Module II : Retail Formats and operations

Retail sales by ownership

The retail sale by ownership is classified as under:

(1) Independent Retailer: An Independent Retailer usually is a small retailer
(not always) and is found in all lines of trade and in all communities. He may
be a young man, fresh graduate just starting his own business or he may be
a man of advanced years with many of them spent in the field of retailing. In
India, many of the independent stores tend to be passed on from one
generation to another. In either case he has a business of his own. He is
independent in-fact as well as in name. The high numbers of independent
retailers is associated with the ‘ease of entry’ into the market place. The
entry and growth of independent retailers in India is a big reason in the high
rate of new retail outlets failure.

(2) Chain stores: A chain retailer or a chain store is a group of two or more
outlets carrying the same sort of merchandise assortment, owned and
controlled jointly and usually supplied from one or more central
warehouses. The main advantage of such a retail format is to make retailer
enable to bargain well with the suppliers. Another advantage is cost
effectiveness in advertising and sales promotions. Thus, a very small number
of stores constitute a chain-store system.

(3) Franchising: A Franchise is a contractual agreement between the

franchiser and the franchisee that allows the franchisee the right to supply
its brand (goods and services) exclusively within a defined area, as per a
particular format for a specified period of time. In return, franchisee pays a
fixed fee in advance and a monthly percentage of gross sales made by him
under franchiser name and fame in the form of royalty. In India, franchising
business is becoming very popular and growing rapidly.

(4) Leased department stores: A leased department which is also known as

shop-in-shops or store-in-store, is a section of a department in a retail store
in the form of specialty/discount store given to any outside party on
monthly rental basis. The person who provides the store space to outside
party is known as lessor, and the person who takes the shop/store space is
known as lessee. The payment made by lessee to lessor for the use of store
space is decided in a contract in the form of monthly rent.

(5) Vertical Marketing system: A Vertical Marketing System (VMS) is a

system in which almost all the members of distribution channel such as
manufacturers, wholesalers and retailers work together to satisfy human
needs and wants by facilitating the smooth flow of goods and services from
manufacturer to ultimate consumer. Three types of VMS are in existence
through which goods and services are usually distributed to customers.

These are:
(i) Independent firm VMS

(ii) Partially integrated VMS

(iii) Fully integrated VMS

(i) Independent firm VMS is a marketing system where manufacturers play

vital role to provide goods and services to customers. This is the case where
retailers are very small and therefore, manufacturers have to reach the
whole market. Also when firm’s financial resources are limited and channel
members are not in a position to share risks and expenses, therefore, they
want manufacturer to come forward and lead the retailing efforts.
Independent retailers on the other hand, target their customer base and
build loyalty by becoming friendly retailer and mouth advertisement.

(ii) Partially integrated VMS is a marketing system in which two

independent, financially strong firms along a channel of distribution perform
all manufacturing and distribution functions without the involvement of any
intermediary. This is the case where involvement of wholesalers may be
expensive and/or unaffordable. The example of such system is where
manufacturers and retailers divide all the retailing activities like production,
storage and distribution without any independent wholesalers.

(iii) Fully integrated VMS is a system where one member of the distribution
channel for say manufacturer performs all production, storage and
distribution functions without the involvement of any channel member.

(6) Consumer co-operatives: Consumer Cooperatives are retail outlets

owned and managed by its customer members. A group of interested
customers (members) start retail operations by investing money, receive
stock certificates, elect members to run day to day activities and share the
profits on the basis of investment made or certificates held.

The reason to setup consumer cooperative is that local retailers are not able
to satisfy consumers’ needs (whatever the reason may be). Therefore,
consumers are left with no option but to open their own store. Examples of
cooperatives in India are the ‘Kendriya Bhandaars’, owned and managed by
government.
On the basis of merchandise offered

1. Convenience Stores

These are small stores generally found near residential areas.The Food
Marketing Association defines them as “small local store selling mainly
groceries open until late night or even 24 hours per day”.The size of
convenience stores ranges from 500 to 1,500 sq. feet and targets at
customers who require to make a quick purchase.

Example – Stores at Gas Stations

2. Supermarkets

Supermarkets are huge, low cost, low margin and large volume
stores.Having self-service processes, they are intended to meet the needs
for groceries and items apart from food Their store size ranges from 800 to
5,000 sq. feet.70% of the goods that are stocked are food-related.

Example

 TESCO
 ALDI
3. Department Stores

Huge stores that sell several product lines with each serving as a separate
department is called as a department store. The product mix is mostly non-
edible items such as apparels, accessories, books, footwear etc. They have a
high service level.Size of such stores ranges from 5,000 to 40,000 sq. feet.

