Retailing management unit - 2 - IMBA- Osmania University

RETAILING
MANAGEMEN
T
UNIT - 2
PRESENTED BY
K.BALASRI PRASAD

BBA/MBA 5 year Integrated Course III Year - V Semester
Paper – 5.1: Retailing Management
Unit – I: Introduction:
Definition and Scope of Retailing; Retailing Scenario – Global; Retailing Scenario-
India; Prospects of Retailing in India’s; Trends in Retailing; Retailing formats; Retail
Strategies.
Unit – II: Store Planning:
Store planning; Design and Layout; Retail merchandising; Supply Chain Management
in Retailing.
Unit – III: Retail Marketing and Advertising:
Retail Marketing Strategies; strategic Positioning; retail marketing mix; customer
relationship management; direct marketing; micro marketing in retailing, and adverting
in retailing.
Unit – IV: Retail Operations and e-Tailing:
Store Operating parameter; using strategic resource model in Retailing; Designing
performance programme; online retailing, and online retail categories.
Unit – V: Retail Management Information System and Retail Research:
Retail Technology and Automations; Retail Technology and CRM; Human resources
and Executive information systems; Developing a research Methodology; Retail audit.
References:
1. Cullen & Newman, 2007, “Retailing, environment and operations”, Thomson. 2. Levy & Weitz, 2005, Retailing, TMH.

Unit – II: Store Planning
Store planning;
Design and Layout;
Retail merchandising;
Supply Chain Management in
Retailing.

Store planning
Store planning enables retailers to constantly assess
which stores are performing adequately to help
achieve the overall corporate objectives established.
Store planning also becomes a key factor when
considering new store openings, store closing, and
relocations.
Great customer service begins with the location,
format, and layout of the store.
If the store is in the wrong location, or doesn’t meet the
specific needs of consumers then all the customer
service can’t make retail Endeavour a success.

There are six key areas of retail store planning that need
to be considered:
1. Store Format
 An effective store format provides the basis for delivering
your products to the right type of customer.
 Using the store format as a starting point allows you to
build your retail plan and put processes in place
accordingly.
 Retail Vision has the knowledge and expertise to help you
match your store format, size, and location to your core
customer.
2. Site Selection
 The best location for your store is one close to where your
customers live or work, or one which is easy to travel to by

3. Site & Building Planning
 Once the ideal site is selected for the store, make the best
use of the site in terms of access, car parks, traffic flow,
and the size of the building in relation to the site.
 How big the stockroom needs to be in relation to the sales
floor, as well as where to position the service, office, and
staff areas.
4. Space Allocation
 Certain product categories will perform better than others,
and correct space allocation can add 15-20 % to your sales
and profits.
 It’s important to identify your best performers and work out
how much space to allocate to each department.
 For example if you are a supermarket, how much space
will you allocate to non-food, household items, and fresh

5. Store Layouts
 In order to determine your retail store layouts you need to
get inside the heads of your customers and identify their
decision-making hierarchy.
 How does your customer move around the store and
decide which product to purchase?
 Each category should be placed in its ideal position, with
related categories adjacent to it.

Steps involved in choosing a Retail
Location
You can either choose a location in a busy
area within the city which has a
considerably high rent.
or
you can choose a retail store location a
small distance away from the city with a
lower rent where a good amount of
money will have to be spent on
advertising campaigns so that it comes

Will they be accessible to your target
customers?
Do not forget that your product won’t reach the
customer’s eye if he/she doesn’t walk in through
the door at your store!
Choosing the wrong retail store location can
have disastrous consequences.

1. Type of Store you wish to set up
Your retail store location should be consistent
with the type of product that you want to sell and
the type of store you want to put up.
Are you looking to get your brand into the public
eye, but at the same time looking for a low-cost
option in the initial days of your business?
The first step for you would be to decide
on whether you want to play the number game
or position yourself as a specialty retailer.

