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The various processes which help the customers to procure the desired merchandise from the retail stores
for their end use refer to retail management. Retail management includes all the steps required to bring the
customers into the store and fulfil their buying needs.Retail management makes shopping a pleasurable experience
and ensures the customers leave the store with a smile. In simpler words, retail management helps customers shop
without any difficulty.
Characteristics of RM
1. Direct End-User Interaction
2. Platform for Promotions & POP displays
3. Lower unit sales
4. Retail location critical
5. Services as important as Core Products
6. Large number of Retailers to meet geographical coverage and population density
What is Retailing?
Retailing – a set of business activities that adds value to the products and services sold to consumers for
their personal or family use. A retailer is a businessmen that sells products and/or services to consumers for personal
or family use.
Examples of Retailers
1. Pantaloon Retail
2. Tata Group - operates Westside
3. K Raheja Group - Shopper’s Stop
4. Piramal Group - 18 TruMart stores
5. Reliance Fresh stores & Reliance Mart Hypermart – Ahmedabad
6. Aditya Birla Nuvo Ltd. They own brands like Louis Phillipe, Van Heusen, Allen Solly, Peter England, Trouser
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Vertical Integration – firm performs more than one set of activities in the channel
Ex: retailer invests in wholesaling or manufacturing
Backward Integration – retailer performs some distribution and manufacturing activities
Forward Integration – manufacturers undertake retailing activities
Large retailers engage in both wholesaling and retailing
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Social Significance of Retailing
The India Brand Equity Forum’s Indian Retail Report for the third-quarter of 2010, forecasts that the
total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014.
With the expanding middle and upper class consumer base, there will also be opportunities in India's
tier II and III cities. The greater availability of personal credit and a growing vehicle population to
improve mobility also contribute to a trend towards annual retail sales growth of 11.4 per cent.
This is a consequence of India's dramatic, rapid shift from small independent retailers to large,
Economic Significance of Retailing
The unorganized retailers takes the lion's share in the Indian retail sector, but the organized
retailers are growing at a good pace, and promises an increase of proportion of 9 - 10% by 2010.
This is to be the largest sector after the agricultural sector.
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Benefits to the economic growth:-
Better quality products and services would lead to better competition
More exports bring more foreign direct investments
Organized Indian retail sector would encourage tourism
Along with the employment boom there would be a vast development in the expertise of the human
There would remain future scope for improvements in agriculture, small, and medium scaled with
the help of the Indian retail sector
One of the largest sectors for job growth in India
Social Responsibility --Corporate Social Responsibility
The voluntary actions taken by a company to address the ethical, social, and environmental impacts of its
business operations, in addition to the concerns of its stakeholders.
Retail companies give away 1.7% of their profits, compared with about 0.9% for companies in other industries.
Sources: India Brand Equity Forum’s Indian Retail Report for the third-quarter of 2010
Need to identify the competition first
Intratype Competition -- Similar stores selling the same product. e.g., Reliance Fresh vs. Big Apple.
Intertype Competition -- Different type stores selling the same product. e.g., Big Bazaar and K B Fair Price.
Vertical Competition -- Retailer competing with wholesaler or manufacturer. e.g., Reebok Shoe store and
Reebok factory outlet.
The retail format is the store ‘package’ that the retailer presents to the shopper.
A format is defined as a type of retail mix, used by a set of retailers.
Store Formats are formats based on the physical store where the vendor interacts with the customer
It is the mix of variables that retailers use to develop their business strategies and
constitute the mix as assortment, price, transactional convenience and experience.
On the basis of ownership
Chain store owners
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Owns, operates only one outlet,
Owner / Proprietor / Family members working as assistants.
Neighborhood kirana shop
Advantages – Ease of entry and rapport with customers.
Disadvantages – Economies of scale and “Total Offer”
A chain retailer operates multiple outlets (store units) under common. In developed economies, they
account for nearly a quarter of retail outlets and over 50 percent of retail sales. Retail chains can range from
two stores to retailers with over 1,000 stores. Some retail chains are divisions of larger corporations or
Franchising is a contractual agreement between a franchiser and a franchisee that allows the franchisee to
operate a retail outlet using a name and format developed and supported by the franchiser
Leased Department Stores
A Leased Department is a department in a retail store rented generally by a manufacturer. The lessee is responsible
for all aspects of business and pays the store a rent. The store may impose operating restrictions for the leased
department to ensure the overall consistency.
The leased departments choose to operate in categories that are generally on the fringe of the store’s major product
lines, such as in-store beauty salons, banks, photographic studios and food courts.
A Consumer Cooperative is a retail firm in which a group of consumers invest in the enterprise. The officers
are elected. Consumer-members share the profits or saving that accrue. Such retailers are many in number
but small in size and are most popular in food retailing. They are started mainly to guard against the
malpractice that many retailers indulge in and either charge higher prices or offer inconsistent quality of
Store Based Retailer
Food- Oriented Retailers:
food based superstore,
box (limited line store)
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A convenience store is a well-located store.
The ease of shopping and personalised services,
charges average to above average prices,
carries a moderate number of items.
stays open for long hours
provides an average atmosphere and customer services.
It is often also called as the "mom–and-pop" stores.
useful for fill-in merchandise and emergency purchases
A conventional supermarket is a self-service food store
Offers groceries, meat,
limited sales of non-food items such as health and beauty aids and general merchandise
large in size and carry 9,000 to 11,000 items.