Example – M&S

4. Hypermarkets

A combination of a supermarket and a departmental store is known as a

hypermarket. The size of such stores ranges from 40,000 to 1,00,000 sq.
feet. They provide with different types of food items and non-food related
products.

Products here normally are at discounted prices and can also be termed as
one-stop shopping.

Example

 Walmart
 Carrefour
5. Specialty Stores

These type of stores concentrate on one particular brand or a specific

category. Speciality stores provide a restricted product line but have good
depth in the lines they provide. It has a high service level. Their store size
ranges from 2,000 to 5,000 sq. feet

Example

 THE HOME DEPOT

 DECATHLOM
6. Factory Outlets

In Factory Outlets, the products are invariably sold at a rate lesser than retail
prices. Off-Price retailers generally obtain manufacturer’s seconds, overruns
and off seasons at deep discounts. Manufacturers could also own such retail
stores. Such outlets are normally seen by the parent company to improve
business.

Non-Store Based Retailing

1. Direct Selling

In direct selling, retailers make personal contact with the customers either
at home or place of work.Commodities such as cosmetics, accessories, food,
nutritional products and educational materials are some of the products
sold in such a format.The salespeople or consultants require training for
such a type of selling.

Example

 Tupperware
2. Television Shopping

Specifications of the product are given through television.In this medium

health-related products, kitchen appliances, artificial jewellery etc. are sold.
After purchase, the products are delivered at the customer’s doorstep.

3. Automated Vending Kiosks

Automated vending kiosks offer convenience to the customers due to its

accessibility. This popular form of retailing is used to sell items like
chocolates, soft drinks, tea, coffee, cigarettes

Example

 ATM by banks
 Gold ATM in DubaiVending Machines
4. E-tailing, also known as the Click and Mortar model

E-tailing is when products are offered to the customers online with the use
of the internet. The model proves to be successful depending on the range
of the products offered and the retailer’s ability to deliver them on time.
Several retailers follow this model simultaneously with the brick and mortar
strategy.

NON STORE BASED RETAIL MIX AND NON TRADITIONAL SELLING

Non-store retailing is a form of retailing in which a firm sells its products

without a physical retail store/space. The firm sells its products via online
platforms and delivers the product to customer’s doorstep.
Generally, non-store retailing is classified into six further types:

 Direct selling
 Telemarketing
 Online retailing
 Automatic vending
 Direct marketing
 Electronics retailing
Direct Selling
Direct selling is the oldest form of non-store retailing. Door-to-door selling is
one of the most common practices in direct selling. Salesmen usually do cold
calls to homes or offices to sell the products. Some salesmen prefer making
an appointment with a potential client and then visit later. Salesmen also
use other options such as promotions, standees, etc.

However, a firm needs highly trained salespeople for direct selling. It is not
easy to persuade a customer unless you have the right skills. Therefore,
companies spend heavy budgets on training such a workforce.

On the other hand, direct selling has a lot of benefits too. For instance,

 Direct selling allows a firm to interact directly with a customer.

 A customer can have a better demonstration of the related product.
 It reduces overhead costs for a business.
Direct selling also has further subcategories such as:

One-to-one selling

One to one selling includes targeting a single or multiple customer directly.

They may visit different homes and offices to sell the products. Moreover,
sometimes, the salesman finds a host who invites his/her friends or
neighbors to one place, and then the salesmen demonstrate the product in
front of a small gathering.
Multi-level Marketing

Multi level Marketing is a large-scale form of direct selling. Amyway.com is

a common example of multi-level marketing. The firm started this mode of
selling in 1994 when they used to hire independent businesses as their
distributors. The company generally targeted the Asia Pacific region and
Japan.
Telemarketing
Telemarketing is another traditional mode of non-store retailing and was
very common in the late 1990s and early 2020s. It involves selling a product
via telephone. However, this non-store retailing channel has almost
diminished over time.

Telemarketing is still a common practice in stockbrokers; they often

approach their potential clients through telephones, etc. Moreover, bankers
often sell their promotional offers, credit/debit cards, etc., via
telemarketing.

Online Retailing
Online retailing is one of the latest and most common forms of non-store
retailing. Companies sell their products either on their websites or through
social media platforms. A firm displays all the available items on its website
so that the customer has multiple options to choose from. Customers select
a product, make the payment, and the firm delivers the product at the
customer’s doorstep.

Automatic Vending
Automatic vending includes selling products with the help of machines.
Mostly, FMCG companies operate with automatic vending machines. Firms
install automatic vending machines in public or even in private places.

