Published on March 6, 2014
Retail Management Service & quality in retailing Consumers satisfied with the store‘s service quality are most likely to remain loyal. Service quality is being increasingly perceived as a tool to increase value for the consumer; as a means of positioning in a competitive environment to ensure consumer satisfaction, retention and patronage. Much of the attention focused on the service quality construct is attributable to the SERVQUAL instrument developed by Parasuraman, Zeithaml & Berry (1988) for measuring service quality. In the process of acting as a link between the wholesaler (or the manufacturer) and the consumer, a retailer performs many functions: 1. Buying and Assembling: It has been said that a retailer stocks wide variety of products to meet the requirements of a large number of customers. For this purpose, the retailer has to assemble products of different manufacturers from different wholesalers through the process of buying. In buying these products he has to be cautious. He has to find out the best and cheapest source of supply. Then he has to select only such of the goods offered which would suit the need of his customers. He must purchase only in quantities enough to meet the demands of his customers. 2. Warehousing and storing: Products thus assembled have to be stored by the retailer so that they are held in reserve stocks out of which consumers requirements are met without any interruption by selling in small quantities. 3. Selling: The ultimate purpose of retailing business is to sell these products to the consumers. Though a retailer is sometimes referred to as buying agent of consumers, producers and manufacturers regard retailer as a means of dispersing goods to the market and drawing income into their hands so that they can continue their business of production. 4. Assumption of Risk: The retailer has to bear the risk of physical deterioration of goods and fall in value. A retailer has to stock goods in anticipation of demand from his customers. This stock must always be sufficient to meet any demand from the customers. This fact involves risk to the extent of the stocks held by any retailer. Firstly, the products stored are subject to the usual risks of flood and other natural calamities. Secondly, there are the risks of flood and other natural calamities. Secondly, there are the risks of spoilage and deterioration due to the very nature of goods. Then there is the risk of change in fashion. Fickle mindedness of the consumers and human tendency to like change in life together make loss of value through change in style and fashion - a very real risk to a retail trader. CET MBA Module 1 Prepared by Belli P K
Retail Management 5. Grading and Packing: Retailers have to sort out in different lots goods or products left ungraded by the producer or the wholesaler. Also, they must make arrangements for proper packing of goods which are sold loose. 6. Financing: Often retailers have to grant credit to consumers. Credit sale in effect means facilitating the flow of products through the marketing channel to its ultimate goal. Thus retailers contribute in financing the marketing process. 7. Supply of Market Information: Retailers, being in touch with the consumers, are most favorably situated to study consumers' behavior, changes in the tastes, fashions and demand etc. Thus they collect valuable information pertaining to the problems of marketing. 8. Advertising: Retailers display goods in their stores. Organised vs unorganized sector Organized retailing, in India, refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the publicly tradedsupermarkets, corporatebacked hypermarkets and retail chains, and also the privately owned large retail businesses. Unorganized retailing, on the other hand, refers to the traditional formats of low-cost retailing, for example, the local corner shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc Organized retailing is based on the principle of unity and unorganized retailing is based on the principle of singularity. Both organized and unorganized retailing is found in most of the countries throughout the world. India and China are strong examples of countries in which unorganized retailing dominated their markets. Today these countries have a growing economy because of the influx of organized retailers into their markets. Future of Retail in India The Indian retail market is estimated at US$ 350 billion. But organised retail is estimated at only US$ 8 billion. However, the opportunity is huge—by 2010, organised retail is expected to grow to US$ 22 billion. With the growth of organised retailing estimated at 40 per cent (CAGR) over the next few years, Reasons for Retail Growth: favourable demographics rising consumer incomes real estate developments especially the emergence of new shopping malls, availability of better sourcing options - both from within India and overseas - and changing lifestyle. Organized versus Unorganized Retailing Changing Age Profile And Disintegration Of Joint Family Growing Disposable Income Income growth and structural changes will fuel growth Organised Retailing Will Expand Sharply Foreign Investment Will Play a Bigger Role in Retailing. India is poised to be the key driver for retail market globally and study after study shows co-existence of organized and un-organized growth. India‘s share of organized retail has just hovered around about 4 per cent despite advent of big corporate in retail sector. China, which brought in global retailers like Wal-Mart in 1996, has just about 20 per cent of organized retail meaning the argument that unorganized retail gets decimated, is fallacious. The highest CAGR achieved for organized retail in India is 46 per cent plus for personal care segment and about 40 per cent for CET MBA Module 1 Prepared by Belli P K
