Retail Dude

As the concept of large retail stores gains ground in India, the practice and concept of merchandising is likely to grow exponentially. In the western countries merchandising receives highest priority in commercial planning of a product. As seasons change, the merchandise collections / planograms too change in a retail store. When such changes take place the store too undergoes a transformation in decor and visual presentation to appeal to the consumers while announcing new arrivals in merchandise collection. There is so much more to merchandising than just a subject to study. The entirety of a retail outlet or a store depends on merchandising. 

The merchandise purchasing process consists of five steps: identifying the sources of supply, contacting the sources of supply, evaluating the sources of supply, negotiating with the sources of supply, and purchasing from the sources of supply. The first step in the merchandise purchasing process deals with determining the type of channel to be used for purchasing each line of merchandise. The retailer can consider different sources of supply: raw-resource producers, manufacturers, wholesalers and resident purchasing offices. 
 
The second step in the merchandise purchasing process involves contacting the various sources of supply. Both the vendor and the retailer can initiate the contact process. Contacts initiated by vendors involve store visits by vendors’ sales personnel or mail or telephone inquiries. Contacts initiated by retailer include visiting central markets, resident purchasing offices, and merchandise trade shows, and making telephone and mail inquiries. 
 
The third step in the merchandise purchasing process deals with the evaluation of several prospective vendors. Retailers evaluate vendors on the basis of a) suitability, availability and the adaptability of the merchandise being offered, b) the exclusiveness of the merchandise offered and the vendor’s distribution policies, c) the appropriateness of the vendor’s price, d) the type and amount of promotional support offered by the vendor, and e) the type and amount of additional services provided by the vendor. Retailers can use a weighted rating method to evaluate vendors.

 
The fourth step in the merchandise purchasing process involves negotiating with the sources of supply. Retailers usually negotiate on price and service issues. Retailers should also consider the various transportation and handling issues that influence the cost of sourcing new merchandise.

 
In the fifth and final step of the merchandise purchasing process, the actual purchasing takes place. Retailers can purchase all the merchandise from a few vendors or from a number of different suppliers. They can also choose from different purchasing methods like regular, consignment, memorandum, approval or specification.

The merchandise handling process is as important as the merchandise purchasing process. This process involves developing a plan to get the merchandise carefully into the store and place it on the shelves for sale. Merchandise handling includes processing, receiving and storing merchandise, pricing and marking the inventory, arranging displays and on-floor assortments, customer transactions, delivering the goods, handling the goods that are returned by customers, taking decisions regarding damaged merchandise, and finally, controlling and monitoring losses due to merchandise pilferage.

 
Once a retailer develops a strategy for handling merchandise, a reorder procedure must be developed. This procedure depends on various factors like the time taken by the retailer to process the order, the time taken by the vendor to fulfill the order, the inventory turnover rate, the financial expenditure and the cost of holding inventory versus the cost of ordering merchandise. The retailer should re-evaluate the complete merchandising process periodically.

 
The hundreds of transactions that take place between retailers and vendors can give rise to a number of ethical and legal issues. These issues must be addressed by both retailers and vendors. 

Therefore it is of prime importance that the merchandising is brought out to the real gleam. 
A new model for merchandising and supply chain management is emerging; it is about to transform the way in which retailers do business and deliver the customer experience. This new operating model will enable retailers to cater to different customer segments, make their product/service offerings more novel and appealing, display those offerings more effectively, and help ensure that they are available in the right amounts and the right channels at the right times.

To be successful, retailers must build networks in which the various merchandising and supply chain functions are fully integrated and supported by systematic business intelligence, including a much deeper understanding of target customers. They must also tailor their operations to suit different products, customer segments, markets and timeframes. It is the complete integration and optimization of the merchandising-supply network that makes it one of the key levers in delivering a customer-centric shopping experience. 

We help retailers enhance their stock returns, prevent losses and markdowns while improving demand forecasts. Our insight in tailoring the assortment to each of the stores in different geographical areas for different times of the year can solve retailer problems. Our solutions help in collaborating with suppliers on planning, forecasting replenishment and assortment and our framework helps in optimizing on markdowns and promotion campaigns. 
 