They are chosen due to volume sales, self-service, low prices and easy parking.
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THEORIES OF RETAIL DEVELOPMENT
These theories revolve around:
• Importance of competitive pressures
• The investments in organizational capabilities and
• Creation of a sustainable competitive advantage.
These are developed to explain the process of retail development:
1. Environmental- where a change in retail is attributed to the change in the environment in which the retailers
2. Cyclical- where change follows a pattern and phases can have definite identifiable attributes associated with them.
3 Conflictual- where the competition or conflict between two opposite types of retailers, leads to a new format being
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A change in retail is attributed to the change in the environment in which the retailers operate
c. Changing Technology
Based on Darwin theory of “survival of the fittest”
NATURAL SELECTION/ ENVIRONMENTAL THEORY
Those Retail Institutions Succeed which adapt to changes in customers, Technology, competition and legal
Department stores have tried to combat specialty stores by opening specialty counters within the stores
Interest in physical fitness and increased number of women in workforce have made salad bars in grocery
Where change follows a pattern and phases can have definite identifiable attributes associated with them
Wheel of Retailing
low price operators
Low profit margins
Offering greater range of products
Leads to losing original focus
Adding unrelated goods & services
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ACCORDIAN THEORY( comes under cynical)
Retailers fluctuate from strategy of offering wide merchandise with shallow assortment to offering limited
categories with deep assortment
In rural markets, Retailers sell many categories under one roof: shoes, cosmetics, foods, cloth, medicines.
However the assortment is shallow and customers have limited choice
Department stores have both width and depth of merchandise
Specialty stores carry special categories with deep selection
The competition or conflict between two opposite types of retailers leads to a new format being developed
Antithesis: a challenge to thesis
Synthesis: blending of thesis & antithesis
DIALECTIC PROCESS/ CONFLICT THEORY
An evolutionary theory based on premise that retail institutions evolve.
The theory suggests that new Retail formats emerge by adopting characteristics from other forms of
retailers in much the same way as the child is the product of the pooled genes of the parents.
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Specialty stores with high margins, low turnover plush operations
Discount stores with low margins, high turnover low operations
Both the above were synthesized to form category specialist stores.
Summary of theories
Environmental Theory--Darwin's the of natural selection has been popularized by the phrase "survival the fittest".
Retail institutions are economic entities and retailers confront an environment which is made up of customers,
competitors and changing technology. This environment can alter the profitability of a single retail state as well as-of
clusters and centers. The environment that a retailer competes in is sufficiently robust to squash any retail form that
does not adjust.
Thus, the birth, success or decline of different forms of retail enterprises is many a times ""attributed to the business
environment. For example, the decline of department stores in the ?western markets is attributed to the general
inability of those retailers to react quickly and positively to environmental change.
Cyclical Theory--The most well known theory of retail evolution is The Wheel of Retailing theory. This theory,
described by McNair II, helps us understand retail changes. This theory suggests that retail innovators often first
appear as low-price operators with a low-cost structure and low profit-margin requirements, offering some real
advantages, such as specific merchandise, which enables them to take customers away from more established
As they prosper, they develop their businesses, offering a greater range or acquiring more expensive facilities, but
this can mean that they lose the focus that was so important when they entered the market. Such 'trading up' occurs
as the retailer becomes established in his own right.
Conflict Theory--Conflict always exists between operators of similar formats or within broad retail categories. It is
believed that retail innovation does not necessarily reduce the number of formats available to the consumer;
instead, it leads to the development of more formats. Retailing thus evolves through a dialectic process, i.e., the
blending of two opposites to create a new format.
This can be applied to Developments in retailing as follows: --
A. Thesis- Individual retailers as corner shops all across the country
B. Antithesis- A position opposed to the thesis develops over a period of time. These are the department stores. The
antithesis is a "challenge" to the thesis.
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C. Synthesis- There is a blending of the thesis and antithesis. The result is position between the "thesis" and
"antithesis". Super markets and hypermarkets thrive. This "synthesis" becomes the "thesis" for the next round of
RETAILING IN INDIA
The Indian retail sector is highly fragmented with more than 90 per cent of its business being carried out by
traditional family run small stores.
This provides immense opportunity for large scale retailers to set-up their operations – a slew of organized
retail formats like departmental stores, hypermarkets, supermarkets and specialty stores are swiftly
replacing the traditional formats dramatically altering the retailing landscape in India.
India is the third-most attractive retail market for global retailers among the 30 largest emerging markets,
according to US consulting group AT Kearney’s report published in June 2010
The total retail sales in India will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015
Indian retail sector accounts for 22 per cent of the country's gross domestic product (GDP) and contributes
to 8 per cent of the total employment.
ORGANISED v/s UNORGANISED
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The Indian retail market, over the last decade, has been increasingly leaning towards organized retailing
The pattern in domestic retailing is altering in the favor of organized modern retailing, a big change from the
traditional plethora of unorganized family-owned businesses.
Rapid urbanization, changes in shopping pattern, demographic dividend and pro-active measures by the
Government are abetting the growth of the retail sector in India.
Traditionally three factors have plagued the retail industry:
Unorganized : Vast majority of the twelve million stores are small "father and son" outlets
Fragmented : Mostly small individually owned businesses, average size of outlet equals 50 s.q. ft. Though India has
the highest number of retail outlets per capita in the world, the retail space per capita at 2 s.q. ft per person is
amongst the lowest.
