RETAILING MANAGEMENT
CHAPTER 1
What is a RETAIL?
Retail – derived from the French word “retailer”, which means to
break bulk
Retailing – last stage in the movement of goods and services to the
consumer
Retail consists of – all activities involved in the marketing of goods
and services directly to the consumers for their personal,
family or household use
RETAIL MANAGEMENT.....
-The process of bringing the ultimate user to the main producer
through a series of stages where retailing is the last one.
-It is not limited to quantities but to the exact requirement of last
user.
-Bringing about operational efficiency at this last stage and making
an environment so compelling that the consumer looks nowhere
else.
-Retail management is an art.
-It requires a number of management tool for a complete end user
satisfaction.
-Retail management is getting to know the final user on behalf of a
manufacturer.
TOP 10 GLOBAL RETAILERS 2021
1. WALMART - $120.13
2. AMAZON.COM - $74.72
3. SCHWARZ GROUP - $84.96
4. ALDI - $84.89
5. ALIBABA - $23.24
6. COSTCO - $43.73
7. AHOLD DELHAIZE - $60.70
8. CARREFOUR - $42.94
9. IKEA - $44.00
10. JD.COM - $8.70
Careers in Retailing
• Buying & Merchandising
• Marketing
• Store Operations
• Sales
• Finance
• Human Resources
• Technology & e-commerce
• Visual Merchandising
• Supply Chain Management & Logistics
Issues in Retailing
*How can we best serve our customers while earning a fair profit?
• How can we stand out in a highly competitive environment where
Do consumers have so many choices?
• How can we grow our business, while retaining a core of loyal
Customers?
Effective Retail Management
• The retailer must keep a record of all the products coming into the
store.
• The products must be well arranged on the assigned shelves
according to size, color, gender, patterns etc.
• Plan the store layout well.
• The range of products available at the store must be divided into
small groups of similar products. Such groups are
called categories. A customer can simply walk up to a particular
category and look for products without much assistance.
Effective Retail Management
• A unique SKU code must be assigned to each and every product
for easy tracking. Necessary labels must be put on the shelves for
the customers to locate the merchandise on their own. Don’t keep
the customers waiting. Make sure the sales representatives attend
the customers well. Assist them in their shopping. Greet them
with a smile The retailer must ensure enough stock is available at
the store.
• Make sure the store is kept clean
• Make sure the store is kept clean. Don’t stock unnecessary
furniture as it gives a cluttered look to the store. The customers
must be able to move freely.
• The store manager, department managers, cashier and all other
employees should be trained from time to time to extract the best
out of them. They should be well aware of their roles and
responsibilities and customer oriented. They should be experts in
their respective areas.
• The store manager must make daily sales reports to keep a track
of the cash flow. Use software or maintain registers for the same.
Remove the unsold merchandise from the shelves. Keep them
somewhere else. Create an attractive display. Plan things well in
advance to avoid confusions later on.
RETAIL ENVIRONMENT
• Key role of technology
• Agility in response and integration within the organization
• Competitive and cost advantages in retailers’ lines of business
• In the light of environmental changes, retailers to rethink their
competitive strategies
• Internet as a powerful channel of distribution
• Mobile commerce- a reality
• Lifestyle retailing
MANUFACTURER - WHOLESALER - RETAILER - CONSUMER
MANUFACTURER - RETAILER - CONSUMER
MANUFACTURER - CONSUMER
The Retailer’s Role in the Sorting Process
MANUFACTURER (BRAND A-F) - WHOLESALER 1-3 - RETAILER - CUSTOMERS
(BRAND A-F)
Multi-Channel Retailing
A retailer sells to consumers through multiple retail formats:
• Web sites
• Physical stores
Relationship Management Among Retailers and Suppliers
Disagreements may occur:
• control over channel
• profit allocation
• number of competing retailers
• product displays
• promotional support
• payment terms
• operating flexibility
Distribution Types
• Exclusive: suppliers make agreements with one or few
retailers that designate the latter as the only ones in a
specified geographic area to carry certain brands or products
• Intensive: suppliers sell through as many retailers as possible
• Selective: suppliers sell through a moderate number of
retailers
COMPARING DISTRIBUTION TYPES
Special Characteristics Affecting Retailers
Retailing strategy
● Small average sale
● Impulse purchase
● Popularity of stores
Retail Strategy
An overall plan for guiding a retail firm
Influences the firm’s business activities
Influences the firm’s response to market forces
Six Steps in Strategic Planning
1. Define the type of business
2. Set long-run and short-run objectives
3. Determine the customer market
4. Devise an overall, long-run plan
5. Implement an integrated strategy
6. Evaluate and correct
Six Steps in Strategic Planning
• Growth objectives
• Appeal to a prime market
• Distinctive image
• Focus
• Customer service
• Multiple points of contact
• Employee relations
• Innovation
• Commitment to technology
• Community involvement
• Monitoring performance
Applying the Retailing Concept
● Customer orientation (retailing concept - retail strategy)
● Coordinated effort
● Value driven
● Goal orientation
Customer Service
Activities undertaken by a retailer in conjunction with the
basic goods and services it sells
• Store hours
• Parking
• Shopper-friendliness
• Credit acceptance
• Salespeople
A Customer Respect Checklist
Do we trust our customers?
