2module Seesion1

Retailing Strategy & Planning
(Module 2)
DR. ANUPAMAA S. CHAVAN
STUDENTS ARE STRICTLY WARNED NOT TO SHARE/UPLOAD THIS PPT WITH ANY PERSON/WEBSITE.
Strategy 2
 The word strategy was first used in warfare
 Itis derived from a Greek word ‘strategos’

meaning ‘army leader’
 Strategy is an art or science of directing military

forces in a war or battle.
Strategy 3
anupamaa.chavan@nmims.edu
 According to webster’s dictionary
 Strategy is ‘the science of planning and
directing large scale military operations of
manoeuvring forces into the most
advantageous position prior to actual
engagement with the enemy.
 कंध ं से मिलते हैं 1.mp4
 कंध ं से मिलते हैं 1.mp4

Retail Strategy 4
A retail strategy is a statement identifying

(1) the retailer’s target market,
(2) the format the retailer plans to use to satisfy the target market’s
needs
(3) the bases on which the retailer plans to build a sustainable
competitive advantage.
More attention to long-term strategic planning
5
than ever before
Dr. Anupamaa S. Chavan
 Due to the emergence of
 New competitors
 New formats
 New technologies
 Shifts in customer
needs
Elements in Retail Strategy 6
Target Market
 the
market segment(s) toward which the retailer plans to focus its resources
and retail mix
 Retail Format
 the
nature of the retailer’s
operations—its retail mix
Sustainable Competitive Advantage
 an advantage over the competition
© image100 Ltd
Criteria For Selecting A Target Market 7
Attractiveness –
Large, Growing,
Little Competition
 More Profits
Consistent
with
Your Competitive
Advantages
Can A Retailer Develop a Sustainable 8
Competitive Advantage by:
Dropping the Price of Your Merchandise?
Building a Store at the Best Location?
Deciding to Sell Some Hot Merchandise?
Increasing Your Level of Advertising?
Attracting Better Sales Associates by Paying Higher Wages?
Providing Better Customer Service?
Sources of Competitive Advantage 9
More Sustainable Less Sustainable
 Location
 Better Computers
 Customer Loyalty
 More Employees
 Customer Service
 More Merchandise
 Exclusive Merchandise/Private Labels
 Greater Assortments
 Low Cost Supply Chain Management
 Lower Prices
 Information Systems
 More Advertising
 Buying Power with Vendors
 More Promotions
 Committed Employees
 Cleaner Stores
Curves International - Fitness Centre 10
 30minutes session
 Burns 500 calories
 Hydraulic Resistance Machine
 Sport Jog/Walk
 Low charges
 More than 10,000 locations
No Mirrors, No Makeup, No Men
Save a Lot – Limited assortment supermarket11
1250 SKUs
More Private labels
Prices 40% less than conventional
supermarkets
Low overheads:
• Card board Shipping Cases
• Own bags/ extra charges for
carry bags
Recent - https://www.youtube.com/watch?v=DvgPDB7Tf6U 12
 Whirlpool top loading washing machines to have inbuilt
heaters that sanitizes clothes and removes germs to 99.9%
 Record surge in sales of Dishwashers, vaccum cleaners, DIY

products
 Pepperfry CMO says that work from home has boosted the
demand for study tables
 https://www.youtube.com/channel/UChLtXXpo4Ge1ReTEboV
vTDg
More Sustainable Competitive Adv 13
 Customer Loyalty
 Vendor Relations
 HRM
 Information System
 Location
Customer Loyalty 14
Jeff Bezos
More than simply liking one retailer over another
Customers will be reluctant to patronize

competitive retailers
Retailers build loyalty by:

 Developing a strong brand for the store or store brands
 Developing clear and precise positioning strategies
 Creating an emotional attachment with customers
through loyalty programs
Example of Positioning
Vendor Relationships 16
Low Cost - Efficiency Through
Coordination
 Electronic Data Interchange (EDI)
 Collaborative Planning and
Forecasting to Reduce Inventory and
Distribution Costs
Exclusive Sale of Desirable Brands
Special Treatment
 EarlyDelivery of New Styles
 Shipment of Scares Merchandise
Human Resources Management 17
“Employees are key to build a sustainable competitive advantage”
Strategies for Recruiting and Retaining Talented Employees
Employee Branding
Develop positive organizational culture

Distribution and Info Systems 18
Flow of Information
By decreasing costs here, there is
Vendor
more money available to invest
Distribution Center in:
Store
-Better services
-Increase in breadth and depth
-Decrease in prices
Location 19
What are the three most important things in
retailing?
 “location, location, location”
Location is a competitive advantage
A high density of Starbucks stores

 Creates a top-of-mind awareness
 makes it very difficult for a competitor to enter a market
and find a good locations
Growth Strategies 20
Market Penetration
Market Expansion
Retail Format Development
Diversification
 Related vs. Unrelated
21
Growth Opportunities
Market Penetration 22
 Attract customers from target market – Walgreens
“on every corner”- Opening more store for same
target market
 Get current customer to visit store more often or buy

on each visit – increasing the variety and assortment
in the store for same target market
 Keeping the store open for longer hours
Cross Selling – sales associates in one department sell

complimentary merchandise from other departments
Example: Manicurist sells services plus hand lotion or nail

polish
Example: Salesperson sells leaf blower directs customer to

electrical department to purchase a 100 foot extension cord.
Market Expansion 23
Market expansion growth
opportunity involves using the
existing retail format in new market
segments
Dunkin’ Donuts – new stores (and at
gas stations) outside northeastern
Abercrombie & Fitch (for college
students) opens lower-priced chain
Hollister Co. for high school students
Retail Format Development 24
Develops a new retail format with a
different retail mix for the same
target market
Multi-channel retailing
UK based TESCO:
 Tesco Express: small stores located close
to where customers live and work
 Tesco Metro: bring convenience to city
center location by specializing in ready-
to-eat meals
 Tesco Superstores: traditional stores
 Tesco Extra: one-stop destination with
the widest range of food & non-food
products and consumer
durable/electronic items
Diversification 25
Introduces a new retail format toward
a market segment that is not currently
served by the retailer
Related diversification
Unrelated diversification
Vertical
integration into wholesaling
or manufacturing
Global Growth Opportunities
Projected global retail e-commerce sales in 2020, by region (in billion U.S. dollars)
Global e-commerce sales forecast 2020, by region
Sales in billion U.S. dollars
0 500 1,000 1,500 2,000 2,500 3,000
Asia Pacific 2,448.33
North America 749
Western Europe 498.32
Central & Eastern Europe 92.91
Latin America 83.63
Middle East & Africa 41.56
Note(s): Worldwide; 2020