Rural bias: Nearly two thirds of the stores are located in rural areas. Rural retail industry has typically two forms:
"Haats" and “Melas". Haats are the weekly markets : serve groups of 10-50 villages and sell day-to-day necessities.
Melas are larger in size and more sophisticated in terms of the goods sold (like TVs)
Experimentation with formats: Retailing in India is still evolving and the sector is witnessing a series of experiments
across the country with new formats being tested out. Ex. Quasi-mall, sub-urban discount stores, Cash and carry etc.
Store design : Biggest challenge for organized retailing to create a “customer-pull” environment that increases the
amount of impulse shopping. Research shows that the chances of senses dictating sales are upto 10-15%. Retail
chains like MusicWorld, Baristas, Piramyd and Globus are laying major emphasis & investing heavily in store design.
Emergence of discount stores: They are expected to spearhead the organized retailing revolution. Stores trying to
emulate the model of Wal-Mart. Ex. Big Bazaar, Bombay Bazaar, RPGs.
Unorganized retailing is getting organized: To meet the challenges of organized retailing such as large Cineplex's,
and malls, which are backed by the corporate house such as 'Ansals' and 'PVR‘ the unorganized sector is getting
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organized. 25 stores in Delhi under the banner of Provision mart are joining hands to combine monthly buying.
Bombay Bazaar and Efoodmart formed which are aggregations of Kiranas.
Known about the customer’s families
Credit and home delivery
Consumer familiarity runs from generation to generation
Open longer hours and stock most of the goods
Consequently, a large number of customers are not willing to pay a premium for the shopping experience
promised by large format retailers.
HIGH COSTS FOR THE ORGANIZED SECTOR
High expenses to organized sector .
The lease cost up to 6-10 percent of sales
Manpower cost is lower at 5-6 percent of sales
Capital costs are more in retail business due to major renovations needed every 5-7 years.
Product offerings in different stores across the country will be very different
No standard mode of operation across formats
Market not mature (has to be validated)
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Infrastructure will bring about logistical challenges
Though, improvements in road networks, power supply are underway
Trained employees with understanding of retail business are inadequate compared to the needs of
Barriers to Entry
High taxes, bureaucratic clearance process and labour laws
High cost of real estate
though over 600 malls are to come up all over the country by the next 4 years
Indian retailers are deeply entrenched, are expanding and building on logistics and technology initiatives
Weakness of Player
Retail not being recognized as an industry in india.
The lack of recognition as an industry hampers the availability of finance to the existing and new players. This
affects growth and expansion plans
The high cost of real estate:
Real estate price in some cities in India are amongst the highest in the
The lease or rent of the property is one of the major areas of
expenditure, high lease rentals eat into the profitability of a project.
Lack of adequate infrastructure
Poor roads , lack of a cold chain infrastructure, etc , hamper the
development of food and fresh grocery retail in india.
The existing supermarkets and food retailers have to invest a substantial amout of money and time in
building a cold chain network.
Multiple and complex taxation system
The sales tax rates very from state to state while organised players have to face a multiple point control and
tax system,there is considerable expense to transfer good from one store to another.
Foreign direct investment:-
The fact that foreign direct investment(FDI)is not permitted in pure retailing is seen as one of the prime
reasons for the slow growth of
retail in India.
A global retailer can enter India only by way of a franchise with an Indian partner or through technological
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Purchasing power of money
As the Indian population mostly consist of middle class families and
low wages worker they don't want to go in the super market or retail market
Drivers of Retail Change in India
Growing Middle Class
Changing Family Structure
Changing consumption basket
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Information Gathering and Processing in Retailing
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Retail Information System (RIS)
A Retail Information System anticipates the information needs of retail managers; collects, organizes and stores
relevant data on a continuous basis; directs the flow of information to the proper decision makers.
Data mining is the in-depth analysis of information to gain specific insights about customers, product
categories, vendors, and so forth
Micromarketing is an application of data mining, whereby retailers use differentiated marketing and develop
focused retail strategy mixes for specific customer segments
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A clear and definite plan outlined by the retailer to tap the market
A plan to build a long-term relationship with the consumers
Process of strategy formulation in retail is the same as that for any other industry
It starts with the retailer defining or stating the mission for the organization
The mission is at the core of the existence of the retailer
Other aspects of the strategy may change over a period of time or vary for different markets
Elements in Retail Strategy
the market segment(s) toward which the retailer plans to focus its resources and retail mix
the nature of the retailer’s
operations—its retail mix
an advantage over the competition
Criteria For Selecting A Target Market
Attractiveness -- Large, Growing, Little Competition More Profits
Consistent with Your Competitive Advantages
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I. DEFINE MSSION OR PURPOSE
Mission statement is a long term purpose of the organization
It describes what the retailer wishes to accomplish in the markets in which he chooses to operate
Retailers mission statement would normally highlight the following
1. The products and services that will be offered
2. The customers who will be served
3. The geographic areas that the organization chooses to operate in
4. The manner in which the firm intends to compete
II. CONDUCT A SITUATION ANALYSIS
Once the retail mission is defined, the retail organization needs to look inwards
Understand what its strengths and weaknesses are
Look outwards to analyze its opportunities and threats
Situation analysis helps the retailer determine his position and his strengths and weaknesses
Helps formulate a clear picture of the advantages and opportunities which can be exploited
The weaknesses need to be worked upon
This forms the basis or he core element of any strategy
Bargaining Power of Suppliers
Bargaining Power of Customers
Threat of Entry of New Firms
Threat of Substitutes
Rivalry of Competitors
“Attractiveness” is associated with profitability, not ease of entry.
