Retail

A customer is the most important visitor on our

premises.

He is not dependent on us. We are dependent on him.

He is not an interruption in our work. He is the purpose
of it.

He is not an outsider in our business. He is part of it.

We are not doing him a favor by serving him. He is doing
us a favor by giving us an opportunity to do so.
-Gandhi
Turnover is vanity,

profit is sanity,

cash is king
With about 11 retail shops for every 1,000 persons,
India has the highest shop density in the world.

That's one shop for every 20-25 families.

In cities, the density is much higher. Delhi, for
example, has nearly 45 shops per thousand persons!

A nation of shopkeepers !!!
With hundreds of customers visiting every day,
scores of competitors continuously tempting the
customers every moment,
Retail is a sector with high wear & tear and most
exciting one too
PATRONAGE
Buy
Basket size
Frequency of visit
Share of basket / wallet
Recommend / refer

K
N
N
Need
Know
Visit

Choose
Referrals
THE RETAIL ENGINE
Atul Natu

Satisfied
Revisit
KNOW
Store location
Visibility
Word of mouth
Promotion
Distance
VISIT
Store front
Ease of access
Convenience
Proposition
Assortment
Pricing strategy
Promotions
Referrals
Past experience
CHOOSE
Assortment
Display
Pricing
Salesmanship
Pricing

NEED GENERATION
Display
Pricing
Assortment

Location
Assortment
Display
THEORIES OF STORE CHOICE
Hedonistic model
Utilitarian model
Convenience model
Gravity theory This theory proposes that the probability of a store being selected by a
customer is directly proportional to the size of the store and inversely proportional to the
distance to be traveled to reach the store
Linear model The linear learning model is based on the premise that the customers
choice of store is based on his / her previous experience with the store. Better the
experience, larger the probability that the store will be visited by the customer.
Agglomeration forces In some categories, more the number of stores are clustered
together, more will be the benefit to the retailer. The stores complement each other due to
the cluster
Situational This theory does not rely on gravity alone to explain the customers store
choice. It takes into account the purpose of the store visit. The customer selects a store
based on the purpose of purchase.
Simultaneous process of store choice - Based on the utility theory, the simultaneous choice
model believes that the customer assesses the utility of each of the store and then selects
the store with maximum utility.
Hierarchical choice It assumes that the customers will not have awareness, time, ability to
know the offering of all the stores selling the desired product. Hence instead of comparing
all the stores, and their utilities, the customers first choose a cluster of stores. After
selecting a particular cluster, the customer chooses a store based on utility theory from
amongst the choices available in that cluster. A Stewart Fotheringham (1988) says
Lowest total cost - Fixed and variable expenses of shopping
HYPOTHESES WRT STORE CHOICE FROM REVIEWED
LITERATURE
Consumers selection of a store is not completely random but is biased by her
previous experience of a particular store and is proportional to the frequency of
her visit to the store
Customers associate stores with specific store attributes. They select the store on
the basis of top-of-mind recall wrt its association with dominant store attributes
Store choice is influenced by the situational factors related to the purchase. Eg
shopping for gifting purpose v/s for one self, shopping in emergency v/s general
shopping
The grocery shopping choice of formats is based on basket size and frequency of
trips. Larger basket size prefer EDLP whereas lower basket size prefer HILO. Higher
frequency prefer HILO whereas lower frequency prefer EDLP
Customers weigh the total cost (comprising of the fixed cost and the variable cost
of shopping) while making a decision on store choice.
Store attribute saliencies differ across task definitions and store choice is
differentiated by task definitions
Customers decide upon a geographic area first before deciding on a store. They
select a store within that geographic area as a second level of decision.
RETAIL STRATEGY
Customer
7 Ps
Product - Assortment width, depth
Price Full price, discount stores
Place towns, location strategy
Physical ambience - size, interiors
People, Promotion, Processes
Property strategy Owned / Leased /
Franchised / Dealer
Formats SIS / Own /
Operations
Merchandising
Category management
Location
Assortment
Customer
Competition
Property
Customer segmentation
Store layout and display management
Technology

SOME RETAILERS
Food & Grocery - More, Easyday, Food Bazaar, Reliance Fresh, Spencer's
Foodservice - CafCoffee Day, Mainland China, Haldiram's, McDonald's, Dominos, Pizza
Hut, KFC
Consumer Electronics - Croma, Next, Reliance Digital, eZone, Reliance iStore
Leisure Crossword, Odyssey, Landmark, Planet M
Beauty & Wellness - VLCC, Kaya Skin Clinic
Pharmacy & Healthcare - Apollo Pharmacy, Guardian, Religare, 98.4
Home & Interiors - Home Centre , Rosebys, Home Town, @home, Home Stop
Department Store - Lifestyle, Pantaloons, Shoppers Stop, Westside
Hypermarket - Spencer's Hyper, Hypercity, MORE, Big Bazaar, Reliance Mart, Star Bazaar

