Download VTU MBA 3rd Sem 16MBAMM301-Retail Management RM Chapter 3 -Important Notes

Download VTU (Visvesvaraya Technological University) MBA 3rd Semester (Third Semester) 16MBAMM301-Retail Management RM Chapter 3 Important Lecture Notes (MBA Study Material Notes)

RETAIL STRATEGY
CHAPTER 3
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
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RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
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RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
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RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
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RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
HR FUNCTION IN RETAIL
ORGANISATION ? HMR PROCESS
? Job analysis
? Recruitment of retail employees ?
Internal sources
External sources
? Selection of retail employees
Pre interview screening and preliminary interview
Formal application form
Interview
Psychological testing
Reference check
Physical examination
Job offer
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
HR FUNCTION IN RETAIL
ORGANISATION ? HMR PROCESS
? Job analysis
? Recruitment of retail employees ?
Internal sources
External sources
? Selection of retail employees
Pre interview screening and preliminary interview
Formal application form
Interview
Psychological testing
Reference check
Physical examination
Job offer
? Training of retail employees
Group training method ?
? Lecture method
? Audio visual method
? Discussion method
? Role playing method
? Panel method
? Round table method
? Brain storming method
Individual training method ?
? On the job
? study course
? Individual coaching
? Observation post
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
HR FUNCTION IN RETAIL
ORGANISATION ? HMR PROCESS
? Job analysis
? Recruitment of retail employees ?
Internal sources
External sources
? Selection of retail employees
Pre interview screening and preliminary interview
Formal application form
Interview
Psychological testing
Reference check
Physical examination
Job offer
? Training of retail employees
Group training method ?
? Lecture method
? Audio visual method
? Discussion method
? Role playing method
? Panel method
? Round table method
? Brain storming method
Individual training method ?
? On the job
? study course
? Individual coaching
? Observation post
DIRECTION OF RETAIL EMPLOYEE
v Communication and implementing company policies and strategies
v Counselling
v Establishing standards of performance
v Creating a favourable work environment
v Continuous training and development
v Responsibilities and expectation

FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
HR FUNCTION IN RETAIL
ORGANISATION ? HMR PROCESS
? Job analysis
? Recruitment of retail employees ?
Internal sources
External sources
? Selection of retail employees
Pre interview screening and preliminary interview
Formal application form
Interview
Psychological testing
Reference check
Physical examination
Job offer
? Training of retail employees
Group training method ?
? Lecture method
? Audio visual method
? Discussion method
? Role playing method
? Panel method
? Round table method
? Brain storming method
Individual training method ?
? On the job
? study course
? Individual coaching
? Observation post
DIRECTION OF RETAIL EMPLOYEE
v Communication and implementing company policies and strategies
v Counselling
v Establishing standards of performance
v Creating a favourable work environment
v Continuous training and development
v Responsibilities and expectation

COMPENSATION OF RETAIL
EMPLOYEES
? Types of compensation :
Financial Compensation
Straight salary method
Straight commission method
Combination of salary and commission
Drawing account and commission plan
Non financial compensation:
Promotion
Recognition program
Fringe benefits
perks
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RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
HR FUNCTION IN RETAIL
ORGANISATION ? HMR PROCESS
? Job analysis
? Recruitment of retail employees ?
Internal sources
External sources
? Selection of retail employees
Pre interview screening and preliminary interview
Formal application form
Interview
Psychological testing
Reference check
Physical examination
Job offer
? Training of retail employees
Group training method ?
? Lecture method
? Audio visual method
? Discussion method
? Role playing method
? Panel method
? Round table method
? Brain storming method
Individual training method ?
? On the job
? study course
? Individual coaching
? Observation post
DIRECTION OF RETAIL EMPLOYEE
v Communication and implementing company policies and strategies
v Counselling
v Establishing standards of performance
v Creating a favourable work environment
v Continuous training and development
v Responsibilities and expectation

COMPENSATION OF RETAIL
EMPLOYEES
? Types of compensation :
Financial Compensation
Straight salary method
Straight commission method
Combination of salary and commission
Drawing account and commission plan
Non financial compensation:
Promotion
Recognition program
Fringe benefits
perks
CHALLENGES AND ISSUES
? High Turnover
? Talent crunch at middle and senior level managements
? Lack of professionally educated workforce
? Employee poaching in the retail industry
? Problems of work life balance
FirstRanker.com - FirstRanker's Choice
RETAIL STRATEGY
CHAPTER 3
? A retail strategy is a statement identifying
? 1) the retailer's target market
? 2) the format the retailer plans to use to satisfy the target market's needs,
? 3) the bases upon which the retailer plans to build a sustainable competitive advantage.
? The target market is the market segments toward which the retailer plans to focus its
resources and retail mix
? A retail format is the retailer's type of retail mix (nature of merchandise and services
offered, pricing policy, advertising and promotion programs, approach to store design
and visual merchandising, and typical location and customer services).
? A sustainable competitive advantage is an advantage the retailer has over its
competition that is not easily copied and thus can be maintained over a long time.
APPROACHES FOR DEVELOPING A
SUSTAINABLE COMPETITIVE
? Advantage:-
?Building strong relationships with Customers
?Building strong relationships with Suppliers
?Achieving efficient internal operations
? Seven important opportunities for retailers to develop sustainable competitive
advantages are
? (1) customer loyalty,
? (2) location,
? (3) human resource management,
? (4) distribution and information systems,
? (5) unique merchandise,
? (6) vendor relations, and
? (7) customer service.

Building a Sustainable Competitive
Advantage
CUSTOMER LOYALTY
? Customer Loyalty means that customers are committed to shopping at retailer's locations.
? Loyalty is more than simply liking one retailer over another
CUSTOMER LOYALTY
? More than simply liking one retailer over another
? Customers will be reluctant to patronize competitive retailers
? Retailers build loyalty by:
? Developing a strong brand for the store or store brands
? Developing clear and precise positioning strategies
? Creating an emotional attachment with customers through loyalty
programs
LOYALTY PROGRAMS
? Loyalty programs are part of an overall customer relationship management program (CRM)
program.