For instance, beverage companies such a coca-cola, Pepsi, Nescafe, etc.,

install their vending machines at public places such as stadiums, banks,
roads, or even private offices. In fact, pizza sellers are now selling their
products via vending machines.
Direct Marketing
Direct marketing is a blend of different non-store retailing practices.
Companies used to do direct marketing through coupons, newspapers,
magazines, and mails (letters). However, with the advent of the internet,
companies now use emails, e-newspaper, websites, e-magazines, etc.

As of now, email marketing has become one of the most effective sources of
direct marketing. Companies offer regular email subscriptions mostly free of
cost. Potential customers are regularly updated about the latest offerings
from the companies.

Electronics Retailing
Electronic retailing is more of online retailing as sellers interact with the
customers on digital platforms. These platforms may include the seller’s
website or social media profiles. Customers select their desired product and
may order through telephone, website, email, or send a direct message on
the company’s social media accounts. Common examples include Etsy, eBay,
Amazon, Alibaba, etc.

RETAIL STORE OPERATION

Components of retail store operations

Retail Store operations is the term used to describe all the activities that
keep the store functioning well. It includes people management, supply
chain, store layout, cash operations, physical inventory, master data
management, promotions and pricing, and so on.

The components include

 Design: Design and aesthetics are a major part of the shopping

experience. Design is both art and science, often using data to help
make choices, such as product display and placement. Here are
aspects of design that fall under retail operations.
 Customer Service: Customers may not always be right, but they’re
always the customer, representing a potential sale and potential
 review. With excellent customer service, stores can increase their
competitiveness, and even make up for shortfalls in other areas, such
as convenience or pricing.
 Cash, Fraud, and Internal Controls:

 Handling cash and credit: Good cash and credit handling

requires both good people and a good system to track
everything, quickly discover discrepancies, and keep the store’s
finances and inventory on accurate, solid footing.
 Shoplifting and fraud prevention: Stores devote significant
resources (both people and technology) to deter shoplifting and
fraud. Security cameras, monitoring, and product scanners are
used commonly. Losses from shoplifting and fraud can be
significant, including by organized rings and scams, so stores
need to be vigilant and find problems quickly if they do occur.
 Internal controls: Stores develop and maintain internal controls,
or standard operating procedures, to prevent problems with
cash handling, credit, shoplifting, and fraud.
 Safety and security: Stores try to ensure that their employees
and customers are safe. They may use security guards and
security camera monitoring.
 Product Inventory: For a store to succeed, it needs to have the
products to satisfy its customers.The store has to maintain the balance
between the supply and the demand of the product

 Administration:This include
1. Managing the premises: Maintain the store in good working
order. Make sure customers aren’t turned off by inadequate
facilities or poor maintenance. Like a home, a store requires
consistent care and attention. Customers may judge you based
on a littered parking lot, insufficient air conditioning, or dirty
restrooms.
2. Training of employees: Employee training is essential, especially
given the frequent turnover in retail jobs. Employees must be
 trained in customer service and store procedures, such as cash
handling and internal controls.
3. Managing of promotions and events: Stores rely on promotions
and sales to drive additional business.
 Store Management: The store manager is responsible for keeping daily
operations functioning smoothly and managing employees. It’s a
challenging role in a challenging environment. The store manager
reports to regional or corporate managers, or an owner, and may have
to follow broad strategies or directives from them.

STORE ADMINISTRATION

Stores Administration involves the management/ organization and

control of all store activities and documentation for maintaining flow of
goods to meet the organization requirements.

STORE MANAGER

An individual responsible for managing the overall functioning of the store is

called a store manager.A store manager takes care of the day to day
operations of the store and ensures maximum profitability for his store.