Further information regarding this statistic can be found on page 42.
Source(s): eMarketer; ID 311357 Selected retail markets
Global Growth Opportunities 27
 China
 Increasing operating
costs
 Lack of managerial talent
 Underdeveloped and
inefficient supply chain
Global Growth Opportunities 28
India:
• Prefers small family-owned
stores
• Restricts foreign investment
Key to Success in Global Retailing 29
Globally sustainable competitive advantage
 Low cost, efficient operations - Wal-Mart, Carrefour
 Strong private label brands: Starbucks, KFC
 Fashion Reputation - The Gap, Zara, H&M
 Category dominance – Best Buy, IKEA, Toys R Us
Adaptability
Global Culture
Financial Resources
International Market Entry 30
Strategies
Direct Investment
Joint Ventures
Strategic Alliances
Franchising
Stages in the Strategic Retail Planning Process
31
32
1. Business Mission 33
 •In developing the mission statement, managers must answer five
questions:
 (1) What business are we in?
 (2) What should be our business in the future?
 (3) Who are our customers?
 (4) What are our capabilities?
 (5) What do we want to accomplish?
34
2. Elements in a Situation Audit
3. Identify Strategic Opportunities 35
 After completing the situation audit, the next
step is to identify opportunities for increasing
retail sales.
4. Evaluate Strategic Opportunities 36
 A retailer must focus on opportunities that utilize its strengths and its area of
competitive advantage.
 Both the market attractiveness and the strengths and weaknesses of the
retailer need to be considered in evaluating strategic opportunities.
 The greatest investments should be made in market opportunities where the
retailer has a strong competitive position.
5. Establish Specific Objectives and Allocate37
Resources
 Specific objectives have three components:
 (1) the performance sought, including a numerical index against
which progress may be measured,
 (2) a time frame within which the goal is to be achieved, and
 (3) the level of investment needed to achieve the objective.
 Typically, the performance levels are financial criteria such as return
on investment, sales, or profits.
6. Develop a Retail Mix to Implement 38
Strategy
 The next step is to develop a retail mix for each
opportunity in which investment will be made
and to control and evaluate performance.
7. Evaluate Performance and Make 39
Adjustments
 The final step in the planning process is evaluating the results of the
strategy and implementation program.
 If the retailer fails to meet its objectives, reanalysis is needed. This
reanalysis starts with reviewing the implementation programs; but it
may indicate that the strategy (or even the mission statement)
needs to be reconsidered.
 This conclusion would result in starting a new planning process,
including a new situation audit
Case Study - Tesco 40
 Identify the More Sustainable and Less sustainable competitive advantages of
Tesco. Why did Tesco fail in US Market? Give suggestions pertaining to the retail
strategy of Tesco.

(Video: Case Study)
41
Retail Location Planning

What Are the Three Most 42
Important Things in Retailing?
Location! Location! Location!
Eddie Tan/Life File/Getty Images

Why is Store Location 43
Important for a Retailer?
 Location is typically prime consideration
in customer’s store choice.
 Location decisions have strategic
importance because they can help to
develop sustainable competitive
advantage.
 Location decisions are risky: invest or
lease?
Types of Locations
 Free Standing Sites 44
 City or Town Locations
 Inner City
 Main Street
 CBD – Central Business District
 Shopping Centers
 Strip Shopping Centers
 Shopping Malls
 Neighborhood and Community Shopping Centers
 Power Centers
 Lifestyle Centers
 Mixed –Use Developments (MXDs)
 Outlet Centers
 Theme/Festival Centers
 Large Multiformat Developments - Omnicenters
 Other Locations – Pop up stores, Kiosks, Airport, Store
within a Store
Selecting a particular location type 45
 Involves evaluating a series of trade-offs between:

 The size of the trade area (geographic area encompassing
most of the customers who would patronize a specific
retail site)
 the occupancy cost of the location
 The pedestrian and vehicle customer traffic
 The restrictions placed on store operations by the
property manager
 The convenience of the location for customers
Tradeoff Between Locations 46
There are relative advantages

and disadvantages to
consider with each location.
Rent
Traffic
Types of Locations
47
Matching Location to Retail Strategy 48
 The selection of a location type must reinforce the retailer’s strategy be

consistent with
– the shopping behavior
– size of the target market
– The retailer’s position in its target market
 Department Stores  Regional Mall

 Specialty Apparel  Central Business District, Regional malls
 Category Specialists  Power Centers, Free Standing
 Grocery Stores  Strip Shopping Centers
 Drug Stores  Stand Alone
49
Shopping Behavior of Consumers in
Retailer’s Target Market
 Factors affecting the location choice

Consumer Shopping Situations
 Convenience shopping
 Comparison shopping
 Specialty shopping
Convenience Shopping 50
 Minimize the customer’s effort to

get the product or service by
locating store close to where
customers are located
Comparison Shopping 51
 Customers have a good idea of what

type of product they want, but don’t
have a strong preference for brand,
model or retailer.
 Competing retailers locate
 Near one another
Typical for furniture,

appliances, apparel,
consumer electronics, hand
tools and cameras.
Specialty Shopping 52
 Customersknow
what they want
 Costly /Designer
labels
 Convenient location
matters less
53
Shopping Behavior of Consumers in Retailer’s
Target Market
 Factors affecting the location choice