LOCATION, LOCATION, LOCATION!!!
Largely defines & restricts the trading area, visibility
Requires complex decision making
Costs lots of money upfront as well as recurring
Little flexibility once a location has been chosen
Attributes of location have a strong impact on the
retailers strategy & Vice versa
STEPS FOR PLANNING LOCATION
Plan the national footprint
Plan the town level / city level zones
Plan the format strategy
Ownership
Size
Type (stand alone / high street / mall / SIS)
Evaluate alternative geographic areas in terms of the
characteristics of residents and existing retailers (trading-
area analysis)
Make a decision about location type
Decide evaluation criteria
Analyze alternate sites
Assess viability
SITE EVALUATION
Site condition
Legal considerations (e.g. environmental
considerations, zoning restrictions, building codes,
signs, licensing requirements)
Terms of lease/rent agreement
Total cost of ownership
Length of lease
Local taxes
Restrictive clauses in lease
Types of Leases
Percentage
Fixed - Rate
Percentage leases - rent is based on a
percentage of sales.
Retailers also typically pay a maintenance
fee based on a percentage of their square
footage of leased space.
Most malls use some form of percentage
lease.
Variations of Percentage Leases
Percentage lease with specified maximum -
percentage of sales up to a maximum amount.
Rewards retailer performance by allowing retailer to
hold rent constant above a certain level of sales
Percentage lease with specified minimum - retailer
must pay a minimum rent no matter how low sales are.

Sliding scale - percentage of sales as rent decreases as
sales go up.
Fixed Rate Leases
Fixed rate leases - used by community and
neighborhood centers.
Retailer pays a fixed amount per month over the
life of the lease.
Not as popular as percentage leases
Graduated lease - a variation of the fixed rate lease
Rent increases by a fixed amount over a specified
period of time.

Percentage or Fixed Rate Leases
Maintenance-increase-recoupment lease -
used with either a percentage or fixed rate lease.
Rent increases if insurance, property taxes, or
utility bills increase beyond a certain point.
Net lease - retailer is responsible for all maintenance
and utilities.
Est MODEL
The Est model guides business leaders in making their
company the best in one of five critical areas
Assortment (biggest).
Price (cheapest).
Fashion (hottest).
Customer service (easiest).
Speed of service (quickest).

Winning At Retail: Developing a Sustained Model for Retail
Success -Willard N. Ander (Author). Neil Z. Stem
Retail Formats
Store-Based Nonstore-Based
Freestanding
Business
District
Nontraditional
Shopping
Centers/Malls
Interactive
TV
Internet
Direct
Selling
RETAILER FORMATS FOR ACCESSING YOUR
TARGET MARKET
Shop in shop
SOME IMPORTANT METRICS
Walk-ins
Conversions
Average Transaction Value (ATV)
Sales per Sq.Ft.
Gross Margin return on Investment (GMROI)
Gross Margin return on Floor space
Gross Margin return on Inventory
Inventory turnover
Sell thru
Same store growth
Markdown Goods percentage
Shrinkage to Net Sales

Store patronage model*

1
Store Attributes
2.2
Task definition
5
Store attribute
salience
6
Store attribute
perception
3
Customer
attributes




4
Marketing
factors




7
Store visit
8
Store experience
9
Purchase /
basket size
10
Post sales
experience
11
Patronage
intentions
12
Word of Mouth /
Advocacy
Factors under management control
New customer affecting
Same customer affecting
Customer subjective
2.1
Product
* Atul Natu
Store factors
Product
Price
Quality
Assortment
Availability
Service
Distance
Size
Format
Advertising
Convenient parking facilities
Convenient location
Convenient opening hours
Friendliness of salespeople
Service
Fast checkout
Store atmosphere
Store image
Ease of credit

Customer factors
Educational levels
Professional activity
Family age
Gender
Age
Income
Values and culture
Behavioral issues
Social expectations




External retail stimuli
Industry reputation
Public relations
Sales promotion
Social responsibility
Factors studied *
Store Attributes
Location / Distance
Size
Price
Format EDLP / HILO, Specialty /
general merchandise
Retail centers
Parking
Convenience
Assortment
Product quality
Freshness
Task definition
Gift v/s self
Time pressured
Risk perception
Basket size

Store attribute salience

Store attribute perception

Customer attributes
Age
Social class perception / self image
Education
Shopping frequency
Self confidence
Occupation
Marketing factors
Feature advertising
Word-of-mouth
Store experience
Billing speed
Store appearance
Store layout
Store assistance friendliness
Convenience
Trust
Organisational benevolence
Post sales experience
Returns policy


Products
Food & Grocery
Apparel
Audio equipment
Soap
Paper tissues
Tooth paste
Coffee


* Atul Natu
Thank you
Operations
Merchandising
Category management
Location
Retail Strategy
7 Ps
Product
Price
Place
Promotion
People
Physical ambience
Processes
Types of retail
Technology
Assortment
Supply chain
Customer
Competition
Property
Customer segmentation
Theories of retail
NKVC VKNC
Time
Convenience

Quotations
Resources & references
Multichannel
Metrics
Shrinkage
Challenges / constraints
Formats
Brands MBO / EBO
Ownership COCO / Dler / Franchisee
Size
Assortment
Locations SIS / Standalone / Mall / High street / Out
of town / Downtown

EXAMPLES
Department store
Shoppers stop
Lifestyle


Consumer electronics
eZone
Croma
Supermarkets
D Mart
Haiko