Do we stand behind what we sell?
Is keeping commitments to customers important to our company?
Do we value customer time?
Do we communicate with customers respectfully?
Do we treat all customers with respect?
Do we thank customers for their business?
Do we respect employees?
Relationship Retailing
Seek to establish and maintain long-term bonds with customers,
rather than act as if each sales transaction is a completely new
encounter
• Concentrate on the total retail experience
• Monitor satisfaction
• Stay in touch with customers
Effective Relationship Retailing
Use a win-win approach
It is harder to get new customers than to keep existing ones happy
Develop a customer database
Ongoing customer contact is improved with information on
people’s attributes and shopping behavior
APPROACHES TO THE STUDY OF RETAILING
● INSTITUTIONAL
● FUNCTIONAL
● STRATEGIC
CHAPTER 2
RESPONDING TO AND TARGETING CONSUMERS
TARGET MARKET
A specific group of consumers at which a company aims its products and services.
.
The end consumer to which the company wants to sell its end products too
.
A group of consumers identified as likely purchasers of a company ' s product or
Services
IMPORTANCE OF TARGET MARKET
Develop a specific marketing mix
.
Differences in customer needs and wants
.
Increased sales and profits from each targeted market
.
Make sure the customers you are targeting have the willingness and ability to purchase
Markets usually change over time
.
DETERMINATION OF TARGET MARKET
● Describes whom a product is appropriate or may be suitable for based on likely
needs, objectives, and financial situations. It also sets out who can distribute the
products.
FACTORS TO DETERMINE THE TARGET MARKET
● Gender
● Age
● Income Level
● Education
Consumers with the same demographics tend to value
The same products and services which
Is why narrowing down the segments is one of
The most important factors to determine target
Markets
HOW TO DETERMINE WHO IS YOUR TARGET MARKET IS?
● Does your product offer international, national or local scope?
● Are your target consumers are male or female?
● Where do they live?
● Is geography a limiting factor for any reason
● What is their lifestyle like?
HOW TO FIND YOUR TARGET MARKET?
●
●
●
●
Don't be afraid to start out broad.
Collect data from existing customers
Actively utilize social media analysis
Look at your competitors target audience
REASON OF PEOPLE TO BUY THINGS
PEOPLE BUY THINGS OUT OF NECESSITY - buying things because it’s required
them, arguably the most evident rationale for making a purchasing decision
a. NEEDS ARE STRONG MOTIVATORS
b. BENEFITS OF UNDERSTANDING NEEDS
PEOPLE VALUE CONVENIENCE - another big reason customers buy stuff is to
decrease their hassles and make their lives more comfortable. Many buyers acquire
new goods to help them do a task more quickly, easily or affordably. They do so to make
their lives less unpleasant.
SECURITY AND PROTECTION - many of the products we buy are intended to keep us
safe. All forms of insurance,including health, auto, homeowners, renters, life, pets and
others, are designed to safeguard our health and possessions. Purchases in this
category help us cope with the pain of future misfortune and protect us from uncertainty.
FEAR OF MISSING OUT (FOMO) - many people purchase goods to get the benefits,
rewards and prestige other buyers have experienced. If they don't follow, they miss out.
And being left out is painful.
