DEFINITION AND SCOPE OF RETAILING
The word 'retail' is plagiarised from the French word 'retail merchant' meaning 'to cut a piece off' or 'to break bulk'. In simple terms, it implies a first-hand dealing with the client.Retailing involves a direct interface with the client and the coordination of business activities from end to end - right from the construct or design stage of a product or offering, to its delivery and post-delivery service to the client. The industry has contributed to the economic growth of many countries and is without doubt one of the fastest dynamic and dynamic industries in the world today.
Retailing and the Marketing Mix
Retailing forms an integral part of the marketing mix and includes elements like product, place, price, people, presentation and promotion. Place relates to the distribution and accessibility of products in various locations. Customers are first introduced to the product at the gross revenue outlet. Organizations sell their products and services through these retail outlets and get feedback on the performance of their products and clients' expectations about them. Retail stores serve as communication hubs for clients. Commonly better-known as the Point of Sale (POS)' or the Point of Purchase (POP), gross revenue outlets transmit information to the clients through advertisements and displays. Hence, the role of retailing in the marketing mix is very significant.
GLOBAL OVERVIEW OF RETAILING
With total gross revenue of US$ 6.6 trillion, retailing is the world's largest private industry, ahead of finance (US$ 5.1 trillion) and engineering (US$ 3.2 trillion). Some of the world's largest companies are in that sphere: over 50 Fortune 500 companies and around 25 of the Asian Top 200 firms are retail merchants. Wal-Mart, the world's second largest retail merchant, has a turnover of US$ 260 billion, well-nig one-third India's GDP. As many as 10% of the world's billionaires are retail merchants. The industry accounts for over 8% of GDP in western countries, and is one of the largest employers. According to the U.S. Department of Labor, more than 22 million Americans are employed in the retailing industry in over 2 million gross revenue outlets.
KEY DRIVERS OF RETAILING IN INDIA
In the pre-liberalisation supply-led market, the power untired clearly with the manufacturers. In today's demand-led market, it's the consumer who calls the shots. Over the last decade, there has been a significant evolution in the Indian consumer, chiefly ascribable the liberalisation of the consumer goods industry that was initiated in the mid-eighties and accelerated through the nineties, combined with a growing consumerism driven by the media, new opportunities and increasing wealth. Although this change is most noticeable in the metros, it has affected consumers in little towns as well. Many retail organizations have client relationship direction (CRM) programmers that help find out about their clients' purchase patterns. This also enables them to design a comprehensive benefit package for them. Retail organizations like Shoppers' Stop have used client loyalty programmers with succeeder, increasing their active base of consumers and delivering innovative benefit plans for them. They also concentrate on acquiring a big share of gross revenue from the loyal base of consumers.
Recent Format Developments
New retail formats have begun to superced conventional ones. Independent big-box multi-brand department stores have started merchandising footgear as a category, especially in metros and cities. Malls are another new shopping format that is growing quickly in the metros. Many future footgear retail merchants are obtaining space inside the mails as mall partners to take advantage of the ready footfalls available. For the existing independent Bobcat stores it is expensive now to run campaigns and promotions to attain the required footfalls and expected conversion.
Merchandise Presentation and Visual Merchandising.
Bobcat pioneered the construct of show windowpane displays in India with a style that was unique to the company. It was professionally managed, with an exclusive team handling the motif and the design. Every moth the direction to decorate the show windowpanes were given by a Norman Mailer prepared by special decorators. Sales mortalnel in each store were trained to be windowpane decorators too. Recently, these windowpanes had to be done away with because the company thought that they should follow the contemporary practice of free-access retailing, where all merchandise pairs are displayed in open shelves to enable clients to help themselves. Remember, in India footgear is always tried on a ottoman and bought after goodish service extended by the gross revenue mortal mortalally. Free-access retailing may work when there is adequate space inside a store to move around. The effect of such 'pigeon-hole' free access is that they give an impression that they are Bobcat's R-Pair outlets.
STORE DESIGN AND THE RETAILING IMAGE MIX THE SPACE MIX
For the retail merchant space is money. The store has to be planned in such a way that it optimizes the merchandising area and minimizes the non-merchandising parts. The merchandising area is accustomed present the merchandise and the non-merchandising part is account for by circulation space, aisles, staircases, lifts, facilities, the back area, etc. The area in a typical department store is: merchandising area about 60%, circulation area 15% and back area 25%.If the store has any extra area, it is given to concessionaires to complement the store offering mix and to de-risk space. Examples are Planet M in Shoppers' Stop, Planet Sports in Pyramid and Ways in Lifestyle.In a clothe gross revenue outlet, provision the size of the client segment is intercepted and there closet mix of clothes and accessories mapped. This then determines the number of styles and the range breadth of the category. Then a business plan is made supported the integration with space.