 Density of Target Market
 Ex. Convenience stores in CBD; comparison shopping stores next
to Wal-Mart
 Uniqueness of Retailing Offering
 Convenience of locations is less important
 Ex. Bass Pro Shop
LEGAL CONSIDERATIONS 54
Other Legal Issues
 Environmental and Sustainability Issue
 Zoning and Building Codes

 Zoning determines how a particular site can be used

 Building codes determine the type of building, signs, size, type of parking lot,
etc. that can be used
 Signs
 Restrictions on the use of signs can also impact a particular site’s desirability
 Licensing Requirements
 Some areas may restrict or require a license for alcoholic beverages
Evaluating Specific Areas for Locations 55
Economic Conditions 56
The growth of population and employment
How long the growth will continue, and how it will effect demand
for merchandise sold in its stores
Which areas growing quickly and why
Competition 57
 Someretailers are going

urban due to:
 Lack of competition
 High level of disposable
income
 Large, untapped labor force
The McGraw-Hill Companies, Inc./John Flournoy,

photographer
Strategic Fit 58
Demographic, lifestyle profile, size and composition of households in
an area
Royalty-Free/CORBIS
REI – outdoor enthusiasts
The McGraw-Hill Companies, Inc./John Flournoy,
photographer
McDonald’s – families with kids

Operating Costs 59
Vary across areas
Affected by proximity
of area considered vs.
other areas where
retailer operates
 Local and state legal

environment has effect
Number of stores in an Area 60
How Many Stores to Open in an Area?
Economies of Scale vs. Cannibalization
One promotional costs for all stores open stores as long as

profits increase
Justifies cost of distribution center
Increases sales per store
Target needs of regional market
Management has control of market

Evaluating a Site 61
for Locating a Retail Store
 When evaluating and selecting a specific site, retailers consider:
 The characteristic of the site
 The characteristic of the trading area
 The estimated potential sales that can be generated
Stockbyte/Punchstock Images

 The characteristic of the site
 Traffic flow and Accessibility
 Location -
 Parking,
 Visibility,
 Adjacent Tenants ,
 Restrictions, Costs
Evaluating a Site for Locating a Retail Store 63
 Trade Area Definition

A contiguous geographic area that
accounts for the majority of a store’s
sales and customers
 Primary zone
 60 to 65 percent of its customers
 Secondary zone
 20 percent of a store’s sales
 Tertiary zone
 customers who occasionally shop at the
store or shopping center

 Estimating Potential Sales for a Store Site
 Huff’s Model
Analog Approach
Regression Analysis
Huff’s Gravity Model 65
Based on the premise that the probability which a

given customer will shop in a particular store or
shopping center becomes larger as the size of store
or center grows and distance or travel time from
customer shrinks
Application of Huff Gravity 66
Model
Huff’s Gravity Model (Continued)67
= Lamda (significance of time versus size of the store)

Application of Huff Gravity Model
store size: 5,000 sq. feet
68
store size: 10,000 sq. feet
Based on its past

experience it has been
found that ^ (lamda) equals
2 for its store location
Application of Huff Gravity Model to calculate Sales at New Store
69
The probability of a Rock Creek resident’s shopping at the new location, PRC , is
Size sqft : new store = 10,000; old store = 5000

10,000/52
PRC =
10,000/52 + 5,000/102 = .889
Time req. by RC to new store 5minutes; old store 10 mins
Time req. by OH to new store 15mins, Old store = 5 mins
Lamda=2
The probability of Oak Hammock residents’ shopping at the new location, POH , is
POH =
10,000/152
10,000/152 + 5,000/52
= .182
The expected sales for the new location thus would be :

PRC X Annual Sales + POH x Annual Sales
.889 x $5million + .182 x $3 million
$ 4,445,000 + $ 546,000 = $ 4,991,000

Application of 70
Huff Gravity Model (Continued)
The probability of a Rock Creek resident’s shopping at the new location, PRC , is
PRC = 10,000/5 2 = .889

10,000/52 + 5,000/102
The probability of Oak Hammock residents’ shopping at the new location,

POH , is
POH = 10,000/152 = .182

10,000/152 + 5,000/52
The expected sales for the new location thus would be :
.889 x $5million + .182 x $3 million = $4,991,000
Exercise - 2 71
There are 3 stores in area A, Details are as under
Stores Time in minutes Size in sq. ft.

1 15 3,000
2 5 10,000
3 20 30,000
Market size is Rs. 3,00,000 per annum for location A. Lamda is 2 (ie time taken is twice
significant than the size of the store). Calculate
1. the probability of traffic moving to various stores
2. The expected sales of each store
The probability of traffic moving to various store
The expected sales of each store, 72
Market size of Area A = Rs. 3,00,000 Lamda = 2
________ 3,000/152__________ = 0.0273

 Prob of Store 1 : 3,000/152 + 10,000/52 + 30,000/202
________ 10,000/52__________ =
 Prob of Store 2 : 3,000/152 + 10,000/52 + 30,000/202
0.819
 Prob of Store 3 : ________ 30,000/202__________ = 0.154

3,000/152 + 10,000/52 + 30,000/202
 Expected Sales:
 Store 1: 3,00,000 X 0.0273 = Rs. 8,100
 Store 2: 3,00,000 X 0.819 = Rs. 2,45,700
 Store 3: 3,00,000 X 0.154 = Rs. 46,200
Exercise - 3 73
 Kia is a household locality mostly occupied by middle income people. There are three convenience stores in the vicinity
Viz., A, B and C. The proximity of the store is of double significant than the store size. All stores are 3500 sq ft in size. The data
w.r.t the travel time is given below:

Travel time (t)
Store A 1 min
Store B 5 mins
Store C 10 mins
 You need to find the probability of a consumer shopping at Store C. Also, provide your interpretation for the same.
 Calculate the sales at each store if the market size of Kia is Rs 35,00,000 per annum
 Expected Sales=
 Store A : 0.9523 X 35,00,000 = Rs. 33,33,050
 Store B : 0.0381 X 35, 00,000 = Rs. 1,33,350
 Store C : 0.0096 X 35,00,000 = Rs. 33,600
 1.0000 35, 00, 000
Exercise - 4 74
 A Drugstore is considering opening a new location at shopping center A, with hopes
of capturing sales from a new neighborhood under construction. Two nearby
shopping centers, B and C, will provide competition. Using the following information
and the Huff gravity model, determine the probability that residents of the new
neighborhood will shop at shopping center A:
 Shopping center Size (000’s sq. ft.) neighborhood (miles)