Technical experts have knowledge of retail industry standards like UCCnet and XML and are constantly contributing in enhancing the ARTS standard framework. There are also works on to build reusable assortment models based on demographics and economic trends, data analytics and price alignment with vendors along with competitive shopping. The models provide support in developing supplier relationship by working in conjunction on category plans and by building retail exchanges. There are implemented applications to take care of out of stock, identification techniques, space planning and open to buy and products like Retek(Wipro). Integration has already taken a leap hold to using technology like SAP. All the major technological providers of the country have evolved their own models and software solutions to assist merchandising systems. There is a huge focus to integrate all systems to make is more accurate and effective. 

Merchandising issues

The question of how best to merchandise the category was a major bone of contention for many of our panel members. Ultimately, all agreed that it all boils down to eliminating confusion by assembling a more customer-friendly presentation, one which invites incremental sales by alerting consumers to health concerns they may not have been aware of when they walked into the department.

One chain is conducting a series of consumer focus groups to try to understand what their customer wants and expects when shopping the natural care category.

In the meantime, some chains are breaking down their natural care sets according to brand, others by segment, and some others are going with an alphabetic presentation. Some were considering the possibility of segmenting the set according to structure/function, stating that “bone/joint health” and “mood/memory” departments might help eliminate the guesswork for the consumer. One retailer questioned if structure/function categories removed much of the confusion, suggesting that perhaps the breakdown should be by lifestyle instead (i.e., women’s health, men’s health, etc.).

The question of how is it best to present the category to the customer gave way to discussion of the financial impact of either merchandising strategy. On the one hand, one retailer posed, if a chain does a lot of advertising and promotion of national brands, does it hurt its business to break up a brand-blocked planogram?

Sudip

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This post is not about fashion trend or i am not going to suggest you any dress to wear in this festival. But considering the worries of retailers, in this festive season when all the stores will stock the same merchandise relevant to occasion, how each one of them can differentiate and attract the customers to their store. The answer is Visual Merchandising, a way of presenting your offerings in a more arranged, attractive and optimized way, not only this; it’s also includes exterior presentation of the store. But in this season where all retailers will light their stores with colored lights and will fill their stores with glittering things, how can you do a little different to make yourself stand out of the crowd. I won’t suggest avoiding lighting and glittering thing because these are the call of the season and you have to become of them in this respect. But taking care of some small things that might the retailer next to you forgot to implement is what you need at this point of time where every retailer is fighting for the same pie with a customer and due to global impact customers is not willing to give that pie away.

 Visual merchandising is an art if we take the creative part of it into consideration, but there are certain rules also attached to it which make it a science in some sense. And thus you have to take care of color mix and match and you also have to think about a theme which should look beautiful to all of your stores in a region. Eighty percent of our impressions are created by sight; that is why one picture is worth a thousand words. Each customer has a mental image of a store and its merchandise; thus you should prepare a theme for your store keeping this in mind. A store should have an inviting appearance that makes the customer feel comfortable and yet eager to buy. And Believe me for this you won’t require any expensive software solution, just a common sense and good customer insight research will be perfect to do a job.

One more thing that most of the retailers ignore is their marquees, banners and signages. Check these for any unlit or missing lighting bulbs, flaking of faded paint or cracked or peeling background and repair them as these can hurt your store image badly.

Most retailers due to festive season stocks lots of merchandise inside store and their remains no place to walk and comfortable browse inside the store. Avoid these types of cluttering on walks/aisles and at the “Entry” of the store so that store appears to be inviting. Keep excess stock in the back room and create an effective replenishment system inside store.

Windows displays can be as important, if not more important, than advertising. As many as one in every four sales could be the result of a good window display. Window displays should attract attention, create interest and invite people into the store purchase goods. There is less than 11 seconds to accomplish this, as that is the average amount of time an individual will spend looking at a window display. Be careful not to crowd too much merchandise into a window, as customer will find it difficult to determine the message and what items are being promoted, and also check none of your merchandise is hidden behind your lighting or other props used for decoration.

