RETAIL MANAGEMENT PROCESS: AN OVERVIEW

RETAIL MANAGEMENT PROCESS: AN OVERVIEW

This post deals with various tasks involved in the planning and managing a retail business. The chart presents an overview followed by discussion-

The flowchart above shows the activities in a sequential manner. However in reality it may not be so. A retail manager may work at different task illustrated above simultaneously.

Retail Mission and Vision

Deciding the mission is the first step to be undertaken in a retail business. The mission statement specifies the reason the organization is in business. It is much more than the corporate objectives, retail objectives or value statement. It provides answers to the following questions;

·         Why the retail business is started?

·         What is going to be done?

·         What does the business stand for?

A good mission statement speaks of the retail organization’s commitment to the customers, employees, shareholders and society. In order to be successful the mission statement should be understood and practiced by the employees. It should be the starting and the guiding point for all the decision taken by the organization. All the plans and process emanate from the mission statement.

A vision statement evolves from the mission and it focuses on the firm’s future goals. A good vision statement contains-

·         A statement of the desired future for the retailer

·         A reminder to the retailer as to why various activities are performed and towards what end?                       

·         Values on which decision are to be made and business is to be carried on

·         Provide information to make policies and take decisions

The vision statement enables the retailer to integrate the activities of all the departments and employees towards the organizations mission. It provides an understanding, motivation and inspiration for the employees. The vision statements should be updated regularly and communicated to everyone involved in the same. While creating the vision statement the retailers should be clear about the following aspects-

·         The values to be held

·         The end means towards which the organization should gear up its activities

·         The retail climate to be set up

·         The image to be projected to the customer, employees and share holders.

The retail objectives provide measurable statements. The main difference between objectives and vision is the latter is for a long term period whereas the objectives is a medium-length term and it provides measurable goals. Retail objectives should have the following characteristic features-

·         The objective should have a time line or deadline so that the management can evaluate whether the objective is met within the set time.

·         The objectives should be measurable and quantifiable which makes the evaluation and control possible.

·         The objectives should be attainable. It an objective is set too high it will not be realistic to achieve the same and lead to frustration.

Situational Analysis

Once the mission, vision and objectives are finalized, the retail manager should assess the overall retail environment. This environmental scanning is needed to tune the business settings to the changing environment. Environmental scanning is a systematic process whereby the retailer acquires and uses information to assist the management in planning the future course of action. The environment should be scanned as it affects the potential operation and performance of the retail business.

The environment analysis should be done both at the macro and micro level. Macro environment includes the study of political, economical, social, technological, legal and competitive situations. The study of micro environment involves analyzing the forces within the organization affecting the business. Environment analysis should be done in a systematic manner. The five-step process can be used for the same-

·         Identify the macro and micro environmental factors which are relevant for the retail business           

·         Keep track of the changes in the identified environment     

·         Evaluate the changes in terms of the nature, direction and magnitude    

·         Analyze and project the impact and timing of the changes along with the potential consequences         

·         Plan the strategies to be implemented to confront the changes in the environment.    

The retailers can obtain the information regarding the macro environment from the newspaper, magazines, trade association, publication from conferences, seminars, trade shows, fairs, internet and other secondary sources. The details regarding the micro environment can be obtained from careful scrutiny of the internal records of the organization, observation and by interaction with people. The organization can also resort to survey involving collection of primary data. The retail manager should keep track of the mission, vision and objectives the retail business while identifying the environmental changes having impact on the overall retail operation.

Retail Strategy

The retail strategy provides a framework for current and future course of action and provides an insight into how the objectives will be achieved. The strategy is derived from the mission and vision. The retail strategy explains the way in which the organization’s plan to satisfy the market place. The strategies must be dynamic and should be able to create or control the future environment, not just react to it. The strategic plan is prepared for a for a year, however it can be prepared for longer period of time ranging from five to ten years. While developing the retail strategy, the resources available in terms of the customers, capital resources and the human resources should be considered. The retail strategy addresses the methods through which the organization plans face the controllable and uncontrollable variables in the area of retail operation. Controllable variables are those areas of the retail operation that can be effectively controlled by the retail managers with proper plan. It includes all the management function, products offered, store locations, price, integrated marketing communication and the like. Uncontrollable variables include those aspects which cannot be controlled by the retail manager like the competitors policies, government regulations, legal aspects, technological developments, changes in the consumer preferences and the like.

Target Marketing

Consumers vary in their needs and behavior. Hence a retailer has to decide the target market on which his efforts would be concentrated upon. Target market refers to the set of consumers at whom the retailer aims the marketing strategies. Once the target market is decided the retailer must decide whether to design a mass marketing strategy aimed at the entire market or to design strategies aimed at different segment of the market.

Segmentation

Segmentation is the process of breaking up the target market into more controllable subgroups. It is process through which the heterogeneous market is divided into homogeneous segments. In case of mass marketing strategy, the retailer focuses on designing one unique marketing mix to try to capture the entire market. In segmented marketing approach the retailer divides the target market into groups called as segments and designs a unique marketing mix for each segment or the segment on which he would like to focus upon.                      

A segment should be decided based on various criteria such as the purchasing power and willingness of the target consumers, the size of the target market, the profitability and the potential for growth and the like.  Once the segment is identified, the retailer should study the behavior of the consumers in the target market so as to enable them to develop cost efficient retail marketing mix. Capturing information relating to four ICs viz demographics, geographic, psychographics and behaviouristics would enable the retail marketers to develop customized strategies.                 