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III. IDENTIFY OPTIONS / STRATEGIC ALTERNATIVES
After determining the strengths and weaknesses vis-à-vis he environment retailer needs to consider various
alternatives available to tap a particular market
Igor Ansoff presented a matrix which looked at growth opportunities
He focused on firm’s present and potential products in the existing and new markets
Ansoff’s matrix also helps to understand the options available to a retailer
IDENTIFY OPTIONS / STRATEGIC ALTERNATIVES
The alternatives available to a retailer are :
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Strategy may focus either on:
- Increasing the number of customers
- Increasing the quantity purchased by customers(basket
- Increasing the frequency of purchase
Increasing the number of customers can be achieved by adding new stores and by modifying the product mix
Another approach is to encourage salespeople to cross sell
Market penetration strategy is the least risky one, since it leverages many of the firm’s resources and
However, market penetration has limits
Once the market approaches saturation, a new strategy needs to be pursued if the firm is to continue growth
MARKET EXPANSION / DEVELOPMENT
When a retailer is said to reach out to new market segments or
completely changes his customer base
This strategy involves :
- Tapping new geographical markets
- Introducing new products to the existing range that appeal to a
Expansion by adding new retail stores to existing network is an example of geographical expansion
Introducing a pharmacy in a supermarket (eg. The medicine Shoppe at the Haiko Supermarket in Mumbai) is
an example of a retailer introducing new products, appealing o a different audience
Another example is McDonald’s who introduced ice creams for Rs.7
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This not only created add on sales, but also brought in customers who had the perception that McDonald’s is
an expensive fast food restaurant
RETAIL FORMAT DEVELOPMENT
When a retailer is said to introduce new retail format to customers
Example fast food retailers like McDonald’s and Subway offer limited menus inside large department stores
Another example is bookstore chain Crosswords, opening smaller format stores by the name Crossword
Corner at Shopper’s Stop
Strategy may be appropriate if the retailer’s strengths are related to specific customers, rather than to
In this situation retailer can leverage its strengths by developing a new product targeted to his existing
IV. SET OBJECTIVES
Translation of mission statement into operational terms
1. Results to be achieved
2. Give direction to and set standards for the measurement of performance
3. Management sets both long term and short term objectives
4. One or two year time frames for achieving specific targets are short term objectives
5. Long term objectives are less specific and reflect the strategic dimension of the firm
Two important focus areas of retailers - Market Performance
- Financial Performance
Objectives are set keeping these focus areas in mind
Sales volume targets
Market hare targets
Returns on investment targets
V. OBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE
Resources needed by a retailer - Human Resources
- Financial Resources
1. Human Resource
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HR plan must be consistent with overall strategy of the organization
HR management focuses on issues such as recruiting, selecting, training,
compensating, and motivating personnel
These activities must be managed effectively and efficiently
2. Financial Resources
Takes care of the monetary aspects of business
Shop rent, salaries and payments for merchandise
VI. DEVELOP THE STRATEGIC PLAN
At this stage strategy is determined through which retailer will achieve objectives
1. The retailer determines and defines his target market
2. The retailer finalizes the retail mix that will serve the audience
Target Market – that segment of consumer market that the retail orgn.decides to serve
No definite process of deciding and selecting the target market
Most retailers look at the entire market in terms of both size and consumer segments to
which it might appeal
From these segments he identifies smaller number of segments that appear promising
These become possible targets
Variables like growth potential, investment needed to compete, the strength of competition, etc are
This enables the retailer to arrive at the best alternative that is most compatible with the organizations
resources and skills
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Financial – not necessarily profits, but return on investment (ROI) – primary focus
Societal – helping to improve the world around us
Personal – self-gratification, status, respect
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- Store location is most often the first consideration in a store choice
- Having a good location increases chances of developing a strong sustainable competitive advantage
- Location decisions can be risky and should be well-thought out
Process of Choosing Particular Locations
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- Size of the trade area
- Occupancy cost of the location
- Pedestrian and vehicle customer traffic location
- Restrictions on operations by property managers
- Convenience of location for customers
Trade area: the geographic area that encompasses most of the customers who would patronize a specific retail site
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THE RETAIL INFORMATION SYSTEM
A Retail Information System anticipates the information needs of retail managers; collects, organizes and stores
relevant data on a continuous basis; directs the flow of information to the proper decision makers.
Applications of IT in Retailing
Automating Processes: Electronic Point of Sales (EPOS), Inventory Planning, Ordering and Management
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Collecting Data About Customers: Purchasing patterns of customers, segmentation, personalization,
customization of offers, loyalty programmes, store design and product placements
Feedback on Marketing Decisions: EPOS data to study effects of promotions, prices, new products and
Communications: With suppliers, customers, internal
Tools to Plan the Business: Software to plan, budget, forecast.
Adding Value to Retail Transactions: IT-assisted transactions (ATMs) may be preferred by some customers,
self-scanning, in-store kiosks for product and info. search.