The merchandising space is then designed in terms of size and location of goods supported the mix of staple, convenience and impulse merchandise Staple Goods are the core USP of the store. These constitute about 55% of the store offering and are4 kept at the central and deeper ends of the store. This enhances visibility, since the client has to pass through the entire store to reach them. The shirts and trousers section in department stores form the staple merchandise. Similarly, grains and sugar are the staples in a supermarket. Convenience goods are no-fuss basic merchandise that constitute about 30% of the store and are bought in multiple units. These need to be in convenient locations in the store to ensure conversions. Underclothes and white basic cotton T-shirt in a department store are convenience merchandise.Impulse purchase merchandise-which ordinarily constitutes about 15% of the store and has the highest of sale-is given maximum exposure in order to tempt the client into buying them. Candies in a supermarket and socks and hair accessories in a fashion store are impulse purchase items and are kept near the cash counters and entrances/exits. The client picks them up after shopping for convenience and staple merchandise. The locations of various goods are chosen carefully to ensure that the client is exposing to the entire store, thus increasing the possibility of a purchase.Talking about space direction and optimisation in a gross revenue outlet, Ajay Mehta, COO of Times Retail (Planet M) says: "Space direction does not end with just optimisation, but has a much big chance for merchandise promotion and display which not only can profit for a retail organization but entertain and delight clients too".
EFFECTIVE RETAIL SPACE MANAGEMENT
The sight of a good gross revenue outlet with attractive windowpanes and an alluring entrance induce the client into entering. The client enters the store and often keeps walking inside following the paseo wherever it leads, or sometimes takes a piece to look for directions inside the store. Sometimes the client's attention is drawn to certain displays and merchandise presentation before he move on. To reach his destination inside the store, the client tends to follow directions to reach there, especially in a big-box format. Seldom does he realize that subconsciously he is directed to 'walk' the entire store and thus exposing him to all that the store has to offer. This is accomplishd through a well thought-out and laid-out retail floor design.Effective retail floor space direction is critical to the succeederful operation of a gross revenue outlet, as increasingly gross revenue from the same space would lead to increased margins for the organization. According to R. Siam, CEO of Crossword: "Space provision is integral to the succeeder of any gross revenue outlet since the biggest investment in retail is in space".
Let us now look at the ground rules for effective floor space provision and direction. At the same time, let us get an insight into the clients' physical and emotional inevitably that contribute to store design constructualization and space provision.
STORE LAYOUT: THE CIRCULATION PLANT (THE "SILENT GUIDE")
Once inside the store, the client inevitably to be target-hunting silently to where he/she wants to go and also expose him/her to the offering. This can be accomplishd by provision the circulation and the location of the merchandise.
FLOOR SPACE MANAGEMENT
One of the common problems in retail floor direction in India is lack of attention paid to space productiveness. Usually space productiveness. Usually space productiveness does not figure in the Key Result Areas of either the Store Operations or Buying and Merchandising departments. But ideally both should pay attention to this area. Store Operations, since it is responsible reorders and fill againment, and Buying and Merchandising because it is responsible fro the Gross Profit Return (GPR) on the space occupied by the merchandise.
Parameters to Judge Space Performance
How the space performs can be judge by:
-The gross revenue output and the succeeding margins.
-The inventory holding that leads to gross revenue and the succeeding margins.
In a nutshell the performance parameters are gross revenue and margins and their direct relationship to the stock holding on the retail floor.
Sales per sq ft, or top-line plan (gross revenue): Here, space productiveness is measured by gross revenue volumes and value accomplishd per sq ft per day.
Margins per sq ft or bottom-line plan (gross margin returns on footage, or GMROF): Here, space productiveness is determined by the average inventory holding per sq ft per day you bet it measures once against the ideal level of stock holding planned for a designed space in the store. Stock-turns in such chosen space play a vital role in earning good revenue returns on the space occupied when they are optimized.This space performance measurement can be done for any of the rungs in the SKU pecking order: a department/division, a category/class, a sub-category/ sub-class, a brand and even for any style or size options.Says G.S.M. Ghana, former Senior Vice-President (Retain) at Bata India Ltd: "One must analysis statistics of the value of merchandise and margins broken down to the space occupied by micro-groups of merchandise in the store. This will help retail merchants develop a blueprint for profitable deployment of especially in chain store operations. In addition, not only should merchandise categories be placed in the right locations that will maximize gainfulness but such placement should help attain uniformity for comfortable shopping by clients."