Retail Management jems and jewelry, as against food and grocery, which, grew only about 16 per cent./ Retail economy accounted for seven per cent plus share of total employment in 2004-05, and with projections to grow every year, with more and more formats opening up in the retail sector. Retail in India has grown manifold over the years with both organized (Reliance, Tatas, Future Group, RPG, Aditya Birla Group and Bharti enterprises etc in the fray with full might). But a clear pan India appeal shows India is ready to host retail without fear or favor. Retailing in India is one of the pillars of its economy and accounts for 14 to 15 percent of its GDP. The Indian retail market is estimated to beUS$ 450 billion and one of the top five retail markets in the world by economic value. India is one of the fastest growing retail markets in the world, with 1.2 billion people. As of 2013, India's retailing industry was essentially owner manned small shops. In 2010, larger format convenience stores and supermarkets accounted for about 4 percent of the industry, and these were present only in large urban centers. India's retail and logistics industry employs about 40 million Indians (3.3% of Indian population). Mom-and-Pop Represent the small, individually owned and operated retail outlet. In many cases these are family-run businesses catering to the local community often with a high level of service but relatively small product selection.. Mass Discounters These retailers can be either general or specialty merchandisers but either way their main focus is on offering discount pricing. Compared to department stores, mass discounters offer fewer services and lower quality products. Warehouse Stores This is a form of mass discounter that often provides even lower prices than traditional mass discounters. In addition, they often require buyers to make purchases in quantities that are greater than what can be purchased at mass discount stores. These retail outlets provide few services and product selection can be limited. Furthermore, the retail design and layout is as the name suggests, warehouse style, with consumers often selecting products off the ground from the shipping package. Some forms of warehouse stores, called warehouse clubs, require customers purchase memberships in order to gain access to the outlet. Category Killers Many major retail chains have taken what were previously narrowly focused, small specialty store concepts and have expanded them to create large specialty stores. These so-called ―category killers‖ have been found in such specialty areas as electronic (e.g., Best Buy), office supplies (e.g., Staples) and sporting goods (e.g., Sport Authority). Department Stores These retailers are general merchandisers offering mid-to-high quality products and strong level of services, though in most cases these retailers would not fall into the full-service category. While department stores are classified as general merchandisers some carry a more selective product line. For instance, while Sears carries a wide range of products from hardware to cosmetics, Nordstrom focuses their products on clothing and personal care products. CET MBA Module 1 Prepared by Belli P K
Retail Management Boutique This retail format is best represented by a small store carrying very specialized and often high-end merchandise. In many cases a boutique is a full-service retailer following a full-pricing strategy. Mall management broadly includes: positioning a mall zoning – formulating the right tenant mix and its placement in a mall promotions and marketing facility management – infrastructure, traffic and ambience management finance management Positioning a Mall Positioning a mall refers to defining the category of services offered based on demographics, psychographics, income levels, competition in neighboring areas and extensive market research of the catchment. For example, if the market research indicates that the average number of households living in a particular area belongs to the upper middle class, then a high-end retail mall would suit the location. Positioning also refers to the location of the shopping mall. A good location defined in terms of factors like ease of access via roads, good visibility, etc. is considered as one of the prime prerequisites for a mall. Zoning – Formulating the Right Tenant Mix and Its Placement in a Mall Tenant mix refers to the combination of retail shops occupying space in a mall. A right tenant mix would form an assemblage that produces optimum sales, rents, service to the community and financiability of the shopping mall venture. Zoning refers to the division of mall space into zones for the placement of various retailers. A mall is dependent on the success of its tenants, which translates to the financial feasibility of the tenant in the mall. Generally, there are two types of consumers visiting malls – focused and impulse buyers. The time spent by focused buyers in malls is relatively lower compared with impulse buyers who also enjoy window shopping. There is little that retailers can do to attract focused buyers as they usually know what they require and from where. However, right tenant mix and optimum retailer placement after a diligent zoning exercise can help retailers attract both types of consumers, especially the impulse buyers. Formulating the right tenant mix based on zoning not only helps attract and retain shoppers by offering them multiple choices and satisfying multiple needs, but also facilitates the smooth movement of shoppers within the mall, avoiding clusters and bottlenecks. This helps influence shoppers‘ mall preference and frequency of visits. It also helps in building a distinct image in the minds of shoppers, which is critical considering the robust upcoming supply of malls. The selection of the right anchor tenant plays a crucial role in establishing a good tenant mix. The anchor tenant is defined as the largest occupier in a mall in terms of square feet. Vanilla retailers5 cluster around the anchor and feed off the shopping traffic it generates. The successful execution of the zoning exercise for a mall is carried forward through lease management on an ongoing basis. Forging good leases with retailers is an essential part of ensuring the presence of the right retailers in a mall. Promotions and Marketing Promotional activities and events in a mall form an integral part of mall management. Activities like food festivals, handicraft exhibitions and celebrity visits increase foot traffic and in turn sales volumes. Organising CET MBA Module 1 Prepared by Belli P K