Technologically-enabled Shopping: Internet shopping
Benefits of IT in Retailing
Cost and Productivity Benefits
• Efficiency of time/transaction speed increases
• Reduced queuing times
• Operating cost reductions
• Increased accuracy of all aspects of the sales transaction
• Improved inventory management
• Reductions in stock outs and stock holdings
Improved data-effectiveness of promotions, forecast of sales
• Ability to incorporate faster responses to changing market conditions
• Consumer benefits from operational efficiencies –e.g. shorter queues
• Can lead to building of loyalty
• Additional selling space coz of reduced stockholdings
• Electronic Point-of-Sale Systems (EPOS)
• Electronic Funds Transfer at Point of Sale (EFTPOS)
Point-of-Sales (POS) applications
The place where a retail transaction occurs is called a point of sale e.g. checkout counter at departmental stores,
kiosks, shops etc. A point-of-sale system combines hardware and software to enable a retail transaction to take
place. The hardware components in a POS system include credit card devices, bar code scanners, invoice printers etc.
The software component is the application that integrates various hardware components during a sale transaction. It
includes point-of-sale tasks as well as integrated accounting, CRM and inventory management solutions. The POS
application also includes invoicing features to generate bills and invoices. The invoicing feature includes items and
prices in a sale and also handles taxes, discounts and various payment options .
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CRM is a business strategy that helps companies in increasing their profits by putting customers’ needs at the center
of the organization. CRM involves managing and storing customer related information, both sales and service
related, to enable companies to provide better services to them. CRM solutions enable companies to create and
maintain relationships with customers by tracking their interests, requirements and buying patterns.
The Universal Product Code (UPC) or Barcode
First 3 digits: Country code
Next 4 digits: Company code
Next 4 digits: Product code
Last digit: Check digit
Electronic data Interchange (EDI)
With EDI, retailers and suppliers regularly exchange information through their computers with regard to inventory
levels, delivery times, unit sales etc of particular items. Both parties enhance their decision-making capabilities,
better control inventory and are more responsive to demand.
Quick-Response (QR) Replenishment Systems
When EPOS are combined with EDI, retailers are in effect adopting just-in-time or quick response (QR)
Reduces stock outs and inventory levels, hence improving service to customers and reducing costs for
Procedure a retailer uses to gather, integrate, apply and store information related to a specific subject area.
Involves use of customer data bases, vendor
data bases, product category data bases etc.
Customer data bases-Purchase frequency, items bought, avg. purchase, demographics, payment methods
Vendor data bases- total retailer purchases per period, total sales to customer per period, most popular
items, retailer profit margins, avg. delivery time and service quality
Product Category Data Bases: Total category sales per period, retailer profit margins, percentage of items
Steps in Data-base Management
Plan the particular database and its components and determine information needs
Acquire the necessary information
Retain the information in a usable and accessible format
Analyze the data base for organization purposes
Update the database regularly
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ALSO EXPLAIN RFID, Data Warehousing, Data Mining ,Micro Marketing,
RIS can be divided into 4 basic types
Transaction Processing Systems (TPS) : Used to facilitate customer transactions and other routine
business processes (e.g. EPOS systems, payroll and employee record keeping). Critical to operations.
Forms major input into other systems
Management Information Systems (MIS): To assist middle managers in their monitoring, controlling and
- Provide routine summary or exception reports
(usually from transaction data from TPS indicating firm’s current performance) either in the form of a report or
-Usually involve pre-specified questions, simple summaries and comparisons.
Decision Support Systems (DSS): IS designed to assist manager in non-routine semi-structured or
-Allows user to conduct a ‘what-if’ analyses by changing the assumptions underlying various components of the
Executive Support Systems : Designed to support senior managers responsible for making strategic decisions-
non-routine and require information about trends in the external environment as well as internally.
- Incorporates information both from MIS and DSS and external data about economic, competitive and regulatory
- Greater benefits to customers
- Greater inconsistency
- Higher cost
- Lower cost
- High consistency
-Meets but does not exceed expectations
The Ten Determinants of Service Quality
1. Access - convenient opening times; alternative methods to accessing services: e.g. telephone and
2. Communication - “plain English” signs & pamphlets/guides; suggestions and complaints procedures.
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3. Competence - all staff knowing, and able to do, their job.
4. Courtesy - staff behaving politely and pleasantly.
5. Credibility - the reputation of the service in the wider community; staff generating a feeling of trust with
6. Reliability - standards defined in local service charters; accuracy of information provided; doing jobs right
first time; keeping promises and deadlines.
7. Responsiveness - resolving problems quickly; allowing users to book an “appointment” for help (e.g. in
literature searching, reference management etc.)
8. Security - ensuring service meets health and safety requirements, for staff and users.
9. Tangibles - up to date equipment and resources.
10. Understanding the customer - tailoring services where practical to meet individual needs.
How do I measure it?
Generally organisations use a mixture of qualitative and quantitative methods:
• Qualitative Methods: interviews, focus groups, observation (including mystery shopping!).
• Quantitative Methods: surveys (questionnaires, customer comments cards), statistics (routine data
• There are also specific tools that can be used to measure service quality in organisations. For example:
• ISO Standards
• LibQUAL+ (specially for use in library and information services)
• RATER scale.
Servqual and gap model
SERVQUAL or RATER is a service quality framework. SERVQUAL was developed in the mid-1980s by Zeithaml,
Parasuraman & Berry. SERVQUAL means to measure the scale of Quality in the service sectors.
The service quality model or the ‘GAP model’ developed by a group of authors- Parasuraman, Zeithaml and Berry at
Texas and North Carolina in 1985, highlights the main requirements for delivering high service quality. It
identifies five ‘gaps’ that cause unsuccessful delivery.