IDENTITY AND BELONGING - Recent studies show that consumers who buy items
have
Elements of their identity that they don't feel good about linked to their purchase .
Everybody is Trying to conceal their weaknesses and compensate for them with money.
As consumers work to better themselves , think about how your product and brand
mission can serve Them.
GETTING A GOOD DEAL OR PRICE - many experts say that price isn’t one of the top
reasons customers buy. But personally regard this motivator as an essential driver of
purchases.
BUYING THINGS TO MAKE US HAPPY - many of the products we buy give us
pleasure. Actually, obtaining joy might be a super motivator.
FOCUS GROUP
A small group of people , typically representatives of your target market, with whom you
share ideas and ask questions about your products, service, or business. The
individuals who make up the focus group should be a mix of current customers and
people who've never made a purchase but might in the future.
Focus group can provide your business with priceless information if the participants are
a reflection of your target audience. The data you collect from them is important
because it can help you build successful strategies by:
● Collecting more accurate needs assessments from customers
● Pulling meaning behind facts and numbers obtained from more general surveys.
ROLL OUT
IS AN INFORMAL business term for the introduction and integration of a new product
or service to the market, this also refers atoa significant product release, which is
frequently accompanied by a strong marketing campaign to generate consumer interest.
UNDERSTANDING ROLLOUTS
PRODUCT ROLLOUTS
Product rollout is a business marketing and operations strategy that deploys new
products to the masses. Mostly refers to the strategy behind a product’s initial
introduction although thi can extend long term operations.
OPERATIONAL ROLLOUTS
A rollout in business may also refer to the implementation of a new system within a
company. Company may refer to its rollout strategy for its new enterprise resource
planning, this rollout is also typically large changes requiring concerted efforts, and the
field of organizational change management in and of itself is a booming one.
LESSON 3 : DEVELOPING A RETAIL STRATEGY
WHAT IS RETAIL STRATEGY?
STRATEGY
- is frequently used in retailing.
- is used to commonly it appears that all retailing decisions are strategic decision
RETAIL STRATEGY
- Is a statement identifying the retailers target markets, the format the retailer plans
to use to satisfy the target markets needs and the bases upon which the retailer
plans to build a sustainable competitive advantage.
TARGET MARKET
- Is the market segment toward which the retailer plans to focus its resources and
retail mix.
RETAIL FORMAT
-
Suggest the type of retail mix (nature of merchandise and service offered, pricing
policy, advertising and promotion program, approach to store design and visual
merchandising, typical location.
SUSTAINABLE COMPETITIVE ADVANTAGE
- Is an advantage over the competition that is not easily copied and thus can be
maintained over a long period of time.
RETAIL MARKET
- Is a group of consumers with similar needs (a market segment) that is serviced
by a group of retailers using a similar retail format to satisfy them.
BUILDING A SUSTAINABLE COMPETITIVE ADVANTAGE
The final element in a retail strategy is the retailer's approach to building a sustainable
competitive advantage. Any business activity that a retailer engages in can be the basis
for a competitive advantage, but some advantages are sustainable over a long period of
time.
RETAIL SUSTAINABLE COMPETITIVE ADVANTAGE
Can a retailer develop a sustainable competitive advantage by:
● Dropping the price of merchandise?
● Building a store at the best location?
● Deciding to sell some hot merchandise?
● Increasing its level of advertising?
● Providing better customer service?
SEVEN IMPORTANT OPPORTUNITIES FOR RETAILER TO DEVELOP
SUSTAINABLE COMPETITIVE ADVANTAGE
● Customer loyalty
● Location
● Human resource management
● Distribution and information systems
● Unique merchandise
● Vendor relations
● Customer service
CUSTOMER LOYALTY
● Means that customers are committed to buying merchandise and services from a
particular retailer
● Other bases for sustainable competitive advantage discussed in this section
help attract and maintain loyal customers.
● For instance, having dedicated employees, unique merchandise, and superior
customer service all help solidify a loyal customer base.
● Is more than simply liking one retailer over another.
RETAILING BRANDING
● Stores use brands to build loyalty in much the same way that manufacturers do
POSITIONING
● A retailer builds customer loyalty by developing a clear, distinctive image of its
retail offering and consistently reinforcing that image through its merchandise
and service.