2. Demographics
Six months prior to opening your store, you must start
your site selection process.
Target audience attributes like Average age, Income
of the people living in your store’s catchment area
must be analyzed.
3. Workforce Attributes
Are the kind of employees you are looking for living in
an area close to your retail store location?
Will it be easy for them to travel to the store?
 Are there enough facilities around so as to make

4.Businesses and competition in the proximity
 It is a smart move to place your store at a point which has
businesses around that can eventually help drive traffic into
your own store.
 Any business or category of product that is closely related
to yours should help your business too.
 Another important aspect to be considered is competition.
Your competitors have done good research on the
demographics before opening their store there.
5. Footfall
 You can understand the optimum level of traffic for a
particular targeted area.
 Understanding the footfall at your neighboring stores will
help you in a big way to estimate foot traffic at your store.
 You can make use of sophisticated location analysis tools

6. Accessibility
Your store should be easily accessible to the common
people using own/public transportation.
Having a store with great quality products in a
deserted area would serve absolutely no purpose.
Depending on which area you are opening the store in,
take into account aspects like parking facilities,
distance from the nearest subway station, whether
the street you’re located on is a walking street, etc.
Space the shelves and display in your storewide apart
such that people needing wheelchairs can navigate
without discomfort.

7. Leases
Before you enter into a lease, it is advisable to hire a
good lawyer who can negotiate the lease for you.
Is this the right location for your store?
Is the condition of the building good?
Are there adequate utilities around?
Is the positioning of your store in the building good
enough?
Is there enough space for all the retail, office storage,
and workroom space you need?

Store Design:
Store design—everything from the height
of the shelf to the carpet on the floor—can
help influence the shoppers in a way that’s
favorable to the sale.
Retail store design factors into window
displays, furnishings, lighting, flooring,
music and store layout to create a brand or
specific appeal.
The objective of retail store design is to
positively impact customer experience and

Three elements of a good design:
Layout: The arrangement of the products in the
shelves and aisles and display stands constitute the
layout of the store.
Signs and graphics: Use of graphics and lettering to
display store hours, Price Talkers, aisle signs and
markers to help customers navigate the aisles.
Feature areas and displays to capture attention: To
get the customers attention items will be placed at
entrances, freestanding displays, and sometimes even
an entire aisle of promotional items

Store Layout
Store layout is the way, the store or business space
that is used to promote sales and to satisfy the
customer.
Store layout is the design of a store’s floor space
and the placement of items within that store.
Store owners choose where the best spots are to
place their merchandise, and this helps them design
their customer flow, as well as the ambiance within
their store.

Significance/Importance of Store layout
 Retailers use layout to influence customers'
behavior by designing the store's flow,
merchandise placement and ambiance.
Layouts also help retailers understand how
much revenue per square foot they are
making; using this information, they can
properly assess the strengths and
weaknesses in their merchandising mix.
Predict Consumer Behavior: The flow of a
store's layout determines how customers shop.
Escalator placement, arrangement of fixtures
and even the placement of departments affect

Maximize Square Footage: This can be predicted with
the use of its layout. So if a specific area is lacking in sales,
the retailer can rearrange merchandise to meet sales
goals.
Provoke Additional Sales: The layout can organize
product categories together so that customers find different
items they are looking for in one location.
 Equally as important is the layout's ability to keep
complementary products or similar brands in proximity
so that a customer will be more inclined to buy products
connected to the one they are shopping for.
Theft Prevention: High-priced items are sometimes
kept in locked showcases in the rear of the store.
Sometimes the store layout places the exit in area that
passes security.

Types of store layout
Adopting and adapting are a few basic store layouts can
unlock unrealized sales potential.
1. Grid/Straight Floor Plan: The straight floor plan is an
excellent store layout for any type of retail store. It makes
use of the walls and fixtures to create small spaces within
the retail store. The straight floor plan is one of the most
economical store designs.
2. Diagonal Floor Plan: The diagonal floor plan is a good
store layout for self-service types of retail locations. It
offers excellent visibility for cashiers and customers. The
diagonal floor plan invites movement and traffic flow to
the retail store.
3. Angular Floor Plan: The angular floor plan is ideal for
high-end specialty stores. The curves and angles of

4. Geometric/FreeFlow Floor Plan: The geometric floor
plan is a suitable store design for clothing and apparel
shops. It uses racks and fixtures to create an interesting
and out-of-the-ordinary type of store design without a high
cost.
5. Mixed Floor Plan: the mixed floor plan incorporates the
straight, diagonal and angular floor plans to create the
most functional store design. The layout moves traffic
towards the walls and back of the store.

Geometric/Free Flow Floor Plan

PERSONAL CARE GONDOLA/END CAPS

Layout selection – Chief Considerations
Along with floor dimensions, it’s essential to do store
layout research before designing your plan.
However, choosing the best store layout involves more
than adjusting your aisle size or sticking to typical
measurements. Instead, it starts with your customers.
Specifically, with an “emphasis on the customer
behavior and the customer experiences the retailer
wants to achieve.”