 A 3,500 4
 B 1,500 5
 C 300 3
Assume that lamda = 2.
Prob of Store A= 0.701

Types of Leases 75
Percentage
Fixed - Rate
 Percentage leases – lease based on a % of sales.
 Retailersalso typically pay a maintenance fee-based on a percentage of
their square footage of leased space.
 Most malls use some form of percentage lease.
https://youtu.be/XluDONZFPss
Chumbak
Exercise 76
 Assume a leased department operator studies three possible

locations with 200, 300, and 500 total square feet of store space
allocated to men’s cologne (by all retailers in the areas). A group of
potential customers lives 7 minutes from the first location, 10 minutes
from the second, and 15 minutes from the third. The operator
estimates the effect of travel time to be 2. Find the probability of
customers shopping at various stores in percentage
Cntd…. 77
Therefore, the probability of consumers’ shopping is

43.9 % for Location 1,
32.2 % percent for Location 2,
23.9 % for Location 3
Exercise: 78
Location 1= 0.4385; Location2 = 0.2983; Location 3= 0.2632

Supply Chain Management & Information
79
Technology …
 Efficientand effective integration of
suppliers, manufacturers, warehouses,
stores, and transportation intermediaries
into a seamless value chain.
 Merchandise is produced and distributed
in the right quantities; to the right
locations; and at the right time.
 Minimization of system wide
costs, while satisfying the
service levels their
customers require.
Ryan McVay/Getty Images
Illustration of Supply Chain 80
Why is Efficient Supply Chain 81
Management so Important to Retailers?
 Strategic advantage
 Improved product
availability
 Higher return on investment

Strategic Importance of 82
Supply Chain Management
 Opportunity to Increase Sales by Making the Right Merchandise is in
the Right Place at the Right Time
 Fewer Stock-outs
 Greater Assortment with Less Inventory
 Opportunity to Reduce Costs
 Transportation Costs
 Inventory Holding Costs
 Improved ROI
Strategic Advantage: ZARA 83
 Timely information from store

mangers with handheld devices
to the corporate office
 Shorter
cycle time from design to
production to delivery to stores
 Shorter lead time – own
production, small quantity
production in close proximity, REFACT:
efficient logistics, premium Consumers in central
transportation, frequent delivery London visit the average
apparel store four times
 No discounts necessary annually, but Zara’s customers
visit its shops an average
of 17 times a year.
Strategic Advantage 84
 Wal-Mart’s success
is from its information and supply chain
management systems
 Why are competitor’s lagging behind?
 Made a substantial investment in developing its systems and has the scale
economies
 Through experience and learning, changes are always made to improve the
system
 Coordinated effort of employees and functional areas throughout the
company
Improved Product Availability 85
These benefits translate into

Benefitsof Efficient greater sales, lower costs,
Supply Chain higher inventory turnover, and
Management to lower markdowns for retailers
Customers:
 Reduced stockouts –
merchandise will be
available when the
customer wants them
 Tailoring assortments –
the right merchandise is
available at the right
store
Higher Return on Investment
86
Return on assets = Net profit margin x Asset turnover
= Net profit x Net sales

Net sales Total assets
= Net profit
Total assets
Efficient Supply Chain Management leads to 

 Increased Sales from more attractive assortments in stock
 Improved Net Profit Margins from increased gross margin and lowered expenses
 Lowered inventory from less backup inventory in stock and higher asset (inventory) turnover
Same Sales Using Less Inventory

Information and Merchandise 87
Flows
Information Flows 88
(Continued)
When a customer purchases a toaster
oven, sales associate scans Universal
Product Code (UPC)on merchandise
and customer credit card/loyalty card
(Flow 1)
Steve Cole/Getty Images
Information about purchase is

transmitted from POS terminal to the
buyer/planner. The planner uses this
information to monitor and analyze
sales and decide to reorder more
toaster ovens or reduce its prices if
sales are below expectations (Flow 2)
(Continued)
Sales transaction data are sent directly from the store to the
vendor, and the vendor decides when to ship more toaster
ovens to the distribution center and stores (Flow 3)
When inventory drops to a specified level in the

distribution center, buyer/planner communicates
with vendor, and then places a purchase order to StockTrek/Getty Images
re-supply stores with toaster ovens (Flow 4)

(Continued)
Buyer/planner notifies distribution center

about incoming orders and how they are to
be distributed to stores (Flow 5)
PhotoLink/Getty Images
Store managers inform distribution center

about receipt of toaster ovens and
coordinate deliveries (Flow 6)
When the manufacturer ships the toaster ovens to

the distribution center, it sends an advanced
shipping notice to the distribution center (Flow 7)
David Buffington/Getty Images
Data Warehousing 92
Data warehousing is the coordinated

and periodic copying of data from
various sources, both inside and
outside the enterprise, into an
environment ready for analytical and
informational processing
 Wal-Mart makes good use of its data warehouse.