By the early 1990s, the authors had refined the model to the useful acronym RATER:
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Customers generally have a tendency to compare the service they 'experience' with the service they 'expect' . If
the experience does not match the expectation, there arises a gap.
Gap between consumer expectation and management perception : This gap arises when the management does not
correctly perceive what the customers want. For instance – hospital administrators may think patients want better
food, but patients may be more concerned with the responsiveness of the nurse. Key factors leading to this gap are:
Insufficient marketing research
Poorly interpreted information about the audience's expectations
Research not focused on demand quality
Too many layers between the front line personnel and the top level management
GAP 2 :
Gap between management perception and service quality specification : Here the management might correctly
perceive what the customer wants, but may not set a performance standard. An example here would be that
hospital administrators may tell the nurse to respond to a request ‘fast’, but may not specify ‘how fast’.Gap 2 may
occur due the following reasons:
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Insufficient planning procedures
Lack of management commitment
Unclear or ambiguous service design
Unsystematic new service development process
Gap between service quality specification and service delivery : This gap may arise owing to the service personnel.
The reasons being poor training, incapability or unwillingness to meet the set service standard. The possible major
reasons for this gap are:
Deficiencies in human resource policies such as ineffective recruitment, role ambiguity, role conflict,
improper evaluation and compensation system
Ineffective internal marketing
Failure to match demand and supply
Lack of proper customer education and training
GAP 4 :
Gap between service delivery and external communication : Consumer expectations are highly influenced by
statements made by company representatives and advertisements. The gap arises when these assumed expectations
are not fulfilled at the time of delivery of the service. For example – The hospital printed on the brochure may have
clean and furnished rooms, but in reality it may be poorly maintained – in this case the patient’s expectations are not
met. The discrepancy between actual service and the promised one may occur due to the following reasons:
Over-promising in external communication campaign
Failure to manage customer expectations
Failure to perform according to specifications
Gap between expected service and experienced service : This gap arises when the consumer misinterprets the
service quality. The physician may keep visiting the patient to show and ensure care, but the patient may interpret
this as an indication that something is really wrong.
Customer Relationship Management (CRM)
■ A business philosophy and set of strategies, programs, and systems that focus on identifying and building
loyalty with a retailer’s most valuable customers.
■ All customers are not equally profitable, and more or less profitable customers need to be treated differently
■ Retailers now concentrate on providing more value to their best customers using targeted promotions and
services to increase their share of wallet – the percentage of the customers’ purchases made from the
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CRM is an iterative process that turns customer data into customer loyalty through four activities:
1. Collecting customer data
2. Analyzing the customer data and identifying target customers
3. Developing CRM programs
4. Implementing CRM programs
Collecting Customer Data:
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■ Transactions – a complete history of purchases
Purchase date, price paid, SKUs bought, whether or not the purchase was stimulated by a promotion
■ Customer contacts by retailer (touch points) --visits to web site, inquires to call center, direct mail sent to
■ Customer preferences
■ Descriptive information about customer
■ Customer’s responses to marketing activities
Approaches that store-based retailers use:
■ Asking for identifying information
Telephone number, name and address
■ Offering frequent shopper cards
Loyalty programs that identify and provide rewards to customers who patronize a retailer
Private label credit card (that has the store’s name on it)
■ Connecting Internet purchasing data with the stores
Analyzing Customer Data
and Identifying Target Customers
Analyze the customer database and convert the data into information that will help retailers develop programs for
building customer loyalty
Data Mining – technique used to identify patterns in data
■ Market Basket Analysis
■ Identifying Market Segments
■ Identifying Best Customers
Market Basket Analysis
Data analysis focusing upon the composition of the customer’s market basket – what items are bought during a
single shopping occasion
■ Adjacencies for displaying merchandise
■ Joint promotions
Bananas in the cereal aisle as well as in the produce section
Beer with baby dippers
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Tissues with cold medicine
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MERCHANDISE MANAGEMENT PROCESS
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Termed as the planning, buying and selling of merchandise
It is an integral part of retailing and is also one of he most challenging functions
Retailers often say, “GOODS WELL BOUGHT ARE HALF SOLD”.
Types of Merchandise
• Staple: regular products carried Eg milk, eggs, bread
• Assortment: Apparel, furniture
• Fashion : Products which have a cyclical sales due to changing tastes and lifestyles
• Seasonal: change according to seasons Eg AC
• Fad: high sales for a short period of time Eg Harry Potter
Termed as the analysis, planning, acquisition, handling and control of merchandise investment of retail
Analysis is required because a retailer needs to understand the needs and wants of his target audience
It is necessary to plan since the merchandise to be sold in future must be bought in advance
Merchandise to be sold in retail store, needs to be procured from others – either from distributors or
It is necessary to determine where merchandise is needed and ensure that the merchandise reaches the
required stores at he right time and the right condition
As the function of retailing involves spending money for acquiring of products, it necessary to control the
amount of money spent of buying
Process of merchandise management includes
the developing of strategies to ensure that the right product
Is bought at the right price
Is available at he right place
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At the right time
In the right amount
In order o satisfy he needs of the target customer
1. Developing a sales forecast
2. Determining a merchandise requirements
3. Merchandise Control- The Open to Buy
4. Assortment Planning
No one in retail can avoid any contact with merchandising activities.Merchandising is the day-to-day business of all
retailers.As inventory is sold, new stocks need to be purchased, displayed and sold. Hence merchandising is often
said to be at the core of retail management.