(1) Customer Desires
Determine what your customers need from your store.
Do they crave a luxurious experience or demand
convenience?
Think about who shops at your store as well.
Address the consumer’s main concerns first, then
move on to the logistics of your store layout ideas.
(2) Store Density Levels
The appearance of a packed store draws people in by
playing on their Fear Of Missing Out (FOMO).
Yet, if your customers can’t comfortably fit down an
aisle, then they may be less likely to make a purchase.

(3) Stock and Presentation Space
 Value: Tightly packed shelves allow you to showcase more
items in less space. But value shoppers want to quickly fill
their shopping carts, which may require wider aisles.
 Exclusivity: Smaller display areas limit the number of
items but may provide for more freedom of movement
while narrow aisles encourage browsing.
(4) Appropriate Transition Spaces: The best floor plans
provide transition spaces that help customers flow naturally
throughout your store.
(5) Decompression Zones: Not everyone is in the
shopping mindset when they enter your doors.
Some may be following a shopping list, while others only
want to browse.
Avoid shocking customers with too much excitement right
when they walk in your store.

(6) Room for Growth
Investing a ton of money into set fixtures doesn’t make
much sense if you can’t alter your space down the
road.
Although you may not know how your future store will
change, it’s a good idea to build in some flexibility to
your planning.
The ability to freshen up your space with minimal
funding helps you in the long run.

(7)Emphasis on the Checkout
 The final checkout (billing) space isn’t merely an area to
complete a purchase.
 Instead, well-planned store layouts guide the shopper to
the checkout area in a natural manner while also providing
opportunities for extra purchases.

(8)Operational Support
 Although your focus should be on your customers, if your
team can’t replace inventory without closing down an
aisle, then you have a problem.
 Before finalizing your design layout plan, take a walk
through from the perspective of an employee.
 Doing so will help you avoid issues with stocking, moving
displays, or creating promotional spaces.
Aisle

Visual Merchandising
Visual merchandising is the practice in
the retail industry of optimizing the
presentation of products and services to
better 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 traditionally occurs
using a blend of lighting, color
combinations, and articles of decor to
stimulate an observer and generate

Retail merchandising
Retail merchandising is the organization of
merchandise in an appealing way to get
shoppers who come to retail store to be
engaged and inspired to purchase more
products than they initially thought they would.
Retail merchandising, when done right,
Removes confusion of customers, what to buy
from shoppers
Encourages a customer to shop in your store
rather than in another, and
Converts more shoppers into customers.

‘The Rights of Merchandising’ are :
The right merchandise
The right quantity
The right price
The right time
The right place
The right quality

Most basic an in-store merchandising plan should
include:
An overall store layout plan of how traffic will move
through your store.
A department plan that changes in-store displays with
the seasons and holidays.
A budget for store fixtures, props, lighting, and
signage.
A merchandise planning system which will help
maximize turn, limit out-of-stocks, increase margins,
and minimize markdowns.
The time needed to merchandise a store will vary due
to a variety of circumstances:
total number of SKU’s,
size of your window displays,

Factors affecting retail
merchandising
Retail merchandising consists of the planning, buying
and selling of goods and products that retailers will
then sell to their customers.
1. Size of the retail operation
 Is it a small operation with a single retail outlet, or is it
a major retail conglomerate with stores worldwide and
websites in every language?
 Who is in-charge of merchandising tasks. In a small
retail operation, the owner might take the controls for
this responsibility.

2. Separation of duties
 Separation of duties is common in mid-size and large retail
operations.
 Often, buying, planning and selling may be separate
tasks and responsibilities for a variety of reasons, from
security to specialization.
 When the same person isn't taking care of all three parts of
the merchandising – buying, selling and planning –
retailers need to consider how that could impact overall
merchandising efforts.
3. Shopping channel
 Nowadays, consumers have a number of options when it
comes to how they want to shop – online, through
television, in-store, via mail catalogs, etc.
 Retailers should offer all of these options to customers, it's

Whether retailers are known for low prices, unique
products or any other trademark, it's important that
they take into account how channel can impact
merchandising efforts.
A study from Retail Systems Research concluding
that 70 percent of respondents believe
Merchandising and Inventory Management are
critical to the success of retailers.
4. The organization structure:
The organization structure that the retail organization
adopts, also affects the merchandising function.
It is usually dependent on the size of the organization.