● Involves the design and implementation of a retail mix to create an image of the
retailer in the customer’s mind relative to its competitors.
LOYALTY PROGRAM
● Are part of an overall customer relation management program (CRM)
● Customer loyalty programs work hand in hand with CRM. members of loyalty
programs are identified when they buy because they use some type of loyalty
card
● Their purchase information then is stored in a huge database known as a data
warehouse.
● From this data warehouse, analysts determine what types of merchandise and
services certain groups of customers are buying.
LOCATION
● Important things is retailing is location
● Location is the critical factor in consumers’s selection of a store
● A competitive advantage based on location is sustainable because it is not easily
duplicated.
HUMAN RESOURCE MANAGEMENT
● Retailing is a labor-intensive business, in which employees play a major role in
providing services for customers and building customer loyalty.
DISTRIBUTION AND INFORMATION SYSTEMS
● All retailers strive to reduce operating costs-the costs associated with running the
business and make sure the merchandise that customers want is available
● Retailers achieve these efficiencies by developing sophisticated distribution and
information systems and sharing information with vendors.
UNIQUE MERCHANDISE
● It is difficult for retailers to develop a competitive advantage through merchandise
because most competitors can purchase and sell the same popular national
brands.
● Many retailers realize a sustainable competitive advantage by developing Private
label brands (store brands), which are products developed and marketed by a
retailer and available only from that retailer.
VENDOR RELATIONS
● By developing strong relations with vendors, retailers may gain exclusive rights
to sell merchandise in a specific region, obtain special terms of purchase that are
not available to competitors who lack such relationships, or receive popular
merchandise in short supply.
CUSTOMER SERVICE
● Retailers also can build a sustainable competitive advantage by offering excellent
customer service. Offering good service consistently is difficult because customer
service is provided by retail employees and human are less consistent than
machines
● The quality of service can vary from person to person and from day to day
● Retailers that offer good customer service instill its importance in their employees
over a long period of time through coaching and training .
SOURCES OF COMPETITIVE ADVANTAGE
MORE SUSTAINABLE
● Location
● Customer service
● Customer loyalty
● Exclusive merchandise
● Low-cost supply chain management
● Information systems
● Buying power with vendors
● Committed employees
LESS SUSTAINABLE
● More advertising
● More promotions
● Better computers
●
●
●
●
●
More employees
More merchandise
Greater assortments
Lower prices
Cleaner stores
MULTIPLE SOURCES OF ADVANTAGE
● To build a sustainable competitive advantage, retailers typically don't rely on a
single approach , such as low cost of excellent service
● Instead they need multiple approaches to build as high a wall around their
position as possible.
GROWTH STRATEGIES
Four types of growth opportunities that retailers may pursue:
1. Market penetration
2. Market expansion
3. Retail format development
4. Diversification
I.
MARKET PENETRATION
● Market penetration growth opportunity involves realizing growth by
directing efforts toward existing customers using the retailer’s format
● Market penetration approaches include opening more stores in the target
market keeping existing stores open for longer hours.
● Other approaches involve displaying merchandise to increase impulse
purchase and training sales people
● Cross-selling means that sales associates attempt to sell complementary
merchandise from other departments to their customers.
II.
MARKET EXPANSION
● A market expansion growth opportunity involves using the existing retail
format in new market segments
III.
RETAIL FORMAT DEVELOPMENT
● A retail format development growth opportunity is an opportunity in which
a retailer develops a new retail format-a format with a different retailing mi
for the same target market.
IV.
DIVERSIFICATION
● A diversification growth opportunity is one in which a retailer introduces a
new retailer format directed toward a market segment that’s not currently
served by the retailer.
● Diversification opportunities are either related or unrelated
RELATED VERSUS UNRELATED DIVERSIFICATION
● In related diversification growth opportunities, retailers present target market or
retail format shares something in common with the new opportunity.
● Unrelated diversification lacks any commonality between the present business
and the new business.
VERTICAL INTEGRATION
● Is diversification by retailers and wholesaling or manufacturing
● In addition, retailers and manufacturers have different customers; the immediate
customers for a manufacturer’s merchandise are retailers, whereas a retailer’s
customers are consumers.