For the interior you can chose to follow the principle of design used in display – balance, emphasis, proportion, rhythm, color, lighting and harmony. Certainly proper use of these will inspire as well as leave an impact on a customer.

Finally don’t forget to have a soothing music, controlled temperature and good fragrance. And a good display for the point of sale (POS) because that can add extra bucks to you pocket.

A pinch of creativity can do wonders…………………

Happy festive season to you all :)  

-Prateek Katiyar

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Wal-Mart, was (is) ruling the Forbes listings, and every one was awed with there strategies, lower pricing, and soon enough, we had the replica’s happening in India as well, not that the lower pricing was something new for us, We were quiet accustomed to bargaining, and lowering down the prices our selves but then it was all as they say “Retail Retail Retail”!

I could judge the “DOT-COM” bust way long back, when they started funding every venture which ended with a DOT-COM, and had a tested method from west in there hands, I remember a e-grocery site providing home delivery in Chandigarh then, all you need to do was to log on, select the products, check out and get the products delivered, It was a flop show! for reasons which need to go in some other post, and then they even had Yahoo!, Google, Amazon, AOL replicas everywhere, and the best one to survive the crash turns out to be “santabanta.com”, something with our humor and our babes!

Back to the topic! So when we thought that everything was going right for the retail industry, we get to face the golbal meltdown! No one anticipated it! (I see eyebrows raising), over staffed our selves, over stocked our selves, over bought the real estate, and over expanded, because we are a growing economy, with new IT money in our hands, and a new found tool called “EMI”. No wonder! every retail shop now proudly show’s off the BIG EMI signs on there products. So now! when Reliance Retail turns down the offer to its on probation employees, it doesn’t comes as a surprise, and now when I surf around the blogosphere, I get to hear of more retail crashes, and retail busts, Star Bucks has already started reducing its presence, and this post mentions the possible international store closings! but some people (Spinach Group) ofcourse do DARE even during the times of Busting! someones loss is someones gain! ;) 

How do they manage it? Blasts me off, I am afraid of economics, and am heading home to blast some real good crackers now! So here is wishing you and your family a very Happy Diwali!

PS: The festive season is around the corner, and we are some lazy dudes around here, so the updates might slow down a bit.

- Sarthak

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Money Kumar is an innovative as well as very meaningful initiative taken by RBI (Reserve Bank of India) to make people understand monetary policies. Money Kumar, the lead character of comic has tried to create awareness that how RBI affects each one of us in our daily life and what is it’s importance in economy. Many concepts which we find difficult to understand in our schools and colleges are explained in a simple manner by ‘Money Kumar’. Important concepts like inflation, price stability, steady growth, recession, financial stability etc. are made easy.

Retail Dude want its readers to have clarity on such important concept and revise it as these are very much required in current economic scenario. As consumers also, it is necessary to have awareness about it.

The comic is available in the download section of retaildude.com

- Rajeev Damani

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Twinkle, twinkle, little star,
How l wonder what you are!
Up above the world so high,
Like a diamond in the sky…….

Among all the gloomy doomsday stories, it was indeed an uplifting experience to find that India will soon join the Lunar Club. At a very cheap cost of just $100 Million, ISRO has managed to start counting down on our first mission to the moon!

It was a revelation when a prominent newschannel anchor asked one expert the following question: “Sir, it’s widely known that human colonies on the moon are now a distinct possibility. May we presume that with this mission India has blocked its rightful estate on the moon now?”

Hope the big-ticket retailers were watching too! After all, when other semi-developed countries start landing such “cheap” lunar vehicles on the pock-marked satellite, real estate prices are bound to go through the milky-way. The first mover advantage can be insurmountable.

Mumbai market, going by today’s TOI reports is all set to boom around High-End luxury goods, very soon. I can’t wait to see the Bransons going gaga over the Panta-Luns on the moon.

Letting this opportunity go by will be sheer lunacy!