Process of merchandise planning
1. Forecast of Sales:
 Merchandise plan or budget is dependent on estimated
sales.
 Forecast of sales for entire organisation, department and
product wise is to be made.
 Further new products to be added, or deletion of product is
to be considered.
 Estimate is made based on past records, present scenario,
impact of fashion, economic trend etc., Firm also has to
determine pricing strategy in the sale of product.
2. Merchandise Budget:
 Estimate of merchandise required is made based on
expected sales.
 Estimate is made at head office level that determines
merchandise required for each store or department.

 Makes financial implication of investment in merchandise.
 Plan ensures that investment on merchandise assures expected
gross profit or return.
 Plan has to assure that each store and departments is given
adequate stock support to avoid scarcity. At the same time it has
to ensure that there is turn-over of merchandise, if not to
adopt strategy like markdown sales to replenish the stock.
3. Merchandise Control:
 Retailer has to balance between purchase and sale of
merchandise.
 It is necessary to avoid either over or under stocking of
merchandise.
 Daily and weekly stock reports are taken to monitor the
movement of stock.
 Fresh order of purchase is made before the stock reaches
danger level.
 Firms will have their own policy of maintaining stock levels.

4. Assortment Planning:
 Assortment is arrangement of products category wise.
 It is presentation of entire products range classified under
categories, department or section.
 E.g. – Food section, cosmetics, Garments etc.,
merchandiser has to ensure that there is proper
assortment i.e., each assortment or section must have
relevant or related items, every category must have
adequate SKU (Stock keeping units) no shelf/rack should
be empty.
 At the same time it should be ensured no department or
product category is overloaded.
 Assorted merchandise need to be presented making
optimum use of space and positioning the products in
racks, hangers etc., so that it is visible, and comfortable for
customer to select.

Merchandise Buying
This activity includes the following −
Step-1: Collect Information − Gather information on
consumer demand, current trends, and market
requirements.
 It can be received internally from employees,
feedback/complaint boxes, demand slips, or externally by
vendors, competitors, or via the Internet.
Step-2: Determine Merchandise Sources − Know
who all can satisfy the demand: vendors and producers.
 Compare them on the basis of prices, timeliness,
guarantee/warranty offerings, payment terms(Lead Time),
performance and selecting the best feasible resource(s).
Step-3: Evaluate the Merchandise Items − By
going through sample products, or the complete lot of

Step-4: Negotiate the Prices Realize a good deal
of purchase by negotiating prices for bulk purchase.
Step-5: Finalize the Purchase Finalizing the
product prices and buying the merchandise by executing
buying transaction.
Step-6: Handle and Store the Merchandise
Deciding on how the vendor will deliver the products,
examining product packing, acquiring the product, and
stocking a part of products in the storehouse.
Step-7: Record the Buying Figures Recording
details of transactions, number of units of products
according to product categories and sub-classes, and
respective unit prices in the Inventory Management

Functions of Merchandise Manager
1. Develop and Maintain Vendor Relationships
 Merchandise Managers are their employer’s representatives in
communication with vendors.
 They are responsible for maintaining a positive working
relationship with all vendors, as well as negotiating product and
shipping prices.
 They are also responsible for evaluating new vendors.
2. Develop and Implement Visual Merchandising
Strategy
 Merchandise Managers are responsible for developing and
implementing the visual strategy for displaying products.
 This involves creating Planograms, performing floor moves and
delegating tasks to sales employees.
3. Maintain Inventory Management Records
 Merchandise Managers keep track of inventory supply.

4. Train Employees on Product Knowledge
 No one knows more about the products a company sells
than the Merchandise Managers.
 They’re responsible for understanding the features and
benefits of a product, and then deciding whether said
product would be a hot seller amongst their target
audience.
5.Analyze Sales Trends and Adjust Product Offering
 Merchandise Managers must constantly be analyzing Key
Performance Indicators ( KPIs ) to see which products
are generating the most revenue and which products are
selling less than projected.
 They then use this data to adjust the offering of products

Merchandise Performance
The following methods are commonly practiced to analyze
merchandise performance −
ABC Analysis
 It is a process of inventory classification in which the total
inventory is classified into three categories −
 A – Extremely Important Items − Very crucial inventory control
on order scheduling, safety, prompt inspection, consumption
pattern, stock balance, refill demands.
 B – Moderately Important Items − Average attention is paid to
them.
 C – Less important Items − Inventory control is completely
stress free.
 This approach of segregation gives importance to each item in
the inventory.
 This way, a company can decide its investment policy in

Sell-Through Analysis
 In this method, the actual sales and forecast sales are
compared and the difference is analyzed to determine
whether to apply markdown or to place a fresh request for
additional merchandise to satisfy current demand.
 This method is very helpful in evaluating fashion
merchandise performance.
Multi-Attribute Method
 This method is based on the concept that the customers
consider a retailer or a product as a set of features and
attributes.
 It is used to analyze various alternatives available with
regard to vendors and select the best one, which satisfies
the store requirements.