? Members of loyalty programs use some type of loyalty card.
? Purchase information is stored in a huge database known as a data warehouse.
?Purchase behaviors of members of loyalty programs
nAre identified when they buy because they use some type of loyalty
card
nSaved in Data Warehouse
? What they buy
? When they buy
? How much they buy
? How often they buy
? How much they spend
? What channel they use
?Develop personalized marketing effort to them
RETAIL BRANDS AND POSITIONING
? A retail brand, whether it is the name of the retailer or a private label, can create an
emotional tie with customers that builds their trust and loyalty
RETAIL BRAND
?Can create an emotional tie with customers that build their
trust and loyalty
?Facilitates store loyalty because it stands for a predictable level
of quality
? Stores use brand (store?s name and store brands ? private label
brands) to build customer loyalty
APPROACHES FOR BUILDING
CUSTOMER LOYALTY
? Brand Image
? Positioning
? Unique Merchandise
? Customer Service
? Customer Relationship Management Programs
Positioning is the design and implementation of a retail mix to create an image of the
retailer in the customer's mind relative to its competitors.
A perceptual map is frequently used to represent the customer's image and
preference for retailers.
LOCATION
? Location is the critical factor in consumer selection of a store.
? It is also a competitive advantage that is not easily duplicated.
? Influences the merchandising mix and layout of the store.
HUMAN RESOURCE MANAGEMENT
? Retailing is a labor-intensive business.
? Knowledgeable and skilled employees committed to the
retailer's objectives are critical assets that support the
success of several companies.
DISTRIBUTION AND INFORMATION
SYSTEMS
? All retailers strive to reduce operating costs. They want to get their
customers the merchandise they want, when they want it, in the quantities
that are required, at a lower delivered cost than their competitors.
? Retailers can achieve these efficiencies by developing sophisticated distribution
and information systems.

UNIQUE MERCHANDISE:
While it is difficult for retailers to develop a competitive advantage through
merchandise, many retailers realize a sustainable competitive advantage by
developing private-label brands (also called store brands), which are products
developed, marketed, and available only at that retailer.
VENDOR RELATION
? By developing strong relations with vendors, retailers may gain exclusive rights
(1) to sell merchandise in a specific region, (2) to buy merchandise with better
terms than competitors who lack such relations, or (3) to receive merchandise
in short supply.
? Example ? Wal-Mart - P&G, BASF, MRPL, HUL CUSTOMER SERVICE
? Retailers also build a sustainable competitive advantage by offering excellent customer service.
? Offering good service consistently is difficult.
? Customer service is provided by retail employees ? and humans are less consistent than
machines.
? Customer service is a key element of store image in retailing
MULTIPLE SOURCES OF ADVANTAGE

? To build a sustainable advantage, retailers typically don't rely on a single approach such as low
cost or excellent service. They need multiple approaches to build as high a wall around their
position as possible.
? McDonald?s Quick Service Restaurant Market.
? IKEA has a large group of loyal customers due to its strong brand image & the pleasant
shopping experience it provides its customers.
? Big bazaar?s Exchange offers
? Flip kart's Bog billion day
THE STRATEGIC RETAIL PLANNING
PROCESS
? The strategic retail planning process is the set of steps that 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.
? Steps involved in developing retail strategy
vEstablish Mission
vAnalyse situation
vIdentify options
vSet objectives
vObtain and allocate resources
vDevelop implementation plan
vMonitor progress and control feedback
STEP I-DEFINE MISSION OR PURPOSE OF
THE ORGANIZATION
? It highlights the following elements:
? The product and services offered
? The customers who will be served
? The geographic areas that the orgnisation chooses to operate
? The manner in which the firm intendsto compete in chosen market
STEP II:CONDUCT SITUATION
ANALYSIS
qManagement experts
have developed various
models for conducting
situational analysis
qPEST
PORTER?S FIVE FORCES
? This framework helps to evaluate entry barriers , suppliers,
customers , substitute products and industry rivalry
INTENSITY OF RIVALRY
? Factors that determine intensity of rivalry
? Structure of industry costs
? Degree of differentiation
? Switching costs
THREAT OF NEW ENTRANTS
? Major barriers to entry include:
oEconomies of scale
oProduct differentiation
oSwitching costs
oCost disadvantages independent of scale
oAccess to distribution channels
oGovernment policy
THREAT OF NEW SUBSTITUTES
? Better performance
? Low brand loyalty
? New current trends
? Low switching costs
BARGAINING POWER
? Suppliers :
? Supplier power can be altered in many ways:
? Differentiation of inputs
? Switching costs for transferring to other suppliers
? Availability of substitutes
? Supplier concentration
? Supplier dependence on volume
? Buyers
STEP III : IDENTIFY
OPTIONS/STRATEGIC ALTERNATIVES
ALTERNATIVES AVAILABLE TO RETAILER ARE :
? Market penetration
? Market development
? Retail format development
? Diversification
STEP IV : SET OBJECTIVES
? Good objectives are specific to time ,and indicate priorities to organization
? Sales volume targets
? Market share targets
? Retail expansion target
? Profitability to be achieved
? Liquidity
? ROI
STEP V:OBTAIN & ALLOCATE
RESOURCES

Resources
Human Financial
?
STEP VI: DEVELOP STRATEGY PLAN
? In order to be successful in segmenting the market retailer must ensure:
? Measurable
? Accessible
? Economically viable?
? Stable
? RETAIL MIX
? MERCHANDISING MIX
? PRICING POLICY
? TYPES OF LOCATION S THE RETAIL STORE WILL BE LOCATED AT
? SERVICES OFFERED BY STORE
? COMMUNICATION PLATFORM ADOPTED BY RETAILER
RETAIL MIX & MERCHANDISE MIX
? Retail mix is a marketing plan that responds to a set of varying
factors, such as location, pricing, personnel needs and offered
services and goods. A retail mix plan targets strategies to attract
customers and influence their purchasing ability.