I’m also sure that many Investment Bank honchos will willingly lend their shareholders’ money, to light up the dark side of the moon, soon.

Twinkle, Twinkle……

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Very recently a forum got over at FICCI’s Delhi office.

Almost next to the world’s most “public” blast-bin, on Barakhamba Road.

Any “explosive” ideas there? Any path-breaking decisions? Not really. Wasn’t even expected I’d guess!

Why is it that we are hell bent on doing the same things “better” & “more efficiently”?

For example, the group decided to “improve services under a single umbrella, by adding spares, servicing, accessories, advise etc. etc.” Is it something new? Did that require an expensive forum (with subsequent traffic snarls thanks to hundred of parked vehicles on an otherwise No Parking zone)?

The one-stop shop was there in most developed countries when we were getting our Amby’s on halogen lamps! The far east tiger nations followed soon, with a great deal of success.

Multi brand vehicle retailing ”was” a proven model, decades back!

As usual, my simple brain with little education keeps asking me some simple questions.

How’s prime commercial space helping auto-retailers in this downturn?

Will multi-brand ever happen here? Why not?

How do the auto giants plan to address adding more services at the same location, without adding significant real esate costs? IF costs do add up, how will it make financial sense for the locations?

Finally, would these one-stop locations become similar to branded outlets in malls, where “brand-building” seems to be way more inmportant than actual commerce?

Now, I am at a loss….you?

- Arnab

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I am posting a e-mail which sugests a way to curb inflation. It is a good lesson to know that why inflation happens, how can we as a consumer control it by controlling our consumption pattern, how corporates take advantage of inflation and get stuck if they don’t exit at right time. I hope it will be a good lesson to learn. Here goes the story…

As the man kept buying eggs the price kept going up. He saw the big egg trucks delivering 100 dozen eggs each day. Nothing changed there. He checked out the huge egg farms and found they were selling 100,000 dozen eggs to the distributors daily. Nothing had changed but the price of eggs.

Then week before Diwali the price of eggs shot up to Rs. 40 a dozen. Again he asked the grocery owner why and was told, “Cakes and baking for the holiday”. The huge egg farmers know there will be a lot of baking going on and more eggs will be used. Hence, the price of eggs goes up. Expect the same thing at Christmas and other times when family cooking, baking, etc. happen.

This pattern continues until the price of eggs is Rs. 60 a dozen. The man says, “There must be something we can do about the price of eggs”.

He starts talking to all the people in his town and they decide to stop buying eggs. This didn’t work because everyone needed eggs.

Finally, the man suggested only buying what you need. He ate 2 eggs a day. On the way home from work he would stop at the grocery and buy two eggs. Everyone in town started buying 2 or 3 eggs a day.

The grocery store owner began complaining that he had too many eggs in his cooler. He told the distributor that he didn’t need any eggs.

Maybe wouldn’t need any all week.

The distributor had eggs piling up at his warehouse. He told the huge egg farms that he didn’t have any room for eggs would not need any for at least two weeks.

At the egg farm, the chickens just kept on laying eggs. To relieve the pressure, the huge egg farm told the distributor that they could buy the eggs at a lower price.

The distributor said, ” I don’t have the room for the %$&^*&% eggs even if they were free”. The distributor told the grocery store owner that he would lower the price of the eggs if the store would start buying

again.

The grocery store owner said, “I don’t have room for more eggs. The customers are only buying 2 or 3 eggs at a time. Now if you were to drop the price of eggs back down to the original price, the customers

would start buying by the dozen again”.

The distributors sent that proposal to the huge egg farmers but the egg farmers liked the price they were getting for their eggs but, those chickens just kept on laying. Finally, the egg farmers lowered the

price of their eggs. But only a few paisa.

The customers still bought 2 or 3 eggs at a time. They said, “when the price of eggs gets down to where it was before, we will start buying by the dozen.”

Slowly the price of eggs started dropping. The distributors had to slash their prices to make room for the eggs coming from the egg farmers.