Experts estimate that it is second in size only to that
of the U.S. government
Electronic Data Interchange 93
 EDI is the computer-to-computer exchange of business documents between retailers and vendors
 Merchandise sales, Inventory On Hand, Orders
 Advanced shipping notices,
 Receipt of merchandise, Invoices for payment
 EDI is the computer-to-computer exchange of business documents between retailers and vendors
 Standards:
 UCS (Uniform Communication Standard)
 VICS (Voluntary Inter Industry Commerce Solutions)
 Transmission system:
 Intranet: local area network (LAN) that employs Internet technology
 Extranet: collaborative network that uses Internet technology to link businesses with
suppliers, customers, etc.
EDI Security 94
There are implications of security failures (loss

of data, loss of public confidence), but retailers
have security policy objectives:
 Authentication – system assures person on
other end of session is who it claims to be
 Authorization - that person has permission
to carry out request
 Integrity – info arriving is the same that was
sent
The Physical Flow of Merchandise - 95
Logistics
Logistics:
 The aspect of supply chain that refers to the planning,
implementation, and control of the efficient flow and
storage of goods, services, and related information from
the point of origin to the point of consumption to meet
customers’ requirements
Merchandise Flow 96
Retailers can have

merchandise shipped
directly to their stores (path
3) or to their distribution
centers (paths 1 and 2)
Activities Performed 97
by Distribution Center
 Managing inbound transportation

 Receiving and checking
merchandise
 Storing or cross docking
merchandise
 Getting merchandise floor ready
 Ticketing and marking
 Putting on hangers
 Preparing to ship merchandise to a
store
 Managing outbound transportation
Advantages of Using 98
a Distribution Center
 More accurate sales forecasts
are possible when retailers
combine forecasts for many
stores serviced by one
distributor
 Enables retailers to carry less
merchandise in the store
 Easier to avoid running out of
stock
 Retail store space is more
expensive than space at the
distribution center
Outsourcing Logistics 99
Retailersconsider outsourcing logistical functions if

those functions can be performed better or less
expensively by third-party logistics companies
Transportation
Warehousing
Freight Forwarders
Integrated Third-Party Logistics Services
Pull and Push Supply Chain 100
Push Supply Chain Pull Supply Chain
Merchandise is allocated Orders for merchandise are

to stores generated at the store level
on the basis of on the basis of
forecasted demand POS sales data
• Less costly than a pull supply chain • Less likely to be overstocked or out
• Less sophisticated information of stock
needed system to support it • Increases inventory turnover
• Efficient for merchandise that has • Responsive to changes in customer
steady, predictable demand demand
• Efficient when demand is uncertain,
and hard to forecast
Advantages of Direct Store Delivery 101
Getsmerchandise faster, and is thus used for perishable goods

(meat and produce)
Helpsthe retailer’s image of being the first to sell the latest

product (video games) or fads
Some vendors provide direct store delivery for retailers to ensure

that their products are on the store’s shelves, properly displayed,
and fresh
Reverse Logistics 102
The process of moving returned goods from their customer

destination for the purpose of capturing value or proper
disposal
Retailers recover loss through on-line auctions
Reverse-logistics systems are challenging

 Items may be damaged or require special handling
 Transportation costs are high
Supply Chain for Fulfilling Catalog and 103
Internet orders
When fulfilling orders from individual

consumers, retailers ship small packages with
one or two items to a large number of different
places
 Distribution centers for picking and packing orders for consumers
Drop Shipping 104
Drop-shipping, or consumer direct fulfillment, is a

system in which retailers receive orders from
customers and relay these orders to vendors and
then the vendors ship the merchandise ordered
directly to the customer.
Drop-shipping has been used for years by

companies that sell bulky products such as lumber,
iron, and petroleum, as well as catalog and mail-
order companies.
Collaboration between Retailers and Vendors
105 in
Supply Chain Management
Bullwhip Effect - The built

up inventory in an
uncoordinated channel
where retailers and vendors
do not coordinate their
supply chain activities
What Causes a Bullwhip Effect? 106
Delaysin transmitting orders and receiving

merchandise
Over-reacting to shortages
Ordering in batches rather than generating a number

of small orders
Collaboration between Retailers and
107
Vendors in Supply Chain Management
Four approaches for coordinating supply

chain activities to reduce the level of
inventory in the chain and reduce the
number of stock-outs (in order of the level
of collaboration)
 Use EDI
 Shareinformation to reduce need for backup inventory,
improve sales forecasts and production efficiency
 Vendor manage inventory (VMI)
 Collaborative planning, forecasting and replacement (CPFR)
Vendor Managed Inventory (VMI)
108
Manufacturer access to POS information
Replenishment automatically triggered
Enables demand-based view of replenishment &

production planning – reduce bull whip effect
CPFR (Collaborative Planning, Forecasting, and
109
Replenishment)
Developed by VICS and adopted by ECR Europe

The sharing of forecast and related business information and
collaborative planning between retailers and vendors to improve
supply chain efficiency and product replenishment
The most advanced form of retailer-vendor collaboration that
involves sharing proprietary information, such as business strategies,
promotion plans, new product developments and introductions,
production schedules, and lead time information.
CPFR (Collaborative Planning, 110
Forecasting, and Replenishment)
Common goals
A single demand forecast developed collaboratively
Collaborative Promotional planning & execution
A single, shared data source
Improved inventory management across Supply Chain
Optimized replenishment strategies with joint
ownership
Process simplicity creates optimal framework for
success
Radio Frequency Identification (RFID)
111
Radio Frequency Identification (RFID) allows

an object or a person to be identified at a
distance using radio waves.
Reduces warehouse and distribution labor
costs
Reduces point of sale labor costs
Inventory savings by reducing inventory
errors
Reduces theft – products can be tracked
Reduces out of stock conditions
Impediments to the Adoption of RFID
112
 RFID is expensive – the return on

investment is low
 It still only makes sense to put tags
on pallets, cartons, expensive
merchandise or high theft items
 RFID generates more data than
what can be currently processed
 Consumers worry about privacy
invasion
https://www.youtube.com/w
atch?v=wwjzxHI92Eg
113
Gaining Competitive Advantage through
114
Human Resource Management

Why does human resource management give a
sustainable competitive advantage?
Labor costs account for a significant percentage of a
retailer’s total expenses
The customer experiences are determined by the
activities of employees (selecting merchandise,
providing information and assistance, etc.)
These potential advantages are difficult for
competitors to duplicate
Tasks performed by a typical retail firm115
Strategic mgt Merchandise mgt Store mgt Administrative Mgt
• Developing the • Buy merchandise • Recruit, hire, train • Promote the firm,
retail strategy • Control store personnel merchandise and
• Target market merchandise • Plan work schedules services
identification inventory • Maintain store • Manage HR
• Determine the retail • Price merchandise facilities • Distribute
format • Locate and display merchandise
• Design org structure merchandise • Establish financial
• Location selection • Sell merchandise control
• Repairs and
alteration
• Customer
complaints
• Physical inventory
taking
• Other services
Organization structure for a small retailer
116
 Organization structure for a National Chain Retailer
117
Objectives of 118
 Short Term
 Increasing Employee Productivity