? The term "merchandise mix" is essentially the product assortment
a retail store offers. It refers to the breadth and depth of the
products a given retail store carries on a regular basis
STEP VII :IMPLEMENT THE STRATEGY,
EVALUATE & CONTROL
? Merchandising must be single minded
? Focus on every aspect of the store
? Feedback on performance of new strategy
? Effectiveness of strategy to be evaluated
? Understanding of one own strengths
LOCATION
? Why is Store Location Important for a Retailer?
? Location is typically prime consideration in customer?s store choice.
? Location decisions have strategic importance because they can help
to develop sustainable competitive advantage.
? Location decisions are risky: invest or lease?
TYPES OF LOCATION
? Free standing location/Isolated store
? Unplanned business district
? Planned shopping center
FREE STANDING LOCATION
? Neighborhood stores
?Convenience products
?Away from major markets
?Inside neighborhood
?Less competition, low rent, easy parking, better visibility.
?Difficulty in attracting customer
? Highway stores
- Attract customer passing highways
- - Fast food restaurant, dhaba
FREE STANDING LOCATION
? Advantages:
? Convenience
? High traffic and visibility
? Modest occupancy cost
? Separation from competition
? Few restrictions
? Disadvantages:
? No foot traffic
? No drawing power
UNPLANNED BUSINESS DISTRICTS
? Merchandise Kiosks ? small temporary selling stations located in walkways of enclosed malls,
airports, train stations or office building lobbies.
? Downtown or central business district
?A hub of retailing activity
?Draws customer from across city and suburbs
?Metro CBDs attract customers outside city
?Connaught place in Delhi, commercial street in Bangalore serve as upmarket for upper and
upper middle class customer.
?Chandni chowk in delhi, chick in Bangalore and new market in calcutta serve middle and
lower middle class customers.
ADVANTAGE TO RETAILERS:
? Affluence returned
? Young professionals
? Returned empty-nesters
? Incentives to move provided by cities
? Jobs!
? Low occupancy costs
? High pedestrian traffic
SECONDARY & NEIGHBOURHOOD
BUSINESS DISTRICTS
SECONDARY BUSINESS DISTRICTS
?Unplanned cluster of stores located on a major intersection of cities.
?Attract customers from many parts of cities.
?Dadar in Mumbai, Karol bag in Delhi.
NEIGHBOURHOOD BUSINESS DISTRICTS:
?Cluster and serve neighborhood trading area.
?Colonies
SUBURBAN BUSINESS DISTRICTS
? Stores located in town?s periphery.
? Rely on traffic of downtown.
? Growing market in Gurgaon and Noida, Bangalore

PLANNED SHOPPING CENTERS
? Architecturally designed with parking facilities designed
and operated as a unit. Connaught place was initially
designed as planned, but subsequently in Chandigarh
various sector markets are planned.
REGIONAL SHOPPING CENTRE OR
MALLS
? Largest planned shopping centers .
? Major departmental stores, large trading area, high rent .
? Cross roads-Mumbai, Spenser plaza-Chennai, metropolitan
mall
SHOPPING CENTERS
? Shopping Center Management Controls:
? Parking
? Security
? Parking lot lighting
? Outdoor signage
? Advertising
? Special events for customers
TYPES OF SHOPPING CENTERS
? Neighborhood and Community Centers (Strip Centers)
? Power Centers
? Enclosed Malls
? Lifestyle Centers
? Fashion Specialty Centers
? Outlet Centers
NEIGHBORHOOD/COMMUNITY
SHOPPING CENTERS
? Usually have a balance mix of stores, grocery, chemist, variety store, few other
stores combined.
? Sector market complex in Chandigarh.
? Bander road in Mangalore
? Food street in VV puram Bangalore
SPECIALIZED MARKET
? Specialized market for a particular product category.
? Ahmadabad for plastic material
? Ludhiana for machinery.
? Godown street in Chennai for clothes.
POWER CENTERS
Shopping centers that consist primarily of collections of big-box retail stores
such as discount stores (Target), off-price stores (Marshall?s), warehouse clubs
(Costco), and category specialists (Lowe?s, Best Buy, Dick?s)
? Open air set up
? Free-standing anchors
? Limited small specialty stores
? Many located near enclosed malls
? Low occupancy costs
? Convenient
? Modest vehicular and pedestrian traffic
Name Location Size
Lulu International
Shopping Mall
Kochi 1,700,000 sqft gross
leasable area
Select City walk New Delhi 1,300,000 sqft gross
leasable area
Phoenix Market City? Mumbai 1,150,000 sqft gross
leasable area
Elante Mall Chandigarh 1,150,000 sqft gross
leasable area
Phoenix Market City ?Chennai 1,000,000 sqft gross
leasable area
Fun Republic Mall? Lucknow 970,000 sqft gross leasable
area
Mantri Square Mall Bangalore 924,000 sqft gross leasable
area
COMPARISON SHOPPING
? Customers have a good idea of what type of product they want,
but don?t have a strong preference for brand, model or retailer.
? Competing retailers locate Near one another
?
? Typical for furniture, appliances, apparel, consumer electronics,
hand tools and cameras.
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? IDENTIFY THE MARKET IN WHICH TO LOCATE THE STORE
? EVALUATE THE DEMAND AND SUPPLY WITHIN THE MARKET
? IDENTIFY THE MOST ATTRACTIVE SITES
? SELECT THE BEST SITE AVAILABLE
STEPS INVOLVED IN CHOOSING RETAIL LOCATION
STEP 1: Market identification: market attractiveness to a retailer
STEP 2: Determining the market potential
? Demographic features of the population :
?Size-rural and urban
?Level of literacy, education
? Characteristic of the household in the area:
?Average household income and distribution of income
?Average age
?Employment level and type of employment
- Competition and compatibility
?Compatibility of the retail with other stores
?Analysis of the competitor
?Square Foot area of stores
STEPS INVOLVED IN CHOOSING RETAIL
LOCATION
? Law and regulations:
?Various permissions
?Hours of operation
?Wages to be offered
?Holidays required
TRADE AREA ANALYSIS
? Trade area ? a geographical area containing the customers of particular firm or group of firms
for a specific goods or services??