Supply Chain Management in Retailing
Supply chain management is the management of
the flow of goods and services and includes all
processes that transform raw materials into final
products.
It involves the active streamlining of a
business's supply-side activities to maximize
customer value and gain a competitive advantage in
the marketplace.
Supply Chain Management (SCM) is the management
of materials, information, and finances while they

It involves the activities of coordinating and
integrating these flows within and out of a
retail business.
Most supply chains operate in collaboration if
the suppliers and retail businesses are dealing
with each other for a long time.
Retailers depend upon supply chain
members to a great extent.
If the retailers develop a strong partnership
with supply chain members, it can be
beneficial for suppliers to create seamless

===================================================================

 SCM is based on the idea that nearly every product that
comes to market results from the efforts of various
organizations that make up a supply chain.
 In SCM, the supply chain manager coordinates
the logistics of all aspects of the supply chain which
consists of five parts:
 The plan or strategy
 The Source (of raw materials or services)
 Manufacturing (focused on productivity and
efficiency)
 Delivery and logistics
 The return system (for defective or unwanted

Supply Chain Integration
 Supply chain integration is a process where all the parties
involved with the fulfillment of a product
are integrated into a single system.
 This requires significant coordination and alignment in
order to ensure everyone is effectively working toward the
same goal at all times.
 The process of creating cohesion and increasing
connectivity throughout the entire value chain, from
procurement to production planning to logistics.
 Integration help to smooth out the day-to-day
functioning of a modern supply chain.
 Different teams within an integrated supply chain should be

Vendor Managed Inventory(VMI)
 A business model where the buyer of a product provides
information to a vendor of that product and the vendor
takes full responsibility for maintaining an agreed
inventory of the material, usually at the buyer's
consumption location.
 A third party logistics provider can also be involved to
make sure that the buyer have the required level of
inventory by adjusting the demand and supply gaps.
 Benefit of VMI is that the vendor is responsible for
supplying the customer(Retailer) when the items are
needed.
 VMI removes the need for the customer to have
significant safety stock because the supplier manages the

 The customer(Retailer) also can benefit from reduced
purchasing costs. Because the vendor receives data
and not purchase orders, the purchasing department has
to spend less time on calculating and producing purchase
orders.
 The need for purchase order corrections and
reconciliation is removed.
 Lower inventories can reduce the need for warehouse
space and warehouse resources.
 As manufacturer has more visibility to
their customers‘(Retailer’s) inventory levels, it is easier to
ensure that stock-outs will not occur.
 Supply chain managers will feel like they can't find
another source for a product that is being managed by

Collaborative Planning, Forecasting and
Replenishment(CPFR)
An approach which aims to enhance supply
chain integration by supporting and assisting joint
practices.
CPFR seeks cooperative management of inventory
through joint visibility and replenishment of products
throughout the supply chain.
 Information shared between suppliers and
retailers aids in planning and satisfying customer
demands through a supportive system of shared
information.
The idea behind CPFR is that by coordinating
activities throughout the supply chain, inventories

Benefits of CPFR
Improved accuracy of sales and order forecasts
Reductions in inventory levels
Closer relationships among the supply chain
partners
Reduced supply chain uncertainty
Realization of supply chain cost reductions
More effective mitigation of supply chain
risks
Improved flow of materials and information
up and down the supply chain

Assignment / Important Questions
Unit-2
1. Explain key areas of retail store planning that need to
be considered.
2. Discuss the Significance of Store layout. Explain
types of Store Layouts.
3. Explain the Process of Merchandise Planning.
Emanate on how Merchandise performance is
evaluated?

Retailing management unit - 2 - IMBA- Osmania University

Retailing management unit - 2 - IMBA- Osmania University

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Retailing management unit - 2 - IMBA- Osmania University