Space Audit: Non-treaded and Black Holes.Any succeederful gross revenue outlet audits its space productiveness from time to time. This audit looks at the various retail functions and activities for which space is employed and analyses returns in order to optimize them. It compares the performance of each function or activity with others in relation to space occupied.Hot Spot Analysis: Hot muscae volitantes are areas where the off take or merchandise is the highest. Similarly, there are warm muscae volitantes and cold muscae volitantes, where merchandise gross revenue are lower. An analysis of these hot spot, warm muscae volitantes and cold muscae volitantes is made periodically and stairs taken to convert cold muscae volitantes to warm muscae volitantes and warm muscae volitantes to hot muscae volitantes piece retaining the best gross revenue and the stock-turns of the muscae volitantes.Such audits reveal non-treaded space, where there in no client traffic, and less treaded space which ha slow traffic. The possible reasons for these are analysis and hurdles and bottlenecks better-known and removed to ensure that there are no non-treaded and black hole areas.
Efficiency of Selling Space to Non-merchandising Space: The employment of merchandising and non-merchandising spaces-back area, facilities area, etc.-are periodically monitored for there efficiency in deliveries. A good retail merchant always aims to optimize merchandising space to improve the bottom-line, piece taking care not to compromise on the efficiency of deliveries of the non-merchandising space.
Ground Rules for Successful Space and Layout Management
Remember the golden rule of the retail floor space provision and direction game-the convenience of the client comes first.Provide the superior chance for the client to walk around the stores and browse through all the merchandise displayed, for it is the browsers who turn into buyers-buyers of a large basket size.Optimize the trading space to accomplish maximum gross revenue, piece not neglected the non-trading area for client convenience/concessions in order to ensure that they spend a longer time store and increase revenues.Make the right floor space direction decisions after every space audit, effecting the necessary course-corrections on time as space costs a sight of money.
Appeal to all the five senses of the client by creating an aesthetic and functionally effective ambience (which should eventually become the creed of a succeederful store) so that you can clutch the mind-space of the client and Bering him back to the store once again and once again. Remember, a retail floor designed, planned and managed well with the target client in mind helps to make an emotional connection with the buyer.
Retail Merchandising
The term 'marketing' is unique and exclusive to the retail industry. It refers to the entire process of inventory provision and direction in a retail organization. Merchandising, when done properly, leads to an increase in the return on invested capital (ROI). The greater the ROI, more the gainfulness.
Merchandise Planning
For a retail merchant, the objective of merchandise provision is clear: achieving the following seven 'RIGHTS'
- The Right Product
- The Right Place
- The Right Quantity
- The Right Quality
- The Right Price
- The Right Mix or Assortment
- The Right Time
In order to satisfy every client's inevitably, the gross revenue outlet must have the right product in the right place, in the right quantity, with the right quality, at the right price, with the right mix of sizes or variants and at the right time. The function of marketing is to accomplish all these 'rights' so that gross revenue are high with an ideal level of inventory holding and thus more profits.
Merchandise Hierarchy.While provision the merchandise mix, a retail organization has to start with a clear definition of its merchandise pecking order. The merchandise pecking order is a disciplined way of grouping the merchandise mix at different levels, starting from a high-level grouping to the worst level of the stock-keeping unit (SKU).The merchandise pecking order forms the platform required to create the store's merchandise mix. The marketing for the store dictates the different divisions and the lower rungs that the store must have in the pecking order.
Building the store's merchandise mix by following the construct of merchandise pecking order has its advantages:
(a) One can define in terms of ratios the mix of elements at each level of the pecking order.
(b) One can analyze and drill down through the rungs of the pecking order to the problem areas, if any up to SKU level.
(c) One can remove or add elements following security escalations.
This means if the store's merchandise decisions have to be taken supported the performance, say, of the millions of SKUs causative to the formation of the merchandise Pyramid for the store - the peak being the divisions - decisions at the lower rungs can be taken by front-line mortalnel. Those at the higher levels, which would impact the merchandise proposition / image of the store, can be taken by the higher-ups.