? Trade area analysis - trade area analysis is a methodology, process or technique that provides a
basis for understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
? Majority of customers to the store
? Know the trade area for demographic and lifestyle segmentation
? Promotional and communication strategy
? Assessing the viability of the site
A trade area consists of three parts:
1. Primary area- encompasses 50 ? 80 % of store?s
customer . Area closest to the store possesses the
highest density of customer to population and highest
per capita sales.
2. Secondary area: containing additional 15 ? 25 % of a
stores customers. Attractiveness of this area
comparatively lower than the primary area but
contribute for a desired footfalls in the stores
3. Fringe area ? include all remaining customer, and they
are the more widely spread. Includes the remaining
customer that shop occasionally at a location as a
alternative to local shopping
Factors to be considered while analyzing trade area:
? 1. Total size and density (demand and supply) of the population.
? 2. Per capita disposable income.
? 3. Education level.
? 4. Family system (joint / nuclear).
? 5. Occupation (job / professional / own business).
? 6. Standard of living.
? 7. Age group distribution.
? 8. Number of residents owning homes.
? 9. Number of manufactures, suppliers, wholesalers available.
? 10. Size of competition.
STEP 3 & 4 : IDENTIFY ALTERNATIVE SITE
AND SELECT THE SITE
- Traffic
- Accessibility of the market
- Total number of stores and the types of stores that exist
- Amenities available
- To buy or to lease
- Product mix offered
METHODS OF EVALUATING TRADE AREA
Reilly?s law of Retail gravitation:
?When two cities compete for retail trade from the immediate rural(suburban) areas, the
breaking point of attraction for such trade will be more or less directly proportion to the
population of two cities and inversely proportional tot the squares of distance from the
immediate area of each city.
? Used to establish a point of indifference between two cities location that helps the retailers
project the physical trading area
? Reilly suggest consumer living between two cities will consider both trading areas for shopping
based in the distance of each area from consumer?s home and size of each area.
? customers are willing to travel longer distances to larger retail centers given the higher
attraction they present to customers.
? This is in terms of mathematical formula:
(Ba/Bb)= (Pa/Pb) (Db/Da)2,where
Ba =business which city A draws from intermediate place
Bb = business which city b draws from intermediate place
Pa= population of city A
Pb= population of city B
Da = Distance of city A to the intermediate place
Db = Distance of city B to the intermediate place
If a retailer wants to know the spend of customers in city X which is 20kmsfrom city A and has a
population of 200000 and 50 kms from city B and has a population of 5,00,000 using the formula he
would deduce that for every rupee spend in city B the customer spends Rs 2.5 in city A
? Assumptions of the retail gravity theory
? The two competing cities are equally accessible from the major road
? Population is a good indicator of the differences in the goods and services available in different cities
HERFINDAHL-HERSCHMAN INDEX
? Known as HHI , commonly accepted measure of market concentration.
? Determined by adding the square of the market share of each competitor within the relevant
product and geographic market
? Takes into account the relative size and distribution of the firms in a market and approaches zero
when a market consists of a large number of firm of relatively equal size.
? HHI> 1800-concentrated
? HHI between 1000-1800 moderated concentrated
? unconcentrated
INDEX OF RETAIL SATURATION
THEORY
? Index of Retail Saturation?(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)
? Higher IRS indicates lower level of saturation thereby increasing the likelihood of success
? Few stores ?understored
? Many stores-overstored-fair ROI
? Saturation is calculated in terms of existing retail facilities and their use
? 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
IRS
? Index of retail saturation (IRS): Ratio of demand for a product
divided by available supply
IRS = (H ? RE) /RF
? IRS - Index of retail saturation for an area
? H - Number of households in the area
? RE - Annual retail expenditures for a particular line of trade per
household in the area
? RF - Square footage of retail facilities of a particular line of trade
in the area
HUFF'S MODEL OF TRADE AREA
ANALYSIS
? David Huff - 1963
? States that consumers will shop at a store of shopping centre more
often if the size of the store or centre is increased and distance to
the shopping area is decreased.
? It is used to estimate sales for a particular trading area.
? The probability that a customer located at I will choose to shop at
store j is calculated according to following formula:
CENTRAL PLACE THEORY
? Comprises of cluster of retail organisations
? Range-maximum customer is willing to travel for a product or service
? Threshold-minimum amount of consumer demand that must exist for a store to survive
? R>T -to be economically viable
? Needs of group of consumers in a particular location-dictates needs of retail
development
SPACE MANAGEMENT AND PLANNING
Size and Space allocation:
?Retailers assign more space for merchandise that registers a higher volume of sales.
?Large stocks of goods which experience high demand to avoid stock out situation
?Use of historic sales data to provide the input for space management
? Space is usually measured by square meters / feet, shelf meters,/ foot, number of shelf module
? Size and space allocation based on product size and sales does not necessarily lead to an
optimal situation as net sales and margin will vary
SPACE IS THE MEDIUM THAT WE USE
TO:
? Display and promote our products
Gondolas and Endcaps
Racks and Shelves
Racks and Shelves
Interactive
Displays
OBJECTIVES OF SPACE MANAGEMENT
? Enhance the Best Buy brand by improving our customer?s shopping experience.
? Provide Retail with easy-to-execute Maps
? Analyze category and item effectiveness to determine the optimal use of space
? Provide customized maps and planograms to support market specific assortments
? To ensure a compatible exciting and rational interface between the customer, merchandise
sales person
SPACE MIX
? For retailer space is money
? Optimise the selling area and minimise the non selling parts.
? The area mix in a typical department store is
Selling area - 60%
Circulation area ? 15%
Back area ? 25%
ELEMENT OF SPACE MIX
? Check in space
? Red carpet space
? POP display and selling space
? Merchandise space
? Customer space
? Personnel space
? Back office space
? Checkout space
? Dead space
STRATEGIES IN SPACE MANAGEMENT
? Space configuration: retailor and vendor - SIS concept
? Shelf position: out let position shelves in a store determine the effect of VM
? Shelf allocation: margin from product
? Special store needs: highlighting product
Categories
SPACE MANAGEMENT OBJECTIVES
? Use space effectively whether floor, page or virtual
? Optimise short- and long-term returns on investment into retail space
? Provide a logical, convenient and inspiring product-customer interface
? Make right selection of products available
? Communication of retailer?s brand identity
SPACE PLANNING PROCESS
? `Measuring retail space: Total amount of space should be measurable. In store terms this would be
physical space, the width, length, height should be taken in to account.