STRATEGIC OPPORTUNITIES AND COMPETITIVE ADVANTAGE
● Typically retailers have the greatest competitive advantage when they engage in
opportunities that are familiar to their present retail strategy
GLOBAL GROWTH OPPORTUNITIES
● International expansion is a market expansion growth opportunity that many
retailers find attractive. But international expansion can be risky because retailers
must deal with different government regulations, cultural traditions, supply chain
consideration and languages.
KEY TO SUCCESS
4 characteristics of retailers that have successfully exploited international growth
opportunities:
a. A global sustainable competitive advantage
b. Adaptability
c. Global culture
d. Financial resources
A. A GLOBAL SUSTAINABLE COMPETITIVE ADVANTAGE
● Entry into non-domestic markets is most successful when the expansion
opportunity is consistent with the retailer’s core bases of competitive
advantage
● CORE ADVANTAGE
- Low-cost ,efficient operation
- Strong private brands
- Fashion reputation
- Category dominance
● GLOBAL RETAILER EXAMPLE
- Wal-mart, carrefour
-
IKEA, starbucks
The Gap, Zara, H&M
Office Depot, Toys R us
B. Adaptability
● While successful global retailers build on their core competencies, they
also recognize cultural differences and adapt their core strategy to the
needs of local markets
C. GLOBAL CULTURE
● To be global retailers must think globally. It is not sufficient to transplant a
home-country culture into another country.
FINANCIAL RESOURCES
● Expansion into international markets requires a long term commitment and
considerable and upfront planning. Retailers find it very difficult to generate
short-term profits when they make the transition to global retailing.
ENTRY STRATEGIES
4 approaches that retailers can take when entering non domestic markets are:
1. Direct investment
2. Joint venture
3. Strategic alliance
4. Franchising
I.
DIRECT INVESTMENT
● Involves a retail firm investing in and owning a division or subsidiary that
operates in a foreign country. This entry strategy requires the highest level
of investment and exposes the retailer to significant risks, but it also has
the highest potential returns.
II.
JOINT VENTURE
● Is formed when the entering retailer pools its resources with a local retailer
to form a new company in which ownership, control and profits are shared.
III.
STRATEGIC ALLIANCE
● Is a collaborative relationship between independent firms
FRANCHISING
● Offers the lowest risk and requires the least investment. However, the
entrant has limited control over the retail operations in the foreign
country,potential profits are reduced, and the risk of assisting in the
creation of a local domestic competitor is increased.
IV.
THE STRATEGIC RETAIL PLANNING
● Entails the set of steps a retailer goes through to develop a strategic retail plan. It
describes how retailers select target market segments, determine the appropriate
retail format, and build sustainable competitive advantages .
● The planning process can be used to formulate strategic plans at different levels
within a retail corporation.
STAGES IN THE STRATEGIC RETAIL PLANNING PROCESS
1. Define the business mission
2. Conduct a situation audit:
- Market attractiveness analysis
- Competitor analysis
- self-analysis
3. Identify strategic opportunities
4. Evaluate strategic alternatives
5. Establish specific resources
6. Develop a retail mix to implement strategy
7. Evaluate performance and make adjustments
I.
DEFINE THE BUSINESS MISSION
● The first step in the strategic retail planning process is to define the
business mission.
● The mission statement is a broad description of retailers objectives and
the scope of activities it plans to undertake.
● The mission statement defines the general nature of the target segments
in retail formats on which the firm will focus.
II.
CONDUCT A SITUATION AUDIT
● After developing a mission statement and setting objectives, the next step
in the strategic planning process is to conduct a situation audit, an
analysis of the environment and the strengths and weaknesses of the
retailer business relative to its competitors.
MARKET FACTORS
● Some critical factors related to consumers and their buying patterns and the
target market size and growth, sales cyclicity, and seasonality. Market size,
typically measured in retail sales dollars, is important because it indicates a
retailer's opportunity to generate revenues to cover its investment.
COMPETITIVE FACTORS
● The nature of the competition in the retail market is affected by barriers to entry,
the bargaining power of vendors, and competitive rivalry.
● Barriers to entry institute condition in an retail market that make it difficult for
another firms to enter the market, such as scale economies, customer loyalty,
and the availability of great locations
● SCALE ECONOMICS - are cost advantage due to a retailer’s size. Markets
dominated by large competitors with scale economics are typically unattractive.