Responsibilities of the Store Manager

 Recruiting employees for the store is the store manager’s prime

responsibility. He not only has to hire the right candidates for the
store but also train them for their overall development. He must
ensure that all the employees (floor manager, department manager,
cashier and so on) contribute to their level best for the effective
functioning of the store. He must act as a strong pillar of support and
stand by his team at the hour of crisis. It is his duty to acquaint his
team members with the latest trends in fashion or any other newly
launched retail software. It is his responsibility to delegate
responsibilities to his subordinates according to their specializations
and extract the best out of them. The store manager must motivate
his team members from time to time.
 The store manager must make sure his store is meeting the targets
and earning profits. He is responsible for the smooth and effective
functioning of the store.
 The store manager is responsible for maintaining the overall image
of the store. It is his duty to sensibly display the merchandise so that it
immediately catches the attention of the customers. The store
manager must ensure that his store meets the expectations of the
customers and lives up to its predefined brand image.
 He must ensure:
 The store is kept clean
 Shelves and racks are properly stocked and products do not fall
off the shelves.
 Mannequins are kept at the right place to attract the customers
into the store and rotated frequently.
 The merchandise should be according to the season as well as
the latest trends.
 The store is well lit, ventilated and offers a positive ambience to
the customers.
 The signage displaying the name and logo of the store is
installed at the right place and viewable to all.
 One of the major responsibilities of the store manager is to make the
customers feel safe and comfortable in the store. It is his key
responsibility to make sure that the customer leaves the store with a
pleasant smile.
 He is responsible for managing the assets of the store. The security
and safety of the store is his responsibility. The store manager must
ensure that sufficient inventory is available at the store to avoid being
“out of stock”.
 He along with his subordinates are responsible for planning, managing
profit and loss, handling cash at the store as well as collating daily
sales as well as other necessary reports.
 He must ensure that the store is free from pilferage.

INVENTORY MANAGEMENT
 Inventory management is one of the pillars of a successful retail operation.
Retail inventory management techniques help stores and ecommerce sellers
satisfy customers, reduce costs and increase profits. Inventory management
is vital for retailers because the practice helps them increase profits. They
are more likely to have enough inventory to capture every possible sale
while avoiding overstock and minimizing expenses.

From a strategic point of view, retail inventory management increases

efficiency. The practice:

 Decreases Inventory Costs:

When you know how much stock you have and how much you need, you
can pinpoint inventory levels more accurately, thereby reducing storage and
carrying costs for excess merchandise. Other savings include shipping,
logistics, depreciation and the opportunity cost that comes from not having
an alternative product that might sell better.

 Minimizes Out-of-Stocks:
To avoid disappointing customers and missing sales, retailers want to avoid
running out of inventory. Retailers can use inventory management tools to
determine how much stock is “just right” to have on hand, neither too much
nor too little. This amount will be larger for bestsellers than for unpopular
products. Also, with real-time information on sales and stock, retailers can
react quickly by reordering, transferring stock from another location or drop
shipping to the customer.

 Improves Profit Margins:

With lower inventory costs and enough supply to fill every order, retailers
improve profitability.

 Prevents Spoilage and Obsolescence:

Inventory management helps retailers address another costly inefficiency
that happens when products expire or become obsolete. This phenomenon
can apply to perishables that have a limited shelf life, such as milk and meat,
or a non-perishable that becomes obsolete because consumer tastes and
technology change. For example, season collections or holiday-specific
 packaging. Or when a piece of consumer technology adds a popular new
feature, the old models may face plummeting demand: Consider how the
rise of smart televisions sunk demand for models that weren’t capable of
streaming content.

 Improves Multi-Channel and Omnichannel Performance and Order

Fulfillment:
If you are selling via physical stores, your website and third-party merchants,
it can be difficult to keep correct inventory counts across all channels.
Having accurate inventory data across selling channels lets you use your
inventory more efficiently, ultimately getting the product to consumers
faster.

 Simplifies Processes and Facilitates Growth:

Strong inventory management also reduces friction in your systems as sales
grow. Shipping, receiving and order fulfillment run more smoothly, and you
minimize errors, customer complaints and staff stress.

 Reduces Shrinkage:
Shrinkage is inventory loss due to shoplifting, product damage, vendor
mistakes or fraud, employee theft and administrative errors. According to
a survey by the FMI food industry association, the average supermarket
loses up to 3% of sales through shrinkage.

 Eases Supply Chain Management:

Having a firm grip on inventory and sales trends helps you manage your
supply chain better. You can use the replenishment system that works best
for you, whether that’s just-in-time ordering or fewer, bigger orders. Retail
inventory management helps you determine your economic order quantity
(EOQ), which is the ideal order size to minimize inventory costs including
holding, shortage and ordering expenses. The EOQ formula, which factors in
demand in units, ordering costs such as shipping charges and holding costs,
works best when these variables remain consistent over time. Learn more
about the EOQ formula.
 Improves Customers Satisfaction:
When customers get the products they want faster with fewer mistakes or
out-of-stocks, it increases customer loyalty.

 Improves Forecasting:
You can use data such as historical sales results and available inventory to
project future sales, growth and capital needs. These forecasts are vital to
your budgeting and guide spending for marketing, product development and
staffing.