Retail Management cultural events has time and again proved vital in attracting consumers to a mall. Such activities may also act as a differentiator for a mall. Developers can work on drafting marketing strategies for individual malls to meet the needs of the local consumer base and the challenges of local, and in some cases, regional competitors. Facility Management Facility management refers to the integration of people, place, process and technology in a building. It also means optimal utilisation of resources to meet organisational needs. It broadly includes infrastructure, ambience and traffic management. Infrastructure Management – Infrastructure management refers to the management of facilities provided to the tenants within the mall. This includes provision of adequate power supply, safety issues in case of emergency and miscellaneous issues related to signage, water supply, sanitation, etc. These form an integral part of mall management as they are the basic amenities that any tenant would look for in a mall. Infrastructure management also includes risk management issues such as essential safety measure asset liability and environmental audits as well as emergency and evacuation training. Ambience Management – The overall shopping experience provided for consumers becomes an important factor for the success of any mall. Ambience management includes management of parks, fountains and overall look of the mall. A mall is not just a place for shopping but is also a place where people spend their leisure time. In favourable, lush green landscaping with seating facilities and the presence of food and beverage inside or outside the mall can increase foot traffic. Traffic Management – Traffic management includes managing foot traffic into the mall and parking facilities. Foot traffic management involves crowd management inside the operational area of a mall. The flow of people is related to the design of the mall and the spatial distribution of its tenants. For example, a star-shaped mall tends to have a problem of crowding in the centre of the mall, as everyone has to pass through the centre while moving from one side to the other. Circular malls, on the other hand, would not have this problem. They tend to have better pedestrian flow and less congestion. Managing parking facilities includes provision of ample parking and manoeuvring of cars in the parking lot. Finance Management Professional financial management of a mall as a business venture is a must. Mall management also covers financial management, which involves monitoring and controlling of various issues such as: cash receipts and collection of income including rentals, service charges, car park receipts, electricity and other utility income developing accounting systems to track the ageing of debts, payment delay patterns, bad debts and payment of all invoices and expenses developing standard financial templates so that a detailed annual property budget is prepared at times, organising resources to deliver an efficient and effective annual external audit. Issues Related to Mall Management in the Indian Retail Market Lack of Feasibility/Market Research Prior to the Development of a Mall – In the past, some malls were constructed without carrying out a rigorous due diligence exercise on their feasibility. The market scene is gradually changing wherein more and more developers are approaching property consultancy firms to conduct feasibility and positioning studies for their projects. Zoning – Landlords/developers tend to lease out retail space on a first-come-first-served basis. This creates a sub-optimal tenant mix like a food and beverage outlet next to a designer apparel shop instead of an accessories or a footwear shop. Design Issues – At present, most of the popular malls have long queues and congestion outside their main entry points during weekends and festive seasons. Having only one entry and exit points also leads to overcrowding. Similarly, the visibility of retail units from all vantage points is poor in many malls. CET MBA Module 1 Prepared by Belli P K
Retail Management Few Promotional Activities – There are very few promotional activities organised in the majority of malls at present. Developers perceive that these events only help increase foot traffic and not revenues. Facility Management – Good infrastructure/facility management of common areas becomes a problem in malls where retail outlets are sold as strata title. Parking – Many malls in India do not have adequate parking. Since most malls are being built in the city, developers typically provide basement parking facilities. However, these parking spaces are inefficient due to low ceiling heights, bad lighting and single entry and exit points. Visual merchandising is the activity and profession of developing the floor plans and three-dimensional displays in order to maximise sales. Both goods and services can be displayed to highlight their features and benefits. The purpose of such visual merchandising is to attract, engage and motivate the customer towards making a purchase. Visual merchandising commonly occurs in retail spaces such as retail stores and trade shows. The purpose of visual merchandising is to: Make it easier for the customer to locate the desired category and merchandise. Make it easier for the customer to self-select. Make it possible for the shopper to co-ordinate and accessorise. Recommend, highlight and demonstrate particular products at strategic locations. Educate the customer about the product in an effective & creative way. Make proper arrangements in such a way to increase the sale of unsought goods. Many elements can be used by visual merchandisers in creating displays including color, lighting, space, product information, sensory inputs (such as smell, touch, and sound), as well as technologies such as digital displays and interactive installations. Window displays can communicate style, content, and price. Display windows may also be used to advertise seasonal sales or inform passers-by of other current promotions. Visual merchandisers may perform the following tasks: communicate with managers of department stores to work out the floor layout, traffic flow and display points, as well as what items are to be displayed and how design window or internal displays based on a theme, style or trend of promotion obtain props and accessories for constructing displays make and paint props and signs dress mannequins and use appropriate lighting to display merchandise for the best possible presentation arrange ticketing and signage maintain, store and dismantle displays after promotion periods. Store operations management Store Atmosphere The store must offer a positive ambience to the customers for them to enjoy their shopping and leave with a smile. The store should not give a cluttered look. CET MBA Module 1 Prepared by Belli P K