? Dividing the space into selling areas: in this stage the process in concerned with dividing the total
retail space into selling area, usually defined by product category or department . Space will be
allocated on the basis of the no. of fixtures that will be given to each category
? Determine layout: product adjacencies will be decided, and the location of the selling areas will be
determined.
? Determine the space allocation of product line: involves the allocation of space on individuals
fixtures to each product line or stock keeping unit.
SPACE PRODUCTIVITY
? Sales volume and profitability can be measured in relation to the amount of space used to
generate them
? This provides productivity measures, e.g.
? sales per square metre
? profit per square metre
? sales per cubic or linear metre
? profits per catalogue page
STAGE 2: DIVIDING SPACE INTO
SELLING AREAS
? Allocation of space to product department or category
? Usually based on previous performance indication, typically sales
? Some products require disproportionately large area (e.g. furniture) others can withstand
disproportionately smaller area (e.g. jewellery)
? Category life-cycle may influence amount of space
STAGE 3: DETERMINE LAYOUT AND
PRODUCT ADJACENCIES
? Converting numerical data into a workable outlet layout, considering inflexible elements:
? entrances, walkways, checkouts
? Consider space quality
? Consider logical flow through products and complementary categories
STAGE 4: ALLOCATING SPACE TO
INDIVIDUAL PRODUCTS
? Products, like categories are often allocated space on the basis of sales.
? Advantage: product is less likely to sell out
? Disadvantage: may not be profitable
? Different sales figures have advantages and disadvantages (see Box 8.2)
? historical sales
? market share
? projected sales
SPACE ELASTICITY
? Space elasticity is a term for the relationship between an increase in space given to a product
line and the resulting increase in sales
? Space elasticity is not uniform amongst products or across stores
? Generally staple products have lower space elasticity than impulse buys
? Cross elasticity is the relationship between the increase in sale of one product and the
resulting increase in sale of another product
SPACE ALLOCATION
? Allocating space according to product profitability
? Advantage: best and most space devoted to products that bring best profit margins
? Disadvantages:
? wasting space because of low space elasticity
? consumers may have difficulty finding products
? Long term customer satisfaction must be considered in space allocation plans
FINANCIAL
STRATEGY
FINANCIAL STRATEGY
? ANALYSISNG FINANACIAL PEFORMANCE IS DONE FOR FOLLOWING REASONS:
? To identify gaps in the targets
? To identify opportunities for improvement
? To evaluate past and present performance
? Two basic methods of evaluating financial performance:
? Income statement
? Balance sheet
INCOME STATEMENT
? A record of revenues earned by the organization and the expenses incurred
? COMPONENTS OF INCOME STATEMENT
a) Sales: Total money received by retailer from the sale of merchandise
b) Cost of goods sold: expenses incurred by the organization for making the goods
c) Gross margin:
Gross profit on sales+ Net sales ?Cost of goods sold
d)Operating expenses: expenses incurred in producing goods
Non operating income-income that is not earned during normal course of the business
Eg: interest earned on any investment made
BALANCE SHEET
? Key elements of balance sheet
1. Fixed assets-land ,buildings, fixtures, computers
2. Current assets ?cash on hand, cash at bank, inventory,debtors
3. Long term liabilities
4. Current liabilities: interest on ; loan, wages, salaries and
payments to be made to suppliers
RATIO ANALYSIS
? Ratios look at relationship between individual values and relate them to how a
company has performed in the past and might perform in future
Profitability ratios: measure margin earned in the business and returns earned
Gross profit margin = Gross profit/Sales
Controls production costs or margins it makes on products it buys and sells
Operating profit:
ROCE-Return on capital employed:
Net profit before tax, interest and dividends/Total assets
Takes in consideration The returns management has made on resources made
available to them before making any distribution of those returns
LIQUIDITY RATIOS
? Current Ratio = Current assets/current liabilities.
? Quick ratio = Cash + Accounts Receivable/Current liabilities
Financial leverage ratios:
Debt equity ratio = Long term debt/total equity
Long term debt-total equity ratio=long term debt/tong term capital
EPS=Earnings attributable to ordinary shareholders/ weighted average ordinary shares in issue
that year
P/E ratio= Market price of share/earning per share
Dividend yield= (Latest dividend per ordinary share/current market price of share)*100
Measures proportion of earnings retained by business than distributed as dividends
MEASURES OF MERCHANDISE
PERFORMANCE
? GMROI: tells a retailer how many times a year stock investment returned with a
given margin
? Gross Margin/Average inventory
Inventory turnover ratio:
=Net sales/Average inventory at retail OR
Cost of goods sold/Average inventory at cost
MEASURING RETAIL PERFORMANCE
AND SPACE PERFORMANCE
GMROF: Gross margin of selling space or footage
? Calculated by dividing gross margin by the retail selling space
Sales per square foot: total sales/total square feet of selling space
Conversion ratio:
No of customers who make a purchase*100
No of customers entering the store
Average sales per transaction/Average ticket size:
Total sales for the day by number of bills generated
MEASURING EMPLOYEE PRODUCTIITY
Sales per employee:
Total sales/total number of employees in the store
GMROL:
? Gross margin/total number of employees in the store
SUPPLY CHAIN MANAGEMENT
?All activities associated with moving goods from raw material stage through to the end user.?