SKU: To use an example (see Fig. 12), a 410-size white shirt of solid design at the price-point of Rs. 750 (all options in the last level) having a button-down collar of the Arrow brand in the full sleeves sub-category or sub-class of the shirts category belonging to the men's department of the apparel division in a organization is an SKU. The levels in the merchandise pecking order may be different for various products categories. For instance, in a supermarket, the levels may be:
Divisions: Food
Department: Packaged Food
Category: Sauces
Sub-category: Tomato
Brands: Magi
Options: 250g, 500g, 1kg.
Range Planning:
The opening in the process of range provision is merchandise assortment provision. This is a mix in percentage terms at every rung of the store's merchandise pecking order.The first element in the merchandise plan is the Strategic Plan. This is ordinarily taken at the high level and accustomed set out the critical succeeder factors for marketing in terms of gross revenue, margins and stocks.A category-level margin plan is also created to plan the gross margins that each level (up to the SKU level) contributes to the store. The definition of the merchandise and the assortment provision supported the pecking order levels help in analyzing weekly gross revenue, stock and consumption plan etc. at the category, sub-category, brand or SKU levels. With this, one can also identify any problems in gross revenue or inventory holding at any levels and take corrective action. It is here that Open to buy (see 'The Buying Function' below) is planned in the process of buying. This is ordinarily the first significant succeeder factor in the implementation of the provision process.
Example of an assortment of shirt 20 pieces in stock:
Small / 2, Medium / 6, large / 7, Extra Large / 4, Extra Large / 1 = 20 pieces
Such an assortment plan helps fill again items to the store stock after they are sold by establishing minimum and maximum levels of stocking units. For instance, in the above example if the assortment ratio is planned as per the planned stock-turn for the store as 20 pieces, then the maximum stocks that are available in the SKU can only be 20. The fill againment trigger can be planned so that it is set off when the stock reaches a minimum nominative level after gross revenue. Another way of provision fill againment - which is done generally in high-turnover categories - is to actuate reorders as and when the merchandise is sold with a cap on the maximum stock holding.
Pangram: There is another type of Assortment plan that is emerging now. It is a graphical range plan called the pangram. This short of plan moves away from the strictly numerical type of provision that has been consumed to now and allows the range to be put together in a visual way. Typically digitally stored images are manipulated into collage-type storyboards. Space provision package packages like that of AC Nielsen support such graphic base stock mapping, which helps in easy fill againment provision and effective store space employment.
Thus merchandise assortment provision and base stock - numerical and visual-numerical methods severally - enable one to appreciate of the space employment in a store by scheming the Return on Space Employed or Returns on Footage.
THE BUYING FUNCTION
Buying for a retail organization is a critical function of marketing. The process begins with the preparation of the buying plan, called 'Open To buy' or OTB. It is helps retail merchants project and control future buying so that the flow of merchandise in the store matches hoped-for gross revenue at desired stock turn rates to give a positive cash flow.For organized buying one need to follow the OTB provision, since it prevents over-buying, eliminates confusion and enables the organization to make more profits.
So what exactly is OTB? OTB refers to merchandise budgets for purchase during a certain period of time for which the stocks have not yet been ordered. It is also the process of foretelling gross revenue and purchases. OTB is a provision tool that assists in setting budgets for gross revenue and merchandise inventory levels and in monitoring the current status of the OTB amount, which is the amount left to be ordered to meet the budget.Every retail merchant inevitably to use an OTB plan, as most tend to overstock when gross revenue increase and under stock when they are low. Often a small increase in gross revenue leads to excessive buying that at last affects the retail merchant fix the ideal amount of stock that should get on hand at the beginning of any given calendar month and the quantum of new merchandise to be received during the calendar month.
Ann efficient OTB plan has the following elements:Forward Sales Planning (Sales Forecast): The gross revenue plan ought to be prepared for the entire year with calendar month-wise details of planned gross revenue. A good OTB plan helps one to react to variations in gross revenue plans (as the current calendar month comes to an end), reschedule deliveries and cancel or alter purchase orders for future deliveries, as the case may be.
Forward Cover: This is supported the planned stock turns for the retail out fit. Form instance, if the planned stock turns for the store is fourfold in a year, and so the ideal stock holding at any point should be equivalent to three calendar months' stock cover.
Stock Required: This is supported the forward cover planned calendar month is calendar month 1, then the stock required will be the sum of the planned/forecast gross revenue of calendar months 2, 3 and 4.