Retail Management The products should be properly arranged on the shelves according to their sizes and patterns. Make sure products do not fall off the shelves. There should be no foul smell in the store as it irritates the customers. The floor, ceiling, carpet, walls and even the mannequins should not have unwanted spots. Never dump unnecessary packing boxes, hangers or clothes in the dressing room. Keep it clean. Make sure the customers are well attended. Don‘t allow customers to carry eatables inside the store. Cash Handling One of the most important aspects of retailing is cash handling. It is essential for the retailer to track the daily cash flow to calculate the profit and loss of the store. Cash Registers, electronic cash management system or an elaborate computerized point of sale (POS) system help the retailer to manage the daily sales and the revenue generated. Prevent Shoplifting/Safety and Security The merchandise should not be displayed at the entry or exit of the store. Do not allow customers to carry more than three dresses at one time to the trial room. Install CCTVs and cameras to keep a close watch on the customers. Each and every merchandise should have a security tag. Ask the individuals to submit carry bags at the security. Make sure the sales representative handle the products carefully. Clothes should not have unwanted stains or dust marks as they lose appeal and fail to impress the customers. Install a generator for power backup and to avoid unnecessary black outs. Keep expensive products in closed cabinets. Instruct the children not to touch fragile products. The customers should feel safe inside the store. Customer Service Customers are assets of the retail business and the retailer can‘t afford to lose even a single customer. Greet customers with a smile. Assist them in their shopping. The sales representatives should help the individuals buy merchandise as per their need and pocket. The retailer must not oversell his products to the customers. Let them decide on their own. Give the individual an honest and correct feedback. If any particular outfit is not looking good on anyone, tell him the truth and suggest him some better options. Never compromise on quality of products. Remember one satisfied customer brings five more individuals to the store. Word of mouth plays an important role in Brand Promotion. Refunds and Returns Formulate a concrete refund policy for your store. The store should have fixed timings for exchange of merchandise. Never exchange products in lieu of cash. CET MBA Module 1 Prepared by Belli P K
Retail Management Never be rude to the customer, instead help him to find something else Supplier relationship management (SRM) is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions. In practice, SRM entails creating closer, more collaborative relationships with key suppliers in order to uncover and realize new value and reduce risk. The focus of SRM is to develop two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved by operating independently or through a traditional, transactional purchasing arrangement. In many fundamental ways, SRM is analogous to customer relationship management. Just as companies have multiple interactions over time with their customers, so too do they interact with suppliers – negotiating contracts, purchasing, managing logistics and delivery, collaborating on product design, etc. The starting point for defining SRM is a recognition that these various interactions with suppliers are not discrete and independent – instead they are accurately and usefully thought of as comprising a relationship, one which can and should be managed in a coordinated fashion across functional and business unit touch-points, and throughout the relationship lifecycle. 1. A formal SRM team or office at the corporate level. The purpose of such a group is to facilitate and coordinate SRM activities across functions and business units. SRM is inherently cross-functional, and requires a good combination of commercial, technical and interpersonal skills. These ―softer‖ skills around communication, listening, influencing and managing change are critical to developing strong and trusting working relations. 2. A formal Relationship Manager or Supplier Account Manager role. Such individuals often sit within the business unit that interacts most frequently with that supplier, or may be filled by a category manager in the procurement function. This role can be a full-time, dedicated positions, although relationship management responsibilities may be part of broader roles depending on the complexity and importance of the supplier relationship (see Supplier Segmentation). SRM managers understand their suppliers‘ business and strategic goals, and are able to see issues from the supplier‘s point of view while balancing their own organization‘s requirements and priorities. 3. An executive sponsor and, for complex, strategic supplier relationships, a cross-functional steering committee. These individuals form a clear link between SRM strategies and overall business strategies, serve to determine the relative prioritization among a company‘s varying goals as they impact suppliers, and act as a dispute resolution body Supplier segmentation, in contrast, is about determining what kind of interactions to have with various suppliers, and how best to manage those interactions, not merely as a disconnected set of siloized transactions, but in a coordinated manner across the enterprise. Suppliers can be segmented, not just by spend, but by the total potential value (measured across multiple dimensions) that can be realized through interactions with them. Further, suppliers can be segmented by the degree of risk to which the realization of that value is subject SRM, in contrast, is about collaboratively driving value for both parties, resulting in lower costs, reduced risk, greater efficiency, better quality, and access to innovation. This requires a focus on both negotiating the contract and managing the resulting relationship throughout implementation, as well as systematic joint valuediscovery efforts Inventory Control is the supervision of supply, storage and accessibility of items in order to ensure an adequate supply without excessive oversupply. It can also be referred as internal control - an accounting CET MBA Module 1 Prepared by Belli P K