● BARGAINING POWER OF VENDORS - markets are less attractive when only a
few vendors control the merchandise sold in it.
ENVIRONMENT FACTORS
● Can affect market attractiveness span technological, economic, regulatory, and
social changes.
● When a retail market is going through significant changes in technology, existing
competitors are vulnerable to new entrants that are skilled at using the new
technology.
3. IDENTIFY STRATEGIC OPPORTUNITIES
● After completing the situation audit, the next step is to identify opportunities for
increasing retail sales. Kelly Bradford presently competes in gift retailing using a
specialty store format.
IDENTIFY STRATEGIC OPPORTUNITIES
4. EVALUATE STRATEGIC OPPORTUNITIES
5. ESTABLISH SPECIFIC OBJECTIVE AND ALLOCATE RESOURCES
6. DEVELOP A RETAIL MIX TO IMPLEMENT STRATEGY
● The 6th step in the planning process is to develop a retail mix for each
opportunity in which an investment will be made and control and evaluate
performance.
LESSON 4 : LOCATION
TYPES OF RETAIL LOCATION
Free Standing Site such as
outparcels and merchandise kiosk
City or Town Location
such as central business
districts, main streets, and inner city location
Advantages of Freestanding Location
- CONVENIENCE FOR CUSTOMER
- HIGH VEHICULAR TRAFFIC AND VISIBILITY
- MODEST OCCUPANCY COST
- SEPARATION FROM COMPETITION
Dis- Advantages of Free Standing Location
- LIMITED TRADE AREA WHEN NOT AROUND NEARBY RETAILERS
- HIGHER OCCUPANCY COST THAT STRIP CENTER
- USUALLY LOCATED WHERE THERE IS A LITTLE PEDESTRIAN TRAFFIC
FREESTANDING SITES
● Retail locations for an individual, isolated store unconnected to other retailers
- Outparcels
- Merchandise kiosk
● MERCHANDISE KIOSK
- Small selling spaces, typically located in the walkways of enclosed malls,
airports, train stations, or office building lobbies.
CITY OR TOWN LOCATIONS
● Gentrification is bringing the population back to the cities.
● Advantages
- Lower occupancy costs
- Higher pedestrian traffic
● Disadvantages
- Traffic is limited due to congestion
- Parking problems reduce consumer convenience.
CENTRAL BUSINESS DISTRICT (CBD)
● Advantage
- Draws people during business hours
- Heavy public transportation
- Pedestrian traffic
- Residential area as well
● Disadvantages
- High security required
- Shoplifting
- Parking is poor
- Evening and weekends are slow
MAIN STREETS VS. CBD’S
- Occupancy costs are generally lower than CBD’s
- Fewer people are employed
- Smaller selection due to fewer stores
- Range of entertainment is usually smaller
- City planning sometimes restricts store operations
INNER CITY
- High density urban areas with higher unemployment and lower median incomes
than surrounding areas.
- Retailers here achieve higher sales volume and higher margins, thus producing
higher profits
- Redevelopment in inner cities can cause increased traffic and parking difficulties,
causing them to be controversial.
IMPORTANCE OF LOCATION DECISION
LOCATION IS A MAJOR COST
FACTOR BECAUSE IT:
- Involves large capital investment
- Affects transportation cost
- Affects human resources cost,
e.g., salaries
LOCATION IS A MAJOR REVENUE
FACTOR BECAUSE IT:
- Affects the amount of customer traffic
- Affects the volume of business
- Location is a broader concept, which
denotes the store and its trading area from
where a majority of its customers originate,
while a site refers to the specific building or
part of the building where a store is located.