 Productivity = Sales/ Number of Employees
 Long-Term
 Employee attitude  customer satisfaction and loyalty 

long-term performance
 Increasing Employee Satisfaction  Reducing Turnover
 Employee turnover
= # of employees leaving their job during the year
# of positions
Human Resource Management 119
Challenges in Retailing
Work Environment Employees
Open Long Hours Unskilled
Peak Sales Periods Part-Time
Emphasis on Cost
Diverse Backgrounds
Control
High Turnover
Downward Performance Spiral 120
Issues in Retail 121
Expense Control
Control expenses to be profitable
Retailers often hire people with little or no experience
A modest investment in hiring more staff may result in a significant
increase in sales
Issues in Retail
122
(Continued)
Part-Time Employees
 Employee need vary depending on the time of day, day of week, time of
year, and promotion schedule
 Tominimize costs, retailers should complement their full-time employees
with part-time workers
 Part-time
employees are less expensive than comparable full-time
employees
Issues in Retail
123
(Continued)
 Utilizing Diverse Employee Groups
 Increased efforts to recruit, train, manage, and retain mature, minority, and handicapped
workers
 Different approaches need to be used to manage younger and older employees
Issues in Retail
124
(Continued)
International Human Resource Issues
 Differencesin work values, economic systems, and labor laws mean
that HR practices must differ
 The legal/political system in countries often dictates the human
resource management practices
Legal Issues in Human Resource 125
Management
Equal Employment Opportunity
 Protect employees from unfair discrimination in the workplace.
Compensation
 40-hour workweek, overtime pay, minimum wage, and employee pensions.
Labor Relations
 The
process by which unions can be formed and the ways in which companies
must deal with the unions.
Management (Continued)
 Employee Safety And Health
 The employer is obligated to provide each employee with an
environment that is free of hazards that are likely to cause death or
serious injury.
 Sexual Harassment
 Unwelcome sexual advances, requests for sexual favors, and other
inappropriate verbal and physical conduct.
Management (Continued)
Employee Privacy
 Employees’ privacy protection is very limited.
Developing Policies
 HRdepartment is responsible for developing programs
and policies to increase awareness of legal restrictions and
know how to deal with potential violations.
Customer Relationship Management
Overview
CRM IS A BUSINESS PHILOSOPHY AND A SET OF STRATEGIES, PROGRAMS, AND SYSTEMS
THAT FOCUSES ON IDENTIFYING, AND BUILDING LOYALTY WITH A RETAILERS MOST
VALUED CUSTOMERS
RETAILERS CAN USE CRM PROGRAMS FOR INCREASING PROFITABILITY BY BUILDING
RELATIONSHIPS WITH THEIR BETTER CUSTOMERS
GOAL:- DEVELOP A BASE OF LOYAL CUSTOMERS WHO PATRONIZE THE RETAILER
FREQUENTLY
FROM USING MASS ADVERTISING RETAILERS ARE SHIFTING THEIR FOCUS TO PROVIDE
MORE VALUE FOR THEIR CUSTOMERS BY USING TARGETED PRODUCTS AND
SERVICES TO INCREASE THE “SHARE OF WALLET”(% OF CUSTOMERS PURCHASES
MADE FROM THE RETAILER) FROM THE CUSTOMERS
THIS PERSPECTIVE IS SUPPORTED BY RESEARCH THAT IT COSTS 3-6 TIMES MORE TO SELL
PRODUCTS TO NEW CUSTOMERS THAN TO EXISTING CUSTOMERS
Customer loyalty- objective of CRM
- it is having the customers to make repeat visits to the retailer and being satisfied with
their experiences
- customer loyalty to a retailer means that customers are committed to purchasing
merchandise and services from the retailer and will resist the activities of competitors
attempting to attract their patronage
-they have a bond with the retailer which goes beyond positive feelings for the retailer
-have an emotional connect
-their reasons for loyalty go beyond the normal retail attributes
- emotional attachment to retailer Customer Loyalty : 2 Types

- Attitudinal Loyalty
- personal attention - Behavioral Loyalty
- memorable positive experiences
- brand building communications programs
Can Offering Price Discounts Achieve 131
Customer Loyalty?
No!
 Retail strategies like these can be copied by
competitors
 These strategies encourage customers to be

always looking for the best deal rather than
developing a relationship with a retailer
Overview of the CRM process 132
Collecting customer
data Learning
Analyzing customer
Implementing CRM data and identifying
programs target customers
Action Developing CRM

programs
133
Step 1:Collecting Customer Data: Customer Database
134
• 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
• Customer preferences
• Descriptive information about customers

• Demographic and psychographic data
• Customer’s responses to marketing activities

Step 1: Collecting Customer Data: Identifying
135
Information
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
• Use Biometrics
• Measuring human characteristics such as a person’s hand geometry, fingerprints, iris,
or voice.
• Place RFID chips on merchandise

Privacy Concerns 136
 Control over Collection:

 Do customers know what information is being collected?
 Do customers feel they can decide upon the amount and type of
information collected by retailers?
 Control over Use:
 Do customers know how the information will be used by the retailer?
 Will the retailer share the information with third parties?
Steve Cole/Getty Images