RECIEPT MANAGEMENT

Receipt management is a key aspect of general accounting. In personal

finance, receipts are a method of tracking household spending habits; the
same holds true within businesses of any size. Businesses also can use
receipts as a method for tracking revenue generation. Receipt
management refers to the practice of organizing, filing and profiting
through keeping accurate and complete track of receipts.

CUSTOMER SERVICES

Customer service is the support a company offers to its customers. This

support begins during the purchasing process and usually extends past the
purchasing date. During the purchasing process, companies typically provide
customers with advice and information about products or services they sell.
This can help consumers make informed decisions. Then, when customers
commit to buying a product or service, companies often provide them with
troubleshooting tools and problem-resolution support.

There are some ways to provide customer services . They are

1. Support customer as a team

2. Listen to customers

3. Offer friendly personal services

MANAGEMENT OF RETAIL OUTLET/ STORE

Store management is the actual handling of items received, held, and issued
from a store. For small retailers, store administration will focus on inventory
management. By maintaining optimal inventory levels, you can meet
customer needs while minimizing unnecessary costs and achieving sales
goals. However, this work becomes more complex with larger stores and
includes:
 Receiving items and materials
 Returning defective or damaged stocks
 Keeping records of incoming and outgoing items
 Maintaining inventory levels precisely to avoid overstocking or
overstocking.
This also includes

1. Control inventory
Inventory control helps to reduce the risk of profit minimization. For
example, if your store is out of stock, customers may buy substitute
products from competitors, so you lose potential sales and reduce customer
loyalty.So perfect control have to be made on inventory

2. Reduce fraud and theft

The biggest concern for store managers is when you have fewer sales and
items in actual inventory than what was recorded. Shrinkage and inventory
deterioration can result from counting errors, damage, or theft. Theft can be
by outsiders or sometimes from within your employees. Therefore, retailers
should also know how to balance cash drawers to reconcile the flow of
goods and cash. From there, you can detect any shrinkage at the earliest.

3.Count physical inventory regularly

Ideally, you should perform cycle counting regularly to keep track of your
inventory. For example, you might consider cycle counting, a method of
counting a small portion of inventory at a particular time. From there, store
administration can quickly overview inventory and identify popular items
that may need to be restocked. What’s more, it’s not as time-consuming as
counting the entire inventory, so it avoids disrupting your daily sales
operations.

4.Choose a suitable store layout

A store layout is the arrangement of products and materials inside the store.
It aims to make efficient use of space for convenient pick-up and delivery,
improve visual merchandising for customer experience, and reduce the risk
of damage, accidents, and petty theft. When designing the store layout, you
should base on the nature of your retail store management and the
popularity of each item.

STORE MAINTANANCE

Store maintenance encompasses all the activities in managing the physical

facilities, parking lot, point of entry and exit, outside signage, display
windows etc. Quality of store maintenance effect consumer perceptions, life
span of the facilities operating costs. It is necessary to make sure that the
store is maintained in an attractive manner.

STORE SECURITY

Store and merchandises protection measures and techniques adopted by

retailers in order to create a secure and safe sales environment and
protect against theft, shoplifting, vandalism, and organised crime.There
are different ways to ensure store security.They are

Time is critical during a break in. It only takes criminals a few minutes to
burglarize your store. Stay connected to your store by installing monitored
alarms. These devices can be installed to detect an open door, broken
window or motion. Once triggered, an audible alarm sounds to ward off
intruders. At the same time, an alert is sent to your mobile device as well as
the monitoring center, which then dispatches the proper authorities.
Access control technology allows retailers to limit who has admittance to
areas of your store. By assigning employees unique codes, you’ll know when
members of your staff arrive to work and what areas they access at any
time. For example, if something is missing from the stock room, time logs
can show which employees were in that room and when. This can help you
identify the culprit.

Electronic article surveillance (EAS) is an anti-shoplifting system that

involves attaching tags to clothing and merchandise. An employee must
remove or deactivate the tag after purchase. If an EAS tag leaves the store
without being removed, an alarm sounds and the storeowner is alerted
immediately.

Today’s retail stores are much different from those of the past. Technology
has transformed the way consumers pay for products and point-of-sale
(POS) systems rely on an Internet connection for functionality.

Installing a video surveillance system is one of the most effective ways to

enhance security in your store. Not only does a surveillance system provide
retailers with the evidence needed to prove theft, but just the sight of
cameras can work as a deterrent for shoplifters.

With a video surveillance system, retailers can monitor all areas of their
store, real-time, and receive instant alerts every time unusual activity is
detected. In addition to installing surveillance cameras throughout your
store, consider placing them:

 Behind cash registers.

 Inside inventory or storage rooms.
 Near all entrances and exits.
 In parking lots.