The egg farmers cut their prices because the distributors wouldn’t buy at a higher price than they were selling eggs for. Anyway, they had full warehouses and wouldn’t need eggs for quite a while.

And those chickens kept on laying.

Eventually, the egg farmers cut their prices because they were throwing away eggs they couldn’t sell.

The distributors started buying again because the eggs were priced to where the stores could afford to sell them at the lower price.

And the customers starting buying by the dozen again.

Now, transpose this analogy to the gasoline industry.

What if everyone only bought Rs 200.00 worth of Petrol each time they pulled to the pump? The dealer’s tanks would stay semi full all the time. The dealers wouldn’t have room for the gas coming from the huge tanks. The tank farms wouldn’t have room for the petrol coming from the refining plants. And the refining plants wouldn’t have room for the oil being off loaded from the huge tankers coming from the oil fiends.

Just Rs. 200.00 each time you buy gas. Don’t fill up the tank of your car. You may have to stop for gas twice a week, but the price should come down.

Think about it.

Also, don’t buy anything else at the fuel station; don’t give them any more of your hard earned money than what you spend on gas, until the prices come down…”

..just think of this concept for a while.

- Rajeev Damani

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What is the necessity of a format for retail? An answer can be given by defining the word “Format” in retail sense. The formats of a retailer is the overall appearance and feel that it presents to customers, primarily its look and layout, the sort of range it stocks and the approach taken to pricing. With the help of this format only a customer can align his/her needs with the offerings of a store. The format, together with range, pricing and marketing, is one of the key determinants of a retailer’s success. Of these, the format is very often the hardest to get right. A good format will both draw in customers (generating footfall) and help present products well to generate sales.

In retail business where everything is related to bottom line, I started correlating profits with the format of retailer. And I found somewhere a relation between the average profits of a retail company with the format it have. The average profit of all the stores of an organization is greatly associated with the different formats in which this organization is dealing with. For example Future group operates in different formats like Big Bazaar – a uniquely Indian hypermarket chain, Food Bazaar — a supermarket chain, Central — a chain of seamless destination malls and many other specialty formats like Star and Sitara, Planet Sports & Home Town and also an online format named futurebazaar.com, the average profit from all the different format stores is correlated with the type of formats each store of an organization is operation in. And this correlation can be given by -

C (AP) _t = cos (F, P) _t

where,

C (AP) is a correlation coefficient of format and profit

F is a vector sum of all the formats (covering assets, real estate value etc.)

P is a vector sum of profits from all the formats

t represents the number of formats

Once we get the correlation coefficient we can figure out the profit of any particular format or we can decide on the format for a particular location from which we already finalized the profit to be earned.

But this quantitative analysis will never take care of the external factors like the one we have right now i.e. global financial crisis.

Reliance, a name not only among big industrialist but also a dominant player in retail segment in India, have a separate format for each category, a format for footwear – Reliance Footprint, a format for grocery – Reliance Fresh , a format for electronic goods – Reliance Digital etc. In total more than 8 formats varying from a hypermarket to specialty and convenience.

My question “Is this a good strategy to have a whole format or a particular format store for a particular category?

From the present scenario it is clear that the Indian retailers are in the mode of opening spree, currently not worrying on the profit margins but what bothers them is to gain national presence and footprint all across India. But is this means to have presence in every format? World’s no. 1 retailers Walmart also don’t operates in all formats. It entered into SFR (small format retailing) few weeks back only, after 46 years of successful & profitable operations, then why this madness regarding formats in India?

And finally what I came to know is Reliance is not able to handle the complexities, as per a report in Economic Times, Reliance Industries is considering merging 3 different formats - hypermarkets (Reliance Hypermart), supermarkets (Reliance Super) and convenience formats (Reliance Fresh). The idea of the merger is still at a conceptual stage and seems to be motivated by the desire to cut costs.

This definitely shows improper and unprofessional planning of retailers. Where all research companies are depecting India as a big playground for retailers, I can’t bet on our myopic home players.