Any one of the four methods given below can be used for planning
the inventory levels needed
1. The Basis Stock Method
2. The percentage variation Method
3. The Weeks’s Supply Method
4. The Stock/Sales Ratio Method
1. The Basic Stock Method
This method is used when the retailer believes that it is necessary to have a given level of inventory on hand
at all times
Basic stock is the minimum amount of inventory that needs to be maintained for a product, category or
store, even during times of low sales
Basic Stock = Average stock for the season – average monthly sales for the season
2. The Percentage Variation Method
This method is used when the stock turnover rate is more than six times a year
The basic premise is that this method of inventory planning is that inventory levels should reflect the actual
It is calculated as under :
BOM Stock = Avg stock for the season x ½ [ 1 + (Planned Sales for the month / Avg
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3. Weeks Supply
Followed by grocers who follow inventories weekly, and whose sales don’t fluctuate substantially
4. Stock to Sales Ratio Method
This method is very easy to use, but it requires the Retailer les ratio.
It involves the maintaining of the inventory levels at a specific ratio to the sales
This ratio tells he retailer how much inventory is needed at the beginning of the month, to support the
month’s estimated sales
Stock-Sales ratio = Value of Inventory / Actual sales
Planned BOM inventory = Stock-Sales Ratio x Planned Sales
• Assortment is the selection of merchandise a retailer carries. Includes breadth of the product categories and
the variety within each category
• Need to choose quality of the merchandise- expensive/moderately priced/inexpensive items
• Width of assortment: number of distinct goods and services (product lines) a retailer carries
• Depth of assortment: Refers to variety in any one goods /service category (product line) a retailer carries
• As a part of assortment planning, retailer chooses a proper mix of manufacturer, private and generic brands.
• Manufacturer brands are produced and controlled by mfgs. Well known ,presold by advts, represent max
quality to consumers. Eg Coke,Sony etc
• Private /dealer/store brands: Names designated by retailers, more profitable, better controlled ,not sold by
competing retailers ,less expensive and may lead to loyalty
• Generic brands: Form of private brands have plain packages ,secondary shelf locations etc
Assortment plan considerations
• Store size
• Store characteristics (walkways, pillars, stairs)
• Available fixtures
• Complementary merchandise (balance eg laptops/cases)
• Profitability of merchandise (exercise caution – not a customer issue)
• Corporate objectives (eg service level)
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Assortment planning for apparels requires a thought in "floor
sets" and can be reviewed sometimes more than 12 times per
In apparel the best practice in the retail scenario stresses that
the class contribution to the Department Plans and the style
contribution to the class plan be broken down and analyzed
Vendor Classification which is another important aspect when it
come to assortment planning must be incorporated as a part of
the process. Federated & Jones Apparel are the international
players who classify vendors extensively
Some companies provide data on current trend, fashion
direction, style etc. These kind of results act as a trigger to start
the assortment planning
The best practices in assortment planning state that it must
start 9 months before the start of the next buying season
Shelf space is a major considerations while doing
assortment planning for non-apparels
Assortment planning for non-apparels usually follows a
category management-style planning approach that
requires determining the role of each category
When retailers introduce grocery products, they do so
one item at a time after careful analysis of each product,
and even then, they will want to mitigate their risk with
the help of vendor support funds
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Pricing decision is important because customers have alternatives to choose from and are better informed
Customers are in a position to seek good value
Value = perceived benefits
So, retailers can increase value and stimulate sales by increasing benefits or reducing price.
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RETAIL Communication objectives:
Specific goals related to the retail communication mix’s effect on the customer’s decision-making
Long-term: ex) creating or altering a retailer’s brand image
Short-term: ex) increasing store traffic
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RESPONSIBILITIES OF A STORE MANAGER
MANAGING STORE EMPLOYEE
PROVIDING CUSTOMER SERVICE
RECRUITING AND SELECTING STORE STAFF
LOCATING PROSPECTIVE EMPLOYEES
◦ LOOK BEYOND RETAIL INDUSTRY
◦ USE YOUR EMPLOYEES AS TALENT SCTOUTS
◦ PROVIDE INCENTIES FOR EMPLOYEE REFERRALS
◦ RECRUIT MINORTIES
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◦ USE STOREFRONT CAREFULLY
SCREENING APPLICATIONS TO INTERVIEW
REALISTIC JOB PREVIEW
Preparation for the interview
Managing the interview
SOCIALIZING AND TRAINING NEW EMPLOYEES
TRAINING STORE EMPLOYEES
◦ STRUCTURED PROGRAM
◦ ON THE JOB TRAINING
Motivating and managing store employees
◦ Leadership behaviours
◦ Leadership decision making
◦ Leadership styles
Setting goals or quotas
EVALUATING STORE EMPLOYEES AND PROVIDING FEEDBACK
WHO SHOULD DO THE EVALUATION?