? This includes
? Sourcing and procurement
? Order processing
? Inventory management
? Transportation
? Warehousing
? Customer service
? BENEFITS OF SCM :
? Improved product availability
? Reduced stock outs
PUSH AND PULL SUPPLY CHAIN
PUSH SUPPLY CHAIN
? Forecast or estimate of sales is made
Suitable when lead time for manufacturing is long
? Forecast of demand is made based on past sales, market conditions, fashion trends
? Used for merchandise that has a predictable steady demand in case of fmcgs
? PULL SUPPLY CHAIN
? Used when it is possible to adjust production and inventory levels according to changes in
market conditions
? Useful when there are variations in demand and difficult to forecast it
? Orders are generated on the movement of merchandise at the store level which is captured
at point of sales terminal
INFORMATION FLOWING SUPPLY CHAIN
? UPC-UNIVERSAL PRODUCT CODE
? Products or tags attached to them are marked with series of thick and thin lines
? Retailer captures information at the point of sales and sends data to a computer that
monitors inventory levels
UPC-UNIVERSAL PRODUCT CODE
? Thick and thin lines-represents items information code.
? Retailer captures information-data is sent to a
computer to monitor inventory levels
? The suppliers computer ? production schedule and plan dispatches
? Distribution center-to ship product to stores
? ASN-Advance shipping notice
Document that informs the distribution center about details of merchandise and
when it will be delivered.
RETAIL LOGISTICS
Logistics
? Part of the supply chain process that plans, implements and controls efficient forward and reverse
flow and storage of goods, services, and related information between point of origin and point of
consumption in order to meet customers requirements
Reverse logistics
? Flow of returned or damaged merchandise to the stores distribution centres and vendors
DATA WAREHOUSE
? All data bases are maintained at one location
? Used for reporting and data analysis
? Housed on an enterprise mainframe server
COMPONENTS
? Data is physically stored
? Software copies original database and transfers
? them to the warehouse
? Processes inquiries
? Directory for categories of information
? available
DATA WAREHOUSE
? Database management involves following steps
1. Determine information needs , plan specific database and
components
2. Captures information accurately and store in accessible formats
3. Update the database regularly to reflect the changing
demographics , purchase pattern
4. Analyses and leverages database for decision making
DATA MINING & EDI
? Data Mining
? In-depth analysis of information to study patterns in data.
? Uses special software to shift and sorts information from the data
warehouse
? Used for decision making on market segmentation, merchandise
displays, promotional campaigns and sales trends
EDI-Electronic data interchange
? Computer to computer exchange of business documents ?in a
standard electronic format between business partners
? .
EDI
? There are 2 popular standard-
? UCS-Uniform communication standards
? Standard transaction sets allows computer to computer paperless
exchange of documents and information
? is used by the?grocery?and retail-oriented industries for electronic
transactions
VICS-Voluntary interindustry standard-standard used for marking products
and shipping containers in the general merchandising sector.
? Pioneered the implementation of cross industry standard quick response
that simplies the flow of products and information in the retail industry for
retailers and suppliers
? Intranet ?internal communications between stores, DC?s and HQ
? Extranet-External stakeholders including vendors, transportation companies and customers
? Operations of distribution center
? Receiving and checking
? Storing and cross docking
? Cross docking-Merchandise which is repackaged and made floor ready by vendors so it can
move from unloading dock at the DC to the loading dock for dispatch to retail stores within
a few hours
? Cross docking speeds up delivery and saves 50% of transportation costs.
? Outbound transportation-DC?s prepare an outbound transportation plan based on location
of stores, road conditions, transportation operating constraints to develop the most efficient
routes.
ROUTING OPTIONS-MODES OF
DELIVERY
? Retailer has two routing options
? Distribution center
? Direct store delivery
THIRD PARTY LOGISTICS (3PL)
? Third party Logistics Provider (3PL) performs logistics services on behalf of another
? company.
? 3PLs provide the management skills along with the physical assets, labor, and
? systems technology to provide professional logistics services, relieving companies of the
responsibility of performing these services themselves.
3PL's typically can provide
? transportation, warehousing, pool distribution, management consulting, logistics
optimization, freight forwarding, transportation management, rate negotiations, cost
evaluations, and contract management services.
3PL
? Third party logistics providers usually specialise in
? Integrating operations
? Warehousing
? Transportation services
? Cross-docking
? Inventory management
? Packaging
? Freight forwarding
FOURTH PARTY LOGISTICS
? 4PL is the planning, steering and controlling of all logistic procedures (for example
? flow of information, material and capital) by one service provider with long term strategic
? objectives. Fourth party logistics (4PL) has evolved as a breakthrough supply chain
solution comprehensively integrating the competencies of third party logistics (3PL)
providers, leading edge consulting firms and technology providers
? ?Third party logistic suppliers provide logistics solutions to clients on the basis of their
domain knowledge they have acquired over the years. 4 PL companies provide logistics
solutions built around the domain knowledge provided by third party logistics companies
? solutions. 4PL leverages combined capabilities of management consulting and 3PLs. The
concept of a 4PL provider is an integrator that accumulates resources, capabilities and
technologies to run complete supply chain solutions.
FUNCTIONS PROVIDED BY A 4PL
COMPANY
? Procurement
? Storage
? Distribution
? Processes
VMI-VENDOR MANAGED INVENTORY
? Vendor/supplier undertaking inventory management in stores.
? This is called QRIS
? Supplier takes inventory replenishment decisions for the customer
? Monitors inventory levels and makes supply decisions regarding order quantities, shipping and
timing
CPFR - COLLABORATIVE,PLANNING,
FORECASTING & REPLENISHMENT
? Sharing of forecast and related business information between retailer and vendors to replenish
products at the retail end and to improve supply chain efficiency
? Share information on business strategies, promotion plans, new product development, and
introduction , product schedule , the lead time information
? Increases product availability, and reduces cost.
? Process begins with an agreement between trading partners to sharing information and
collaborate on planning,
? Also share forecasts results and data
? CPFR technology analyses data and if the forecasts do not match it notifies planners and both
the companies
EMERGING RETAIL TECHNOLOGIES
1)Radio-frequency identification ( RFID) uses electromagnetic fields to
? automatically identify and track objects or persons at a distance using
Radio waves. The tags contain electronically stored information.