Opening Stock: The value of the opening stock is a flow calculation. In OTB provision, the first entry is an estimate. From the second calendar month onwards, the opening stock is the closing figure of the previous calendar month.
Intake Requirement: This is the difference between the required stock and the opening stock.
On Order: These are stocks that have been already ordered and due for delivery during the applicable period.
Open to Receive: This figure is arrived at by deducting the stock on order, if any, from the consumption requirement. This figure indicates the OTB quantity.
Closing Stock: To make this figure, one inevitably to take the opening stock, take off the gross revenue, and add the on-order and open-to-receive quantities.
Advantage of an Open to Buy Plan
The OTB plan enables retail merchants to estimate in advance the amount
It helps ensure the right inventory level to support planned gross revenue and to attain the best Gross Margin Return on Inventory (GMROI).The OTB plan places restraints on merchandise commitments so that the stock receives the right merchandise at the right time and not before or after.
It enables a continuous flow of fresh merchandise into the store calendar month after calendar month during the seasons.
The OTB plan establishes goals so that the actual performance can be compared with the plan and corrective action taken inn the required areas.Above all, an efficient OTB plan provides the organization more chance for profit.Retailers who follow a well-formulated POTB plan are succeederful in their marketing and buying efforts. The merchandise direction system employed in the organization generally support such applied mathematics techniques in the OTB plan, but it is the buyer's insight and decision-making capability that help deliver best result.
MARKUPS AND MARKDOWNS IN MERCHANDISE MANAGEMENT
Markup is the percentage amount (deliberate on cost) added to cost in order to make the maximum retail price for a product. Hence,
Markup = percentage of margin deliberate on cost added to make the maximum retail price.
Cost = Maximum Retail Price - Margin
Margin = Maximum Retail Price - Cost
Maximum Retail Price = Cost + Markup
Markup is supported cost and is expressed in percentage terms.
Problem: What is the markup percentage for a dress that cost Rs. 200 and retails for Rs. 400?
Markup % = Difference between MRP and cost (Rs.400 - Rs.200) ÷ Cost (Rs.200) x 100
= Rs.200 ÷ Rs. 200 x 100
= 100%
Sometimes the retail merchant inevitably to look at the cost of an item and determine what that item should retail for It is fixed if the target client is willing to pay that price. Markdown is the amount reduced from the maximum retail to make the new retail price. Markdown is deliberate as a percentage of MRP. Problem: What is the markdown percentage for a dress whose original MRP is Rs. 400 and the new retail price after markdown is Rs.200?
Markdown % = Difference between old MRP and new MRP after markdown (Rs.400 - Rs. 200) ÷ old MRP (Rs. 400) x 100
= Rs. 200 ÷ Rs. 400 x 100
= 50%
Markdowns are done when product gross revenue low are or when the season draws to a close and the business line inevitably to be cleared from the shelves. Merchandise is also marked down when inventories are high, when salable merchandise is shop-soiled or when certain price-off promotions are done. Markdowns are also affected when products that have manufacturing defects but are still salable are found at the floor level. It is essential that the markdown percentage is kept at the worst, as it directly affects the returns on gross margins in a gross revenue outlet.
The Current Scenario in India
Retailing in India is infested by weak gross margins compared to those in global retailing. While apparel retail merchants manage to get gross margins of 30-33% after troubled a sight with vendors and brand markets the food sphere has to settle for just 15-19%.
The life-style clothes and related accessory retail merchant Shoppers' Stop has four in-store private label brands that contributed or s 25% to its turnover, growing 5% over the previous year. The private label of a Delhi-based apparel retail merchant Robyn Retail contributed or s 21% to total gross revenue last year.
I grocery, Food world's private label brands account fro around 21% of total gross revenue. It is reported that the company plants to increase the share of its store brands to 27% of total gross revenue by the time the first phase of the private label initiative is over. Food World expects to extend its private label brand to 38 sub-categories from the 22 it presently has.
West-side, the apparel retailing initiative from the house of Tatars, is a succeeder story with a strategic approach to private brand retailing (or s 80% to 85% of the merchandise retailed comprises its own brands). The store is said to be troubled in the area of men's apparel, which is truly brand-led, and is said to be contemplating accommodating a couple of 'must have' men's brands in its outlets in addition to its core private labels.
References:
1) fibre2fashion.com/.../impact-of-retail-direction-in-the-growth-of-indian-economy1.asp
2) fibre2fashion.com/industry-article/free-retail-industry-article