HOW OFTEN SHOULD THE EVALUATION BE MADE
FORMAT FOR EVALUTIONS
Compensating and rewarding store employees
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◦ Types of compensation plans
Straight salary compensation
Incentive compensation plans
Designing compensation programme
Legal issues in compensation
REDUCING INVENTORY SHRINKAGE
DETECTING AND PREVENTING SHOPLIFTING
◦ STORE DESIGN
◦ EMPLOYEE TRAINING
◦ SECURITY MEAURES
REDUCING EMPLOYEE THEFT
◦ SCREENING PROSPECTIVE EMPLOYEE
◦ USING SECURITY PERSONNEL
◦ ESTABLISHING SECURITY POLICIES AND CONTROL SYSTEMS
Legal and Ethical Issues in Retailing
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CAUSES OF SHRINKAGE
Shortages can and will occur at every point where merchandise changes hands or paperwork is created or processed. Proper systems with
built-in controls must be put in place to eliminate or reduce these shortages. While there is not enough room to list all the specific causes of
shrinkage, we will give several examples of each of the three general causes: paperwork errors, internal theft and shoplifting.
Paperwork errors can happen almost anywhere in the merchandising cycle. For example:
* Marking goods at a price lower than the retail price recorded on the receiving record.
* Failure to record all markdowns.
* Miscounting physical inventory.
* Clerical errors causing the book inventory to be higher than it should be.
* Timing is of particular importance. When comparing the actual physical inventory count to the perpetual book inventory, care must be taken
to ensure that every invoice representing goods that have been received before the physical inventory count is included in the calculation of
While internal theft can be anything from taking merchandise to taking cash or store supplies, we will focus on those instances of internal theft
that pertain to merchandise. Some examples are:
*Writing up a cash sales slip for merchandise but destroying the ticket after the customer leaves and pocketing the cash. *Recording a false
cash refund and pocketing the cash.
*Taking merchandise without paying for it.
*Extending unauthorized discounts or credit card refunds for friends.
Shoplifting can occur at any time. Anyone can be a shoplifter; a regular customer who never intended to steal but gave in to temptation and
opportunity, or a seasoned professional.
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Although shortages are normally expected, it is not logical to have counted in the physical inventory more than the book figure
indicates. Goods are stolen, but not donated to the store. Therefore, overages are due largely to errors in record keeping, although they may
be due to an employee trying to cover up the theft of merchandise. Some examples are:
*Recording markdowns without actually reducing prices on price tickets.
*Overstating the physical inventory.
*Including in the physical inventory count merchandise that has not yet been recorded in the book inventory.
HOW TO REDUCE SHRINKAGE
There are several factors that affect the reduction of shrinkage.
*Whether or not you have a stated shrinkage goal to work towards.
*Top management's commitment to reduce shrinkage. If top management gives shrinkage control top priority, it will invariably be reduced.
*Whether or not proper procedures that contain built-in internal controls have been set up for each transaction or event in the flow of
merchandise from the time it is ordered until it is purchased by your customer. And whether or not these procedures are being followed.
*The record keeping system being used. The Retail Inventory Method can help keep losses down. The fact is that shrinkage declines when it is
measured, and the Retail Inventory Method generally provides the best measurement of shrinkage.
PREVENTION OF PAPERWORK ERRORS
Paperwork errors can be controlled by use of a good, well-documented system containing built-in checks and balances. This is an area in which
we have helped many retailers by conducting internal security checks and developing written procedure manuals. But a good system is not
enough. All employees (receiving clerk, salespeople, buyers, office personnel) must be properly trained. They must be told the importance of
following the proper procedures. And, of course, management must follow up to see that the proper procedures are being followed.
PREVENTION OF INTERNAL THEFT
The retail store by its very nature presents many day to day temptations to employees who handle the merchandise and money of the
company. It is the responsibility of managers to remove as many temptations as possible thereby helping to keep employees honest. This is
done by setting up procedures containing good internal controls and by seeing that these procedures are followed without exception. For
* Require management approval on all refunds and credits.
*All employee purchases should be rung up and checked by the owner, manager or another designated person.
*Keep strict control over refund authorization slips, sales tickets, gift certificates or any other types of forms which can be used by an employee
to obtain cash or goods.
*Know your employees. When hiring new employees make an effort to hire honest employees. This can be done through interviewing
techniques, by carefully checking references and by the use of carefully developed written honesty tests.
PREVENTION OF SHOPLIFTING
How your merchandise is displayed can have an impact on shoplifting. For example:
*Keep small, expensive items behind a counter.
*Keep your store neat and uncluttered. Neat displays make it easier for alert salespeople to spot missing merchandise.
*Do not have blind spots on the sales floor. Try to avoid counters that are exceptionally high.
While the above can act as a deterrent to shoplifting, well-trained and attentive sales personnel are your best defense. Alert, courteous
salespeople can deter many would-be shoplifters by their presence. Make sure they are properly trained so they can spot suspicious behavior
and know what to do if they see someone taking merchandise. Your local police department may have information concerning this or may be
willing to present a seminar on the prevention and detection of shoplifting.
There is no one shrinkage solution for all retailers since every retail store is unique. Solid accounting procedures and systems must be
developed specifically for your store and scrupulously followed at ALL levels. Employees must be properly trained to follow correct
procedures. Management must follow up to see that procedures are being followed. In other words, good management will help reduce the
temptation and conditions favorable for dishonesty and theft and reduce your shrinkage losses
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All the activities involved in selling products and services to final international consumers for their personal consumption.
When you think of International Retailers the names that come to one’s mind would be the Wal-Mart, Gucci, Ralph Lauren, Mango, GAP etc. All
of these are International Retailers. However we can broadly classify the International Retailers under two categories. The first category would
be the global grocery retailers and the second category belongs to the International fashion Brands.