Protecting Customer Privacy 137
 Privacy by design
 Shift responsibility for privacy from consumers
to retailers.
 Simplified consumer choice
 Allow customers to track their online activities.
 Greater transparency
 Improve customer understanding
Stockbyte/Punchstock Images
Customer’s Decision to Offer 138
Information
Frequent shopper programs- loyalty programs 139
• - are programs which identify and provide rewards to customers who

patronize the retailer
• - when customer enroll for such programs they provide detailed info
about themselves and their household,
• - issued a card with an identifying number
• -customers are offered an incentive to use the card when they make
purchases from the retailer
• -offer 2 benefits:- provide demographic and other info when they sign up
and are motivated to identify themselves at each transaction.
motivated by the rewards offered at each visits and amount purchased
at each visit
140
Frequent shopper programs- loyalty programs
 Drawbacks:
 customer might forget to bring it or decide not to show it- use of phone
no
 Use of ILC- interactive loyalty cards- optical scanner- use of kiosks
 Fingerprint scans
STEP 2: ANALYZING DATA AND IDENTIFYING
141
TARGET CUSTOMERS
- the next step- to analyze the customer database and convert the data into
information that will help retailers develop programs for building customer loyalty
- data mining – used to identify the patterns of data.
- Market Basket Analysis: specific type of data analysis that focuses on the
composition of the basket, bundle of products purchased by a household during a
single shopping occasion. eg tissues near cold medicines
Identifying Best Customers 142
 Estimating Lifetime Value (LTV)

 The expected contribution from the customer to
the retailer’s profits over his or her entire
relationship with the retailer
 Use past behaviors to forecast future

purchases, the gross margin from these
purchases, and the costs associated with
serving the customers
 Classifying Customers by recency,

frequency, and monetary value of
purchases (RFM Analysis)
(c) Brand X Pictures/PunchStock
Identifying market segments
- identifying segments- group of customers who have
similar needs, purchase similar merchandise and
respond in a similar manner to marketing activities
- identifying best customers: retailers can develop a
score or a number indicating how valuable customers
are to the firm. this score can be used to target the
customers
Market Basket Analysis 144
Data analysis focusing upon the composition

of the customer’s market basket – what
items are bought during a single shopping
occasion?
Uses:
 Adjacencies for displaying merchandise
 Joint promotions
 Bananas in the cereal aisle as well as in the
produce section
 Beer with baby diapers
 Tissues with cold medicine Burke/Triolo Productions/Getty Images
Life time Value (LTV)
A measure to score each customer is called lifetime customer value. LTV
is the expected contribution from the customer to the retailers profits
over his or her entire relationship with the retailer.
To estimate LTV retailers use past behavior, gross margins, costs of
service. Eg: a customer who buys apparel only when it is on sale will
have low LTV than a customer who typically pays the full price and buys
the same amount
Customer pyramid: most customers differ in their LTV. follow the 80-20
rule, 80% of sales come from 20% of customers
The Customer Pyramid
Most profitable Platinum
Gold
Iron
Lead
Least profitable
The Customer Pyramid
• top 25% of LTVs
Platinum • Not concerned about price but place more value on
customer service
• The next 25% after platinum segment

Gold • More price sensitive, buy significant amount from retailer,
not as loyal as platinum, may buy from competitors
• Modest LTV- Iron – not much deserved attention by the
Iron & Lead

retailer
• Lead: Cost company money, often demand attention,
but don’t buy much
RFM Analysis
AN RFM (RECENCY, FREQUENCY ,MONETARY) ANALYSIS IS OFTEN USED BY CATALOG RETAILERS AND
DIRECT MARKETERS IS A SCHEME FOR SEGMENTING CUSTOMERS ACCORDING TO HOW RECENTLY THEY
HAVE MADE A PURCHASE, HOW FREQUENTLY THEY MAKE A PURCHASE, AND HOW MUCH THEY HAVE
BOUGHT
USE THIS TYPE OF ANALYSIS TO DETERMINE WHICH CUSTOMER GROUP SHOULD BE SENT CATALOGS. FROM
EACH RFM GROUP THEY WILL DETERMINE THE % OF CUSTOMERS IN EACH GROUP WHO MADE A
PURCHASE FROM THE LAST CATALOG SENT TO THEM
CUSTOMERS WHO HAVE MADE A SMALL INFREQUENT PURCHASES – FIRST TIME CUSTOMERS
OBJECTIVE OF SUCH CRM PROGRAM IS TO CONVERT THEM INTO EARLY REPEAT CUSTOMERS AND
EVENTUALLY INTO HIGH VALUE CUSTOMERS
CRM PROGRAMS DIRECTED TOWARDS HIGH RFM VALUE- LOOK FOR MAINTAINING LOYALTY, INCREASE
RETENTION AND INCREASE THE SHARE OF WALLET
RFM Analysis 149
Used by catalog retailers and direct marketers

Recency: how recently customers have made a purchase
Frequency: how frequently they make purchases
Monetary: how much they have bought
Developing CRM Programs 150
Retaining Best
Customers
Converting Good
Customers into
Best Customers
Getting Rid of
Unprofitable
Customers
Step 3: Developing CRM programs
After segmentation – next step is to develop programs for
different customer segments
Programs retailers use for retaining the best customers
- Converting good customers into high LTV customers
- Getting rid of unprofitable customers
Customer retention
TO RETAIN THE BEST CUSTOMERS RETAILERS USE THE FOLLOWING
PROGRAMS
 - FREQUENT SHOPPER PROGRAMS
• - SPECIAL CUSTOMER SERVICES
• - PERSONALIZATION
• - COMMUNITY
Frequent shopper programs
USED TO BUILD A CUSTOMER DATABASE BY IDENTIFYING CUSTOMERS BY THEIR TRANSACTIONS AND
ENCOURAGE REPEAT PURCHASES AND CUSTOMER LOYALTY
RETAILERS PROVIDE INCENTIVES TO ENCOURAGE CUSTOMERS TO ENROLL AND USE THE CARD
INCENTIVES- IN FORM OF DISCOUNTS ON PURCHASES OR POINTS ON EVERY RUPEE SPENT
NATURE OF REWARDS CAN BE
TIERED ACCORDING TO VOLUME OF PURCHASE TO MOTIVATE THE CUSTOMERS TO INCREASE THE
LEVEL OF PURCHASES
OFFER CHOICES OTHER THAN POINTS FOR ALL CUSTOMERS WHO DON’T VALUE THE SAME
REWARDS.
EG TESCO- OFFERS DISCOUNTS ON ENTERTAINMENT, VACATIONS ETC
LINK FREQUENT SHOPPER PROGRAMS TO CHARITABLE CAUSES
- DISADVANTAGES:
1. DIFFICULT TO MAKE CORRECTIONS IN PROGRAM SYSTEM
2. NOT CLEAR IF SUCH PROGRAMS INCREASE CUSTOMER SPEND
3. DIFFICULT TO GAIN COMPETITIVE ADVANTAGE AS IT CAN BE EASILY REPLICATED BY COMPETITORS
4. EXPENSIVE
Special customer services 154
 Retailers provide high quality customer service to build and maintain