-
Store location is most often the first
consideration in a store choice
- Having a good location increases
chances of developing a strong
sustainable competitive advantage
- Location decisions can be risky and
should be well-thought out
Factors Affecting Location
- SIZE AND CHARACTERISTICS OF MARKET (POPULATION)
- LEVEL OF COMPETITION
- ACCESS TO TRANSPORTATION
- PARKING SPACE AVAILABILITY
- ATTRIBUTES OF NEARBY STORES
- PROPERTY COSTS
- LENGTH OF AGREEMENT
- POPULATION TRENDS
- LEGAL RESTRICTIONS
- OTHER FACTORS
Process /Steps
IN CHOOSING RETAIL LOCATION
-
SIZE OF THE TRADE AREA
RESTRICTIONS ON OPERATIONS BY PROPERTY MANAGERS
PEDESTRIAN AND
VEHICLE CUSTOMER TRAFFIC LOCATION
OCCUPANCY COST OF THE LOCATION
CONVENIENCE OF LOCATION FOR CUSTOMERS
RETAILING
LEVEL OF RETAIL LOCATION DECISION
CITY CHOICE
- Trading area
- Population and growth trends
- Economic conditions
- Purchasing power
-
Trade potential
Competition
LOCALITY CHOICE
- Shopping district
- Competition
- Accessibility
- Civic body rules and restrictions
- Expanding localities
- Law and order
SITE CHOICE
- Cost and capacity
- Passing customer traffic
- Interception potential
- Complementary outlets
- Parking and convenience
- Visibility
RETAIL LOCATION THEORIES
1.CENTRAL PLACE THEORY
2.RETAIL GRAVITY THEORY
-HUFF'S GRAVITY MODEL
- REILLY'S LAW OF RETAIL GRAVITATION
3.SATURATION THEORY
4. HERFINDAHL – HIRSCHMAN INDEX
CENTRAL PLACE THEORY
● Theory proposed by Walter Christaller in 1933
● Christaller made a number of assumption such as
- All areas have an isotropic (all flat) surface
- An evenly distributed population
- Evenly distributed resources
- Similar purchasing power of all consumers and consumers will patronize
nearest market
- Transportation costs equal in all directions and proportional to distance
- No excess profits (perfect competition)
TERMS IN CENTRAL PLACE THEORY
● A central place is a settlement which provides one or more services for the
population living around it.
● Simple basic services(e.g. universities) are said to be of high order
● Having a high order service implies there are low order services around it, but not
vice versa.
● Settlements which provide low order services are said to be low order
settlements, settlements that provide high order services are said to be high
order settlements.
● The sphere of influence is the area of influence in the central place.
DETAILS OF THE THEORY
● The theory consist of two basic concepts:
- Threshold - the minimum population that is required to bring about the provision
of certain good or services
- Range of goods or services - the average maximum distance people will travel to
purchase goods and services.
RETAIL GRAVITY THEORY
● Suggests that there are underlying
consistencies in shopping
behavior
that yield to mathematical analysis
and prediction based on the notion
or concept of gravity
HUFF'S GRAVITY MODEL
● Based on the premise that the
probability that a given
customer will
shop in a particular store or shopping
center becomes larger as the size of
store or center grows and distance or
travel time from customer shrinks
HUFF’S LAW
● Assumption
● The proportion of consumers patronizing a given shopping area varies with the
distance from the shopping area
● The proportion of consumers patronizing various shopping areas varies with the
breadth and depth of merchandise offered by each shopping area.
● The distance that consumers travel to various shopping areas varies for different
types of products purchased
● The pull of any given shopping area is influenced by the proximity of competing
shopping areas.
REILLY'S LAW OF RETAIL GRAVITATION
● When two cities compete for retail trade
area from the
immediate suburban area,
the breaking point for the attraction of
such trade will be more or less in direct
proportion to the population of the two
cities and in inverse proportion to the
square of the distance from the
immediate area of the city
SATURATION THEORY
● Examines how the demand for goods and services of a potential trading area is
being served by current retail establishments in comparison with other potential
markets.
INDEX OF RETAIL SATURATION (IRS)
● IRS is the ratio of demand for a product (households in the geographic area
multiplied by annual retail expenditures for a particular line of trade per
household) divided by available supply (the square footage of retail facilities of a
particular line of trade in a geographic area.
IMPLICATIONS
● It is calculated based on existing retail facilities and their use
● Low level saturation is indicated by higher IRS- which means the likelihood of
success is higher
● If the market has too few stores and is unable to satisfy the demands of the
customers, the market is under-stored.