-Prateek Katiyar

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Yes! Many big retailers like Reliance Retail, Future Group etc. have substituted their expansion spree with contraction because of slowdown. The most recent addition in the list is that of RadhaKrishna Group’s Foodland Fresh and Wadhwan’s Spinach. Foodland Fresh has shut down many stores in last few months whereas Spinach has decided to currently hold their expansion plan.

There are several factors behind such a scenario in retail environment. Whereas increased MSP for cotton, higher raw material cost, higher real estate prices, bleeding Sensex, postponement of purchases are the root cause, another factor affecting retailers is falling rupee.  

As dollar grew from Rs. 39 in January to Rs. 47 in October, forward bookings by retailers are getting impacted. Resorting to higher prices in also not an option for retailers as due to inflation, disposable income has already decreased for common man, so they will switch to cheaper local alternative. Moreover majority discounters follow the practice of forward booking and they cannot sell increase the prices of their product due to their format.

But this will certainly increase market for local make products in India as they will be very cheaper comparatively.  

- Rajeev Damani

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Certainly, sir, and how would you like your sandwich?

At SUBWAY sandwich shops around the world, the ’submarine’ style sandwiches come hot or cold, and with an almost infinite combination of breads, fillings and sauces. The first choice: do you want your sandwich to be ‘6-inch’ or ‘footlong’. Then there are 5 types of bread, 11 toppings, and 9 dressings and sauces to choose from - making for an almost endless combination of possibilities. These choices involve consumers in the brand, allowing them to ‘make it their own’ and giving them a reason to keep coming back. There are more than two million different sandwich combinations available on the SUBWAY menu.

The SUBWAY restaurant chain was founded in 1965 by Fred DeLuca, a 17-year-old college freshman, and family friend Dr. Peter Buck. The first restaurant opened in Bridgeport, Connecticut, USA on August 28 and was called Pete’s Super Submarines. Now, there are nearly 30021 Restaurants In 88 Countries, and the company estimates that about 1,900 SUBWAY sandwiches are served every minute around the world. It’s the biggest fast-food chain in the USA, and the company aims to overtake McDonald’s globally by 2009. The number goes on increasing each day. This is one of a kind of its business, since all its outlets are franchisees. They believe that it’s the country that wants good and healthy food that brings them to it and not their operations. SUBWAY chain is a privately held company and is not traded on any stock exchange.

McCarthy, Mambro Bertino Advertising (MMB), located in Boston, Massachusetts, is the SUBWAY^® chain’s creative agency. They very widely use the acronym BMT® which stands for Biggest, Meatiest, and Tastiest. In the early days of SUBWAY^® restaurants, it was a promotion that was based on the Brooklyn Manhattan Transit system in New York City that went along with the subway theme.

And in a deliberate strategy targeting rivals such as McDonald’s and Burger King, SUBWAY have positioned themselves as the healthy choice: offering sandwiches with ‘6 grams of fat or less’ as well as salads and other low-fat options. There is one amazing story of a person called Jared Fogle who lost 245 lbs. by eating nothing but SUBWAY sandwiches for almost a year in a diet program of his own design that included lots of walking and, yes, he is real. Jared came to our attention after Men’s Health magazine ran an article that featured his amazing weight-loss success story. Appearing in a series of SUBWAY TV commercials beginning in January 2000, Jared has since inspired many others to follow his lead. These days, he keeps busy by traveling throughout the United States and Canada, making public appearance and doing thousands of interviews for television, radio, newspapers and magazines. All their menu cards and delivery have the nutrient content of the diet. A wholesome list is also available about nutrition and contents in its website.

They also care about the localized market where they go into, such as they replaced beef with chicken when they launched in India and similarly pork with beef when in Pakistan, so as not to hurt sentiments of its residents.

The questions that comes to my mind is that  “Can we offer customers more choice, and so make the brand more appealing, while staying true to our focused and distinctive brand offer? “

Who remembers that Porsche has a category of SUV’s?  Usually companies and organizations spread out while trying to do so and in the process dilute its own image even if it is the “MENU”. This is what SUBWAY has done so exceptionally.  

BRAVO!

Sudip

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