? Used in billing, inventory tracking and anti theft measures
2)Global positioning system (GPS) is technology that can give an accurate position of an object
anywhere on earth with respect to latitude and longitude
3)Geographic information systems (GIPS) is a computer based information system used to digitally
represent and analyze the geographical features present on the earth?s surface
It is useful in storing capturing analyzing and managing data and associated attributes
GPS and GIS are used in store locating decisions, consignment tracking, vehicle tracking, route
definitions and logistic solutions
RETAIL PRICING
AND
PROMOTION
RETAIL MARKETING MIX
? Product ?product development, product management, product
features and benefits , product branding and packaging , after
sales service
? Price ?costs , profitability , value for money , competitiveness ,
Quality and status
? Place ?Target market, Channel management , Retailer?s image
,Retail logistics and retail distribution
? Promotion ?Advertising management , Sales promotion ,
Developing promotion mix , Sales management Public relations
and direct marketing
? People ? staff capability , efficiency, availability , effectiveness ,
customer interaction
? Presentation
? Customer services ?credit policies , relationship marketing ,
product return policy
RETAIL PRICING
Price defined as the exchange of goods and services in terms of money
Factors to be considered while arriving at pricing strategy
1) Business model the retailer has chosen to follow.
2) Demand for product & target market
? Store policies and image
? Competition for the product and competitor?s price
? Economic conditions
ELEMENTS OF PRICE
? Fixed costs-rent for office space,office equipment
? Variable cost-raw materials,hourly pay for contractor
? Price is the selling price per unit
? Break even point-where retailer neither makes nor loses money
EXTERNAL INFLUENCES ON PRICING
STRATEGY
1)Customers
? Price sensitivity
? Customer segments
a)economic-do not differentiate between various retailers on factors such a store image and
service
b)Convenience oriented-prefer web shopping or shopping through catalogues
c) Image oriented-buy prestigious brands from value stores that offer them high degree of
customer service
d)variety oriented-Look for diversity in the product category they purchase
? Loyalty oriented-purchase from familiar outlets
? Look for strong relationships with the establishment
Difficult Comparison effect:
Store unique offerings whose prices cannot be compared and they can charge
high
Benefits /Price effect:
Defines the relationship between people?s perception of benefits they receive
from a product and the price they pay for it
Benefits derived from ego gratification and recognition of the image
? Situational effect:
Rich d?cor and good ambience gives the feeling of high price high quality
product
? Suppliers:
? When a new product is introduced
Conflict between retailers and manufacturers
? Manufacturers who want to have control over prices or goods sold to the
consumer go in for exclusive distribution network
? Retailer has his own methods of gaining control
? Selling against Brand
? Gray market goods-branded goods bought in foreign market without
proper payment of duty,imitation or stolen goods procured without a
invoice
? Retailer asks for price guarantees
CHARACTERISTICS
? The following characteristics influence bargaining power of suppliers:
? Number of suppliers, size of suppliers
? Number of substitutes for a particular merchandise
? The switching costs from one supplier to another
? The suppliers level of forward integration to obtain higher prices and margins
COMPETITORS
? Threat of new competitors will depend on the extent to which there are
barriers to entry. Some barriers are
? Economies of scale-minimum size requirements for profitable operations
? High initial investment and fixed costs
? Brand loyalty of customers
? Protected intellectual property such as patents ,licenses
? Inadequacy of important resources
? Good customer relations of the existing players
COMPETITION
? Perfect competition-all firms sell an identical product
? Monopoly-when production of goods or service with no close substitutes is carried out by a
single firm with market power to decide price of its output
? Produce less and sell at high price
? Oligopoly-produce as much and charge little
PERFECT COMPETITION
? Perfect competition is a market structure in which the following five criteria are met: 1)
All?firms?sell an identical product;
? 2) All firms are price takers - they cannot control the?market price?of their product;
? 3) All firms have a relatively small market share;
? 4) Buyers have complete information about the product being sold and the prices charged by
each firm; and
? 5) The industry is characterized by freedom of entry and exit. Perfect competition is
sometimes referred to as "pure competition".
G OVERNMMENT
? They are broadly divided into two:
1)One that affects buying of merchandise
? Price discrimination and vertical fixing
2)Affects the customer
? Horizontal fixing
? Predatory fixing
? Price discrimination
? When a vendor sells the same product to two or more
customers at different prices, it amounts to price
discrimination
? Vertical price fixing-It involves agreements to fix prices
between parties at different levels of the marketing channel
? Horizontal price fixing-Agreements between retailers that are
on direct competition with one another to have the same
prices
? agreement?for co-operation between two or more
competing businesses operating at the same level in the market.
This is generally to develop a healthy relationship between
competitors.?
? Predatory pricing-establish merchandise prices to drive
competition away from the marketplace
MARK UP PRICING
? Mark up-difference between cost of the product and
final selling price
? Mark up=retail price ?cost
? Cumulative mark up-calculated for group of products
? Initial mark up-difference between cost price of
merchandise and the initial retail price
? Maintained mark up-difference between gross
merchandise cost and selling price
MARK DOWN
? Reduction on the normal selling price
? Mark down=Normal SP-Reduced SP
APPROACHES
? Cost oriented pricing
? Demand oriented pricing
? Competition oriented pricing
? Value oriented pricing
COST ORIENTED PRICING
A method of setting?prices?that takes into account the
company's profit objectives and that covers its?costs?of
production. For example, a common form of?cost-oriented
pricing?used by retailers involves simply adding a constant
percentage markup to the amount that the retailer paid for each
product.
The retailer has consider
? the product?s average turnover
? Amount of competition for the product
? Level of service required
? Amount of sales time and effort
Basic Mark up is added to the cost of merchandise
Price
PRICING IN RETAIL
? Selling price= Cost + Markup
? Mark up%(retail)= (Retail SP-Merchandise cost)*100
___________________________
Retail SP
? Mark up%(cost)=(Retail SP-Merchandise cost)*100
___________________________
Merchandise cost
DEMAND ORIENTED PRICING
Demand oriented pricing?as the name suggests uses the customer?demand?to set up
the?price?in the market.
We first determine the customer's willingness to pay for any good or service.
A high?price?is charged when the?demand?is high and a low?price?is charged when
the?demand?is low.