Retail Management procedure or system designed to promote efficiency or assure the implementation of a policy or safeguard assets or avoid fraud and error etc. Inventory control may refer to: In economics, the inventory control problem, which aims to reduce overhead cost without hurting sales, In the field of loss prevention, systems designed to introduce technical barriers to shoplifting. It answers the 3 basic questions of any supply chain: 1. When? 2. Where? 3. How much? A warehouse is a commercial building for storage of goods. Warehouses are used by manufacturers, importers, exporters, wholesalers, transportbusinesses, customs, etc. They are usually large plain buildings in industrial areas of cities and towns and villages. They usually have loading docks to load and unload goods from trucks. Sometimes warehouses are designed for the loading and unloading of goods directly from railways, airports, orseaports. They often have cranes and forklifts for moving goods, which are usually placed on ISO standard pallets loaded into pallet racks. Stored goods can include any raw materials, packing materials, spare parts, components, or finished goods associated with agriculture, manufacturing and production. For a warehouse to function efficiently, the facility must be properly slotted. Slotting addresses which storage medium a product is picked from (pallet rack or carton flow), and how they are picked (pick-to-light, pick-tovoice, or pick-to-paper). With a proper slotting plan, a warehouse can improve its inventory rotation requirements—such as first in, first out (FIFO) and last in, first out (LIFO)—control labor costs and increase productivity. Traditional warehousing has declined since the last decades of the 20th century, with the gradual introduction of Just In Time (JIT) techniques. The JIT system promotes product delivery directly from suppliers to consumer without the use of warehouses. However, with the gradual implementation ofoffshore outsourcing and offshoring in about the same time period, the distance between the manufacturer and the retailer (or the parts manufacturer and the industrial plant) grew considerably in many domains, necessitating at least one warehouse per country or per region in any typical supply chain for a given range of products. Recent retailing trends have led to the development of warehouse-style retail stores. These high-ceiling buildings display retail goods on tall, heavy duty industrial racks rather than conventional retail shelving. Typically, items ready for sale are on the bottom of the racks, and crated or palletized inventory is in the upper rack. Essentially, the same building serves as both warehouse and retail store. Another trend relates to Vendor Managed Inventory (VMI). This gives the vendor the control to maintain the level of stock in the store. This method has its own issue that the vendor gains access to the warehouse. Large exporters/manufacturers use warehouses as distribution points for developing retail outlets in a particular region or country. This concept reduces end cost to the consumer and enhances the production sale ratio. Cross docking is a specialized type of distribution center (DC) in that little or no inventory is stored and product is received, processed (if needed) and shipped within a short timeframe. As in warehousing, there are different types of cross docks. Reverse logistics is another type of warehousing that has gained attention in our "green-conscious" world. The term refers to items that are going from the end user back to the distributor or manufacturer. Franchising is the practice of using another firm's successful business model. The word 'franchise' is of AngloFrench derivation - from franc - meaning free, and is used both as a noun and as a (transitive) verb. For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods that avoids the investments and liability of a chain. The franchisor's success depends on the success of the franchisees. The CET MBA Module 1 Prepared by Belli P K
Retail Management franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business. Two important payments are made to a franchisor: (a) a royalty for the trademark and (b) reimbursement for the training and advisory services given to the franchisee. These two fees may be combined in a single 'management' fee. A fee for "disclosure" is separate and is always a "front-end fee". A franchise usually lasts for a fixed time period (broken down into shorter periods, which each require renewal), and serves a specific territory or geographical area surrounding its location. One franchisee may manage several such locations. Agreements typically last from five to thirty years, with premature cancellations or terminations of most contracts bearing serious consequences for franchisees. A franchise is merely a temporary business investment involving renting or leasing an opportunity, not the purchase of a business for the purpose of ownership. It is classified as a wasting asset due to the finite term of the license. Franchise fees are on average 6.7% with an additional average marketing fee of 2%  A franchise can be exclusive, non-exclusive or 'sole and exclusive' Obligations of the parties Each party to a franchise has several interests to protect. The franchisor is involved in securing protection for the trademark, controlling the business concept and securing know-how. The franchisee is obligated to carry out the services for which the trademark has been