loyalty of their best customers:
 Nordstrom holds complementary private parties for invitees to view new
clothing lines
 Saks Fifth Avenue offers free fur storage, complimentary tailoring, and
dinner at the captain’s table on a luxury cruise line.
 Neiman Marcus In-circle members receive exclusive offers and
shopping events and earn Perk Cards good for in-store dining,
alterations, parking, delivery and more.
Personalization
SPECIAL CUSTOMER SERVICES : PROVIDE HIGH QUALITY CUSTOMER SERVICE TO BUILD AND MAINTAIN LOYALTY
DIFFERENT CUSTOMERS IN EACH SEGMENT WILL REQUIRE DIFFERENT STRATEGIES
AVAILABILITY OF VARIOUS DATA ANALYSIS TOOLS, RETAILERS OFFER UNIQUE BENEFITS AND DIFFERENT TARGET MESSAGES TO
INDIVIDUAL CUSTOMERS
1 TO 1 RETAILING: DEVELOPING RETAIL PROGRAMS FOR SMALL GROUPS OR INDIVIDUALS. USUALLY PRACTICED BY LOCAL
RETAILERS.
INTERNET ALLOWS PERSONALIZATION EG AMAZON
REWARDS AND BENEFITS ARE BASED ON INFORMATION OBTAINED BY THE RETAILERS
POSITIVE FEEDBACK CYCLE FOR CRM PROGRAM : INCREASING REPEAT PURCHASES- INCREASES DATA- PERSONALIZED BENEFITS-
INCREASES PURCHASES
Community
TO DEVELOP A SENSE OF COMMUNITY AMONGST CUSTOMERS
INTERNET ALLOWS OPPORTUNITY FOR CUSTOMERS TO EXCHANGE INFORMATION USING
BULLETIN BOARDS
EG: SPORTING GOODS RETAILER POSTS INFO ON LOCAL SPORTING WEBSITE
Converting good customers into best customers
INCREASE THE SALES MADE TO CUSTOMERS IS REFERRED TO AS CUSTOMER ALCHEMY:-
CONVERTING IRON AND LEAD TO PLATINUM CUSTOMERS
ALCHEMY INVOLVES OFFERING AND SELLING MORE PRODUCTS AND SERVICES TO EXISTING
CUSTOMERS AND INCREASING THE SHARE OF WALLET
USE DATABASE ANALYSIS FOR CROSS SELLING AND ADD ON SELLING
Dealing with unprofitable customers
AT BOTTOM TIER – CUSTOMERS HAVE NEGATIVE LTV
RETAILERS LOSE MONEY WHEN THEY MAKE SALE TO THEM
CATALOG RETAILERS- CUSTOMERS BUY 2-4 ITEMS AND KEEP ONLY ONE OF THEM
COST OF PROCESSING IS MORE THAN PROFIT
CHARGE CUSTOMERS FOR SERVICES THEY ARE ABUSING

NEED TO DEVELOP A LOWER COST APPROACH
Step 4: Implementing CRM programs
NEEDS TO APPOINTING A CRM MANAGER,
COMPUTER AND TECHNOLOGY FOR DATA ANALYSIS
CLOSE COORDINATION BY DIFFERENT FUNCTIONS
160
anupamaa.chavan@nmim
Retail Research & Retail Franchising
Refer Notes Given

161
Thank you

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Retailing Strategy & Planning

DR. ANUPAMAA S. CHAVAN

 The word strategy was first used in warfare

 Itis derived from a Greek word ‘strategos’

 Strategy is an art or science of directing military

 कंध ं से मिलते हैं 1.mp4

 कंध ं से मिलते हैं 1.mp4

A retail strategy is a statement identifying

Competitive Advantage by:

 Record surge in sales of Dishwashers, vaccum cleaners, DIY

Customers will be reluctant to patronize

Retailers build loyalty by:

Exclusive Sale of Desirable Brands

Strategies for Recruiting and Retaining Talented Employees

Develop positive organizational culture

Location is a competitive advantage

A high density of Starbucks stores

Retail Format Development

 Attract customers from target market – Walgreens

 Get current customer to visit store more often or buy

Cross Selling – sales associates in one department sell

Example: Manicurist sells services plus hand lotion or nail

Example: Salesperson sells leaf blower directs customer to

Develops a new retail format with a

Sales in billion U.S. dollars

0 500 1,000 1,500 2,000 2,500 3,000

Asia Pacific 2,448.33

North America 749

Western Europe 498.32

Central & Eastern Europe 92.91

Latin America 83.63

Middle East & Africa 41.56

Note(s): Worldwide; 2020

Retail Location Planning

Location! Location! Location!

Eddie Tan/Life File/Getty Images

 Involves evaluating a series of trade-offs between:

There are relative advantages

 The selection of a location type must reinforce the retailer’s strategy be

 Department Stores  Regional Mall

 Factors affecting the location choice

 Minimize the customer’s effort to

 Customers have a good idea of what

Typical for furniture,

 Factors affecting the location choice

 Zoning determines how a particular site can be used

 Someretailers are going

The McGraw-Hill Companies, Inc./John Flournoy,

McDonald’s – families with kids

Vary across areas

 Local and state legal

Economies of Scale vs. Cannibalization

One promotional costs for all stores open stores as long as

Justifies cost of distribution center

Increases sales per store

Target needs of regional market

Management has control of market

for Locating a Retail Store

 Trade Area Definition

for Locating a Retail Store

Based on the premise that the probability which a

= Lamda (significance of time versus size of the store)

store size: 10,000 sq. feet

3,000/152__ = 0.0273

 Prob of Store 3 : 30,000/202__ = 0.154