store exteriors ensure more natural light across the day , reharvested wood ensures the environment friendly image of the retailer. Flexibility is also an important aspect of store fixtures. Example : College Bookstore

57 Legal requirements Laws for firesafety, disabled people, building strength, consumer privacy , etc

58 STORE DESIGN ELEMENTS Three design elements are Layout SignageFeature areas

59 Layout Retailers have three general types of store layouts viz. grid, racetrack and free form Grid Layout : Has parallel aisles with merchandise on shelves on both sides of the aisles. Cash registers are located at entrance/ exit of the store Grid layout provide ease of merchandise locating which ensures that customers spend less time searching. Hence this layout is suitable for stores selling groceries and day to day needs The grid layout is also cost efficient as it wastes less space

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61 Racetrack layout The racetrack layout , also known as loop, is a store layout that provides a major aisle that loops around the store to guide customer traffic around different departments within the stores. The racetrack layout facilitates the goal of getting customers to see the merchandise available in multiple departments encouraging unplanned purchases. The layout also allows customers to see the product from the different angles Race track layout video

62 Free-Form layout A free form layout also known as a boutique layout , arranges fixtures and aisles in an asymmetric pattern. It facilitates a lot of browsing and relaxing environment This layout is costly as very few merchandise are placed in the store and personal selling becomes very important as customers cannot drawn across all areas of the store

63 Signage and Graphics Signage and graphics help customers locate specific products and departments , provide product information, and suggest items or special purchases Graphics such as photo panels can reinforce a store’s image Signage is used to identify the location of merchandise categories within a store and the types of products offered in a category. The signs are hung typically from the ceiling to enhance their visibility

64 Signage

65 Signage and Graphics Icons are also used to facilitate communication with customers speaking different language Some different signs are : Category signage Promotional signage Point of sale signage

66 Category and Promotional Signage

67 Feature Areas Windows : Window displays draws in the customers and provide a visual message about the type of the merchandise offered at the store Entrances : Decompression zone Freestanding displays : Freestanding displays are fixtures or mannequins that are located on aisles and attract customers and bring them into a department in stores using racetrack or freeform Layout

68 Window Display

69 Feature areas End Caps : Displays at the end of the aisle

70 SPACE MANAGEMENT Space mgmt involves 2 decisions :The allocation of store space to merchandise categories and brands The location of departments or merchandise categories in the store

71 Space allocated to merchandise categoriesSpace Productivity : A simple thumb rule is for allocating space on the basis of the merchandise sales Inventory turnover : More space is allocated to fast selling merchandise to minimize the need to restock Display considerations : The importance of display cannot be undermined in modern retail

72 Location of merchandise in a categoryExamples : Private labels are placed right adjacent to national brands as western customers read from left to right and see the national brands but buy the less priced high margin private labels In supermarkets most profitable merchandise is placed on the third shelf from floor as it is eye contact level for most customers The merchandise influenced by kids are placed on lower shelves

73 Tools used by retailers to position items in a categoryPlano grams : A planogram is a diagram that shows how and where specific SKU’s should be placed on retail shelves or displays to increase customer purchases By developing planograms retailers make a category visually appealing and induce customers to buy

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75 VISUAL MERCHANDISING

76 Visual Merchandising VM is the presentation of a store and its merchandise in a way that will attract customer eyeballs FIXTURES : The primary purpose of fixture is to efficiently hold and display merchandise

77 Straight Rack fixture

78 Rounder Fixture

79 Four way Fixture

80 Gondola Fixtures

81 Presentation TechniquesIdea Presentation : Some retailers use an idea oriented presentation – a method of presenting merchandise based on specific ideas or the image of the store. Individual items are grouped to show customers how the items could be used or combined. Mostly used in furniture stores

82 Idea Presentation

83 Presentation TechniquesItem and Size Presentation : Presentation based on items like cereals with cereals and pack of 250 gms with other 250 gms Colour presentation : Presentation based on grouping basis colour Price Lining : Organizing basis price points Vertical merchandising : Same pic as in gondola pic t shirts Tonnage Merchandising : large quantity of merchandise displayed together as in D Mart

84 Tonnage Merchandising

85 Atmospherics Atmospherics refers to the design of an environment by stimulation of the five senses. Atmospherics include the store's layout, noise level, temperature, lighting and decorations. Lighting, Colour, music , scent, temperature all contribute towards creating an excellent stimulating atmospherics They are designed to set the store apart from its competitors in a positive way. It is part of an overall companies branding and image.

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90 Tips for designing a good websiteMake it simple Good Visual of Products – 3d view Easy Checkout