made prominent or famous. There is a great deal of standardization required. The place of service has to bear the franchisor's signs, logos and trademark in a prominent place. The uniforms worn by the staff of the franchisee have to be of a particular design and color. The service has to be in accordance with the pattern followed by the franchisor in the successful franchise operations. Thus, franchisees are not in full control of the business, as they would be in retailing. Customer relationship management (CRM) is a model for managing a company‘s interactions with current and future customers. It involves using technology to organize, automate, and synchronize sales, marketing, customer service, and technical support. Types of CRM Sales force automation (SFA) uses software to streamline the sales process. The core of SFA is a contact management system for tracking and recording every stage in the sales process for each prospective client, from initial contact to final disposition. Many SFA applications also include insights into opportunities, territories, sales forecasts and work flow automation CRM systems for marketing track and measure campaigns over multiple channels, such as email, search, social media, telephone and direct mail. These systems track clicks, responses, leads and deals. CRMs can be used to create, assign and manage requests made by customers, such as call center software which help direct customers to agents. CRM software can also be used to identify and reward loyal customers over a period of time. Appointment CRMs automatically provide suitable appointment times to customers via e-mail or the web, which are then synchronized with the representative or agent's calendar For small businesses a CRM may simply consist of a contact manager system which integrates emails, documents, jobs, faxes, and scheduling for individual accounts CRMs available for specific markets for professional markets (legal, finance) are frequently touted for their event management and relationship tracking opposed to financial return on investment (ROI). Social media is the modern form to build customer relationship. Some CRMs coordinate with social media sites like Twitter, LinkedIn, Facebook and Google Plus to track and communicate with customers who share CET MBA Module 1 Prepared by Belli P K
Retail Management opinions and experiences about their company, products and services. Once you have identified the trends through social media a business can make more accurate decisions on what products to supply to the society. CRM futurist Dennison DeGregor describes a shift from 'push CRM' toward a 'customer transparency' (CT) model, due to the increased proliferation of channels, devices, and social media. Supply chain management A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves. It is a network of facilities and distribution options that performs the functions of procurement of materials, transformation of these materials into intermediate and finished products, and the distribution of these finished products to customers. Supply chain management acknowledges all of traditional logistics and also includes activities such as marketing, new product development, finance, and customer service. Taken individually, different supply chain requirements often have conflicting needs. For instance, the requirement of maintaining high levels of customer service calls for maintaining high levels of inventory, but then the requirement to operate efficiently calls for reducing inventory levels. It is only when these requirements are seen together as parts of a larger picture that ways can be found to effectively balance their different demands. Effective supply chain management requires simultaneous improvements in both customer service levels and the internal operating efficiencies of the companies in the supply chain. there are five areas where companies can make decisions that will define their supply chain capabilities: Production; Inventory; Location;Transportation; and Information. As with factories,warehouses too can be built to accommodate different approaches. There are three main approaches to use in warehousing: 1. Stock keeping unit (SKU) storage—In this traditional approach, all of a given type of product is stored together. This is an efficient and easy to understand way to store products. 2. Job lot storage—In this approach, all the different products related to the needs of a certain type of customer or related to the needs of a particular job are stored together. This allows for an efficient picking and packing operation but usually requires more storage space than the traditional SKU storage approach. 3. Crossdocking—An approach that was pioneered by Wal-Mart in its drive to increase efficiencies in its supply chain. In this approach, product is not actually warehoused in the facility. Instead the facility is used to house a process where trucks from suppliers CET MBA Module 1 Prepared by Belli P K
Retail Management arrive and unload large quantities of different products. These large lots are then broken down into smaller lots. Smaller lots of different products are recombined according to the needs of the day and quickly loaded onto outbound trucks that deliver the products to their final destination. Wal-Mart is a company shaped by its supply chain and the efficiency of its supply chain has made it a leader in the markets it serves. Wal-Mart introduced concepts that are now industry standards. Many of these concepts come directly from the way the company builds and operates its supply chain. Let’s look at four such concepts: The strategy of expanding around distribution centers (DCs) Using electronic data interchange (EDI) with suppliers The “big box” store format “Everyday low prices” The strategy of expanding around DCs is central to the way Wal-Mart enters a new geographical market. The company looks for areas that can support a group of new stores, not just a single new store. It then builds a new DC at a central location in the area and opens its first store at the same time. The DC is the supply chain bridgehead into the new territory. It supports the opening of more new stores in the area at a very low additional cost. Those savings