● If there is to many stores the market is over stored, unable to give fair return on
investment to retailer
HERFINDAHL – HIRSCHMAN INDEX
● It is a measure of market
concentration
The Herfindahl index (HI) is a
measure of industry
concentration
equal to the sum of the squared
market shares of the firms in the
industry
BUYING POWER INDEX (BPI)
● It is an indicator of a market’s overall retail potential and is composed of the
weighted measures of effective buying income (personal incomes,including all
nontax payments such as social security, minus all taxes), retail sales and
population size.
LESSON 5 : Store Layout and Design
Definition of Store layout and Design
Store layout is
the design of a store's floor space and the placement of
items within that store. Store layout helps influence a customer's
behavior, which means when done right, it's a key strategy to a store's
prosperity.
Elements of Store Design
1. Fixtures
A major consideration in developing an appropriate store design involves the use
of fixtures. They are used to display merchandise, to help sell it, to guard it, and
to provide a storage space for it. They should be attractive and focus customer’s
attention and interest on the merchandise.
2. Displays
Display an important role in a retail store. An attractive and informative display
can help sell gods. Poorly designed displays can ruin the store’s atmosphere and
center an uncomfortable setting. Since displays often take up premium space
with in the store, they carry a heavy burden of productivity in terms of creating
Sales.
3. Color
The psychological effect of color continues to be important to retailers. Color is
also important in warehouse type stores because of the vast open area of the
interior. Bold colors are frequently used to highlight merchandise sections or
departments and to reduce attention to what is typically an open—girder ceiling.
Clearly, intelligent use of color is important in store design.
4. Lighting
Proper lighting is one of the most important considerations in retail design. At
one point in time the function of lighting was to provide customers with a
means of finding their way through the store. Today, lighting has become a
display medium. It is an integral part of the store’s interior and exterior design.
Lighting should match the mood retailer is attempting to create with the rest
of the store decor and should complement, rather than detract from, the
merchandise
5. Ceilings
Ceilings represent a potentially important element of interior design. In older
stores, ceilings of twelve to sixteen feet are still common, but most department
store ceilings are now in the nine-to-ten foot range. Remember, the higher the
ceiling, the more space to heat and cool at increasing energy rates. Ceiling
heights are becoming much less standardized within stores. Designers are
making use of varied ceiling drops to create distinct for different departments
within a store.
6. Flooring
Retailers are taking a sophisticated “return investment” approach to flooring
decisions. Firms are willing to pay higher-up-front installation costs for more
expensive materials if they see a return in greater durability and reduced
maintenance expenses. Flooring choices are important because the coverings
can be used to separate departments, muffle noise in high — traffic areas, and
strengthen the store image. The range of choices for floor coverings is endless:
Carpeting, wood, terrazzo, quarry tile, and vinyl composition all have
applications in different settings.
7. Shelving
The material used for shelving as well as its design must be compatible with
the merchandising strategy and the over all image desired. Stainless steel
shelving creates an entirely different effect than the painted wood cubes in the
Country Seat or the typical metal shaving seen in a general merchandise store,
Glass shelving, framed in the woods, creates an element of elegance difficult to
achieve otherwise. General shelving considerations and merchandise display
are discussed in the next selection
8. Plano Grams and Shelf Layout Design
One of the key tools of modern shelf and layout planning is the Plano gram.
This is a graphical representation that visually shows the space to be allocated
by describing where every stock keeping unit(SKU) within a space is physically
located. Every product has its own SKU. The Plano gram produces a map for
the length, height, and depth of shelves with the number and location of the
SKU.
9. Other considerations
There are other considerations that can round out the image and atmosphere
created by the interior design elements. For example, the type and sound level
music can be focused on a given market segment. Scents can be used to
help identify with a market group or create a feeling about being in the store.
The level of maintenance and cleanliness also sets a tone.
CRITICAL ISSUES RETAILER CONSIDER IN DESIGNING A STORE
● Implement retail strategy
● Increase sales on visits
● Build loyalty
● Control cost
Advantages and Disadvantages of alternative store lay out
Advantage
A well designed layout proves advantageous not only to
those connected with the production process but also
benefits the entire organization. It results in
improved
efficiency, reduction in manufacturing cycle time, cost
reduction, increases the inventory turnover and ultimately
improved customer satisfaction.
Disadvantage
You don't make the most of your floor space. Your
stock control and handling are more complex than
other layouts.
Loitering is encouraging, which can
confuse your custom