Selection of the Location

Selection of location is critical because of the complexity involved in decision making, the high costs of real estates, lack of flexibility once a site is selected and the impact of a site on the strategy. A good retail location can contribute in a greater way to the success of the retail business even if other strategy mix is not so effective. The selection of a store location includes a series of activities like evaluating the alternative trading areas, determining the best type of location, choosing a general site and finalizing a specific site. A trading area is the geographical area from which customers are drawn. The retailers can utilize the geographic information system (GIS) software to describe and analyze trading areas. Various factors should be taken into consideration in trading area analysis like the population characteristics, economic base characteristics, competition and the level of saturation.

The decision regarding the general location and specific site follows the selection of the trading area. There are three basic location types viz., an isolated store, unplanned business district, planned business district. An isolated store has no completion and characterized by low rent, flexibility, road visibility and parking and low real estate cost. It does not have much traffic and usually lacks a variety of shoppers. An unplanned business district is a shopping are with two or more stores located nearby. These shops have variety of goods, services and prices and are easily accessible. A planned shopping centre is centrally owned or managed and well balanced. The centre is popular due to extensive goods and services offerings, expanding suburbs, shared cost, attractive location parking facilities and the like. After the selection of general location, extensive analysis is made to evaluate the specific sites within it. Several criteria like the pedestrian traffic, vehicular traffic, parking facilities, transportation, store composition, the attributes of specific sites and the like should be considered. An overall rating is developed and the site scoring high is selected.

Financial Operations Management

Financial management is an important element contributing to the success or failure of the retail business. It has got an implication on areas viz,, marketing strategies, human resources planning, logistics, consumer satisfaction, merchandise management and the like. The financial resources in the retail organization should be utilized in a justifiable manner in order to ensure adequate returns. Financial plan of a retail concern has got implications on the overall retail management plan. Specifically the decision making relating to the format of the retail outlet, size and physical layout of the store, allocation of sales space, warehouse space, inventory decisions etc. The retailer may have to prepare various statements to show the stakeholders how the business is run. This requires an understanding of the financial operations and the statements prepared. The decision regarding financial operations should be based on logical and scientific information. This will enable the retailer to allocate the resources in a highly efficient and effective manner.

Merchandise and Logistics Management

Merchandise management involves a number of salient decisions like the companies from which the products will be purchased, the assortments, the system to be followed for purchasing products, the process of evaluating the source of supply etc, Merchandising involves the concept of logistics. Logistics is concerned with the movement of the product and services from the point of production to the point of consumption. It is defined by the Council of Logistics Management as “that part of the supply chain process that plans, implements and controls the efficient, effective flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements.” Supply chain management is a strategic process and logistics is a tactical process. In order to arrive at an excellent logistical plan and an effective management system for supply chain the retailer should pay specific attention to the issues related to inventory, order processing and fulfillment, transportation, storage and warehousing.

Human Resource Management

Human resource management is a pertinent aspect requiring the attention of a retailer as it occupies a considerable percentage of the total cost of retail operation as well as they directly or indirectly contribute to the customer satisfaction. They may directly contribute by way of interacting with the shoppers leading to a pleasant shopping experience or indirectly by way of working in the back office. Human resource management involves recruiting, selection, training, compensating and supervising personnel in a manner consistent with organizations policies and strategy mix. Recruitment process involves generating job applicants from various sources like educational institution, channel members, competitors, advertisement, employment agencies, unsolicited application, existing employees and the like. Selection involves through job analysis, job descriptions, interviews, testing, reference checking and physical examination. Pre-training and on the job training may be provided after selection. The training process involves identification of needs, deciding the methods and assessing the results. Employees may be compensated by direct monetary payments and by indirect payments. The direct compensation plans include straight salary, straight commission, salary plus commission and bonus. Indirect payments involve paid vacations, health benefits and retirement plans.                   

Personnel policies in retail setting are arrived based on the line of business, the number of employees, the location of the outlets and other factors. Human resource management        in retail environment is characterized by a large number of inexperienced workers, long hours of working, highly visible employees, diverse work force and variable consumer demand. These factors contribute to the complication in the employee hiring, staffing and supervision. Often the retail unit requires a large number of employees and this leads to hiring of people with little or no prior experience. The prospective employees choose the job in retail environment mainly because the jobs are available near to the home and the retail positions like stock clerks, sales assistants and the like requires limited educational qualification and training. Poor performance, high labour turnover, lateness and absenteeism are some of the problems commonly witnessed in retail sector.             

Retail Tactics

The strategy of a retail organization with respect to pricing, integrating marketing communication and the customer service are dealt below-

Pricing- Pricing has got an implication on the revenue generated by the retail organization. It also affects the overall objectives and other components of the retail strategy. A price plan should be integrated and responsive enough to provide good value to the shoppers. The retailer should take into consideration the factors affecting pricing decision. The price elasticity of demand, government restriction, competitors pricing policy, the shoppers’ purchasing power, the cost incurred and the like should be considered in fixing the price. The retail pricing objectives is fixed based on the sales, profits, and return on investment or cash flow. Once the objective is fixed the pricing policy is outlined. The policy outlines the series of actions to be undertaken consistent with the retailer’s image and oriented to the short and the long run. Once the objectives and polices are in place, an overall pricing strategy is developed. The strategy gives direction to all decision made regarding the pricing variable viz., when to use customary and variable pricing, one-price policies and flexible pricing, odd pricing, leader pricing, multiple-unit pricing and price lining