are passed along to the customers. The use of EDI with suppliers provides the company two substantial benefits. First of all this cuts the transaction costs associated with the ordering of products and the paying of invoices. Ordering products and paying invoices are, for the most part, well defined and routine processes that can be made very productive and efficient through EDI. The second benefit is that these electronic links with suppliers allow Wal-Mart a high degree of control and coordination in the scheduling and receiving of product deliveries. This helps to ensure a steady flow of the right products at the right time, delivered to the right DCs, by all Wal-Mart suppliers. The big box store format allows Wal-Mart to, in effect, combine a store and a warehouse in a single facility and get great operating efficiencies from doing so. The big box is big enough to hold large amounts of inventory like a warehouse. And since this inventory is being held at the same location where the customer buys it, there is no delay or cost that would otherwise be associated with moving products from warehouse to store. Again, these savings are passed along to the customer. Everyday low prices are a way of doing two things. The first thing is to tell its price-conscious customers that they will always get the best price. They need not look elsewhere or wait for special sales. The effect of this message to customers helps Wal-Mart do the second thing, which is to accurately forecast product sales. By eliminating special sales and assuring customers of low prices, it smoothes out demand swings making demand more steady and predictable. This way stores are more likely to have what customers want when they want it. CET MBA Module 1 Prepared by Belli P K
Retail Management Retail Promotion • Any communication by a retailer that informs, persuades, and/or reminds the target market about any aspect of that firm Management of Promotional Efforts Must Fit Into a Retailer‘s Overall Strategy • A retailer‘s location will help determine the target area for promotions • Retailers need high levels of traffic to keep merchandise moving – promotion helps build traffic • Retailer‘s credit customers more store loyal and purchase on larger quantities making them an excellent target for promotions • Promotions can increase short-run cash flow • Promotional creativity and style should coincide with building and fixture creativity • Promotion can be viewed as a major component of customer service because it provides information Promotional Guidelines • Utilize promotions that are consistent with and enhance store image • Review success or failure of each promotion to help in developing future promotions • Test new promotions when possible • Use appeals that are of interest to your target market and that are realistic to obtain • Make your objectives measurable and obtainable • Develop total promotional campaigns, not just ads • New stores need higher promotional budgets than established stores • Stores in out-of-the-way locations require higher promotional budgets than stores with heavy traffic planning a retail promotional strategy Promotional Objectives • Increase sales • Stimulate impulse and reminder buying • Raise customer traffic • Get leads for sales personnel • Present and reinforce the retailer image • Inform customers about goods and services • Popularize new stores and Web sites • Capitalize on manufacturer support • Enhance customer relations • Maintain customer loyalty • Have consumers pass along positive information to friends and others Public Relations CET MBA Module 1 Prepared by Belli P K
Retail Management • Public Relations - Any communication that fosters a favorable image for the retailer among its publics – Nonpersonal or personal – Paid or nonpaid – Sponsor-controlled or not • Publicity – Any nonpersonal form of public relations whereby messages are transmitted through mass media, the time or space provided by the media is not paid for, and there is no identified commercial sponsor Public Relations Advantages • Image can be presented or enhanced • More credible source • No costs for message’s time or space • Mass audience addressed • Carryover effects possible • People pay more attention than to clearly identified ads Disadvantages • Some retailers do not believe in spending on image-related communication • Little control over publicity message • More suitable for short run • Costs for PR staff, planning activities, and events Advertising • Paid, nonpersonal communication transmitted through out-of-store mass media by an identified sponsor • Key aspects – Paid form – Nonpersonal presentation – Out-of-store mass media – Identified sponso Advertising Advantages • Attracts a large audience • Gains pass along readership (for print) • Low cost per contact • Many alternatives available • Control over message content; message can be standardized • Message study possible • Editorial content surrounds ad • Self-service operations possible Disadvantages • Standardized messages lack flexibility • Some media require large investments • Geographic flexibility limited CET MBA Module 1 Prepared by Belli P K
Retail Management • Some media require long lead time • Some media have high throwaway rate • Some media limit the ability to provide detailed information Yellow Pages • The average consumer looks at: 4.32 ads. • 70% of consumers look at the bigger ads when they are not sure where to make a purchase. • 65% of consumers feel that a large ad signifies a business with an established reputation. • 83% of consumers start looking at ads in the beginning of a heading Billboards/Outdoor Ads • On average, a billboard is only viewed for 7 seconds! • A good rule is to use about 8 to 10 words in your entire ad! • Your message must be very short so it can be easily read by the people driving 60 to 75 miles per hour by your sign. •Measured and priced in gross rating points (GRP) - the total number of postings in a marketing schedule versus the population. The GRP is calculated by dividing the traffic count by the population . •Billboards are typically purchased as 25, 50, 75, or 100 GRP (showings). For example, if you want a 50 GRP (showing), than 50% of the population should see