COMPETITOR PRICING
? When the prices adopted by the retailer plays an key role in determining price of the product
? Competitive pricing?is setting the?price?of a product or service?based?on what
the?competition?is charging. This?pricing method is used more often by businesses selling
similar products, since services can vary from business to business, while the attributes of a
product remain similar.
? A firm with strong site, superior service, good assortments, favorable image, exclusive brands
sets prices above competitors
STRATEGIES
? Differential pricing
? Price levelling
? Lifecycle pricing
? Price lining
? Price stability
? Psychological pricing
? Penetration pricing
? Leader pricing
? Promotional pricing
RETAIL PRICING STRATEGIES
? Price lining is a term used by retailers when they sell their merchandise only at given prices
? Price range/price zone: Range of prices for a particular merchandise line
? Number of price points that a retailer chooses to offer range of products at
? Price point: Specific price in that price range
? Price bundling:
Various products are bundled together and sold as one unit.
Loss Leader Pricing:
Retailers price particularly fast moving products at a lower price to attract customers in the
store.
They are sold at cost price or even at loss
? Multiple unit pricing
Retailers offer a lower price per unit for two or more products of the same type when bought
together than when units are bought singly
Everyday low pricing
Continually price their products lower than other retailers in that area
Odd-even pricing:
It is setting pricing at odd numbers to denote a lower price or a good deal
Setting prices at even numbers to imply higher quality
Single pricing:
Retailer charges the same price for the same product under similar circumstances
Pre-emptive pricing
Setting low prices in order to discourage or deter potential entrants to retailer?s market.
Extinction pricing:
Setting very low prices in the short term in order to undercut competition or discourage
potential new entrants.
Prices are set at a level lower than suppliers own cost of production
Perceived value pricing:
? Seller attempts to set the price at the level that intended buyers value the product.
? Price strategies that can be adopted by a retailer are:
? Market skimming:
High price and lower it over time
Potential problems with this strategy:
? Dominant market share will be obtained by low cost retailer
? Inventory turnover is low
? Entry of competitors
? Gain negative publicity
? Early purchasers feel cheated
? Makes organization inefficient
PENETRATION PRICING
? Set a low initial entry price
? Main objective-increase share or volume
? Disadvantage-
? Establishes long term price expectations for the product and image preconceptions about the
retailer
? Only switchers get attracted
TACTICS FOR FINE TUNING THE BASE
PRICE
? Coupons:
Documents that provide right to the holder to purchase at a reduced price or entitle a discount
on the product.
Rebates:
Money returned to the buyer on the basis of some portion of purchase price.
RETAIL PROMOTION
? All communication that informs, persuade, and or reminds the target market or the
prospective segment about the marketing mix of the retail firm
? Methods of promotion
? Paid impersonal promotion
? Paid personal promotion
? Unpaid impersonal promotion
? Unpaid personal promotion
FACTORS AFFECTING RETAIL
PROMOTION
? Type of product:
Frequently purchases require repeat messages
Industrial product-personal selling,product demo, sales presentation, exhibitions
Nature of market
Intensity of competition, locational characteristics of consumers and requirements of channel
members
STAGES IN PLC
? Introduction & early growth-awareness creation and motivational product trials.
? Maturity-brand loyalty and brand preferences
-Budget availability-Limited resources-dealer display , wall paintings,personal selling
-Large scale-more sophisticated promotional tools
COMPANY POLICY
Top management-role of promotion , product market strategy and type of corporate image it
wants to project.
Type of product marketed:
Business markets and consumer markets having different promotion strategies.
BUYER READINESS STAGE
Advertising and publicity ?awareness building
Customer comprehension-advertising and personal selling
closing the sale- personal selling and sales promotion
re-ordering-influenced by advertising and sales promotion
DEVELOPING PROMOTION OBECTIVES
? SMART
?Specific
?Measureable
?Achievable
?Realistic
?Relevant
?Targeted
?Timed
METHODS
? Paid impersonal promotion - TVC, Radios
? Paid Personal promotion ? personal selling
? Unpaid impersonal promotion ? publicity or coverage in newspaper
? Unpaid personal promotion ? Word of mouth
FACTORS
? Types of product
? Nature of market
? Stage in product life cycle
? Budget availability
? Company policy
? Type of product market
RETAIL PROMOTION STRATEGIES
? Retail advertisement
? Retail sales promotion
? Retail personal selling
? Retail public relation
? Retail publicity
? Retail word of mouth
Objectives:
? Product quality objectives
? Skimming objectives
? Market penetration objectives
? Market share objective
? Survival objective
? ROI objective
? Profit objective
? Status quo objective
? Cash flow objective
HUMAN RESOURCE MANAGEMENT
? Align the capabilities and behaviours or employees with the short term and long term goals of
the retail firm
? Measure employee productivity
? Good quality of manpower is must for retail industry .
? Require to perform basic functions ? buying, displaying and merchandising, customer services
HR FUNCTION IN RETAIL
ORGANISATION ? HMR PROCESS
? Job analysis
? Recruitment of retail employees ?
Internal sources
External sources
? Selection of retail employees
Pre interview screening and preliminary interview
Formal application form
Interview
Psychological testing
Reference check
Physical examination
Job offer
? Training of retail employees
Group training method ?
? Lecture method
? Audio visual method
? Discussion method
? Role playing method
? Panel method
? Round table method
? Brain storming method
Individual training method ?
? On the job
? study course
? Individual coaching
? Observation post
DIRECTION OF RETAIL EMPLOYEE
v Communication and implementing company policies and strategies
v Counselling
v Establishing standards of performance
v Creating a favourable work environment
v Continuous training and development
v Responsibilities and expectation

COMPENSATION OF RETAIL
EMPLOYEES
? Types of compensation :
Financial Compensation
Straight salary method
Straight commission method
Combination of salary and commission
Drawing account and commission plan
Non financial compensation:
Promotion
Recognition program
Fringe benefits
perks
CHALLENGES AND ISSUES
? High Turnover
? Talent crunch at middle and senior level managements
? Lack of professionally educated workforce
? Employee poaching in the retail industry
? Problems of work life balance
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