your billboards every single day. Radio Advertising • Retailers spent $72.2 million on metropolitan commercial radio advertising in the first six months of 2005 Media Selection • Coverage – maximum number of consumers in the retailer‘s target market • Reach – actual total number of target customers who come into contact with the ad message • Frequency – average number of times each person who is reached is exposed to the ad during a given time period Scheduling Retail Ads • Ads should appear on (or slightly precede) the days when customers most likely to purchase • Ads should be concentrated around the times when people receive their payroll checks • If funds are limited, concentrate ads during periods of highest demand • Ads should be timed to appear during time of say or day of week when the best cost-per thousand for the target market ((cost of ad/number of people in the target market viewing the ad) x 1000) • The higher the degree of habitual purchasing of a product class, the more the advertising should precede the purchase time Personal Selling Oral communication with one or more prospective customers for the purpose of making a sale Personal Selling Advantages • Message can be adapted • Many ways to meet customer needs • High attention span • Less waste • Better response • Immediate feedback Disadvantages • Limited number of customers handled at one CET MBA Module 1 Prepared by Belli P K
Retail Management time • High costs • Doesn’t get customer in store • Self-service discouraged • Negative attitudes toward salespeople (aggressive, unhelpful) Selected Reasons Why Retail Sales Are Lost Sales Promotion Encompasses the paid communication activities other than advertising, public relations, and personal selling that stimulate consumer purchases and dealer effectiveness Sales Promotions Advantages • Eye-catching appeal • Distinctive themes and tools • Additional value for customer • Draws customer traffic • Maintains customer loyalty • Increases impulse purchases • Fun for customers Disadvantages • Difficult to terminate • Possible damage to retailer’s image • More stress on frivolous selling CET MBA Module 1 Prepared by Belli P K
Retail Management points • Short-term effects only • Used as a supplement Types of Sales Promotions Promotion and the Hierarchy of Effects CET MBA Module 1 Prepared by Belli P K
Retail Management Corporate social responsibility Corporate social responsibility (CSR) is of high topicality in business practice across all industries. Even though CSR is not a new idea and there are several retailers that have always cared for socially responsible behavior, CSR activities such as ethical sourcing, corporate philanthropy, cause-related marketing or socially responsible employment have been introduced or intensified by retail companies mainly in the past several years: ―What was once embraced by a small elite group of companies (names like Timberland, Patagonia, Aveda and REI [in the USA] or dmDrogeriemarkt, The Body Shop, and Coop [in Europe] come to mind), has gone mainstream ...‖ (Wilson 2008). The reasons why retailers engage in CSR initiatives are not only routed in legal rules or accounting regulations. Retailers are also aware that their customers more and more evaluate them according to their socially responsible behavior. Thus, the question of whether acting socially responsible or not is not only an ideological one but an economic one (Smith 2003). Retail companies have learned that ―not only is ‗doing good‘ ‗the right thing to do,‘ but it also leads to ‗doing better‘ through its positive effects on key stakeholder groups‖ (Bhattacharya and Sen 2004: 9). The leading US retail practice magazine Chain Store Age, thus, labeled corporate social responsibility as ―the defining issue of our time categorized CSR activities of 600 companies into six broad domains: community support (e.g. health programs, educational initiatives), diversity (e.g. family-, sex-, disabilitybased initiatives), employee support (e.g. job security, safety-concerns), environment (e.g. waste management, pollution control, animal testing), non-domestic operations (e.g. overseas labor practice, operations in countries with human rights violations), and product (e.g. product safety, antitrust disputes). CET MBA Module 1 Prepared by Belli P K
Retail Management CSR seems to have a positive impact on consumer behavior, but the underlying processes that lead to such positive effects still remain somewhat open. As in previous research in the area of retailing usually only several aspects of socially responsible behavior have been included in the analyses (e.g. only philanthropic or ecological oriented activities) HRM in retail Increasing competition in domestic and international markets has focused attention on developing strategies that maximise the return on investment in human resources. The transition from a manufacturing labour-intensive economic model to a service-driven knowledge-centred one, coupled with an almost unprecedented level of environmental uncertainty has forced organisations towards re-evaluating the importance of human capital and readjusting their strategic priorities. As a result, there is a greater recognition that distinctive organisational competencies obtained through highly developed employee skills; unique organisational cultures and effective management systems form the basis for achieving competitive advantage (Greer 2001; Johnson & Scholes 1999). In this context, Lengnick-Hall & Lengnick-Hall (1990) argue that competitive advantage is the essence of competitive strategy encompassing those capabilities, resources, relationships and decisions, which permit an organisation to capitalise on opportunities in the marketplace and to avoid threats to its desired position. While it has long been recognised that investment in human resources can provide a sustainable source of competitive advantage and increases the likelihood of successful implementation of a firm’s business strategies (Greer 2001; Cunningham & Hyman 1995), it has been argued that more clarity is needed in specifying the process by which HRM is linked to competitive strategy CET MBA Module 1 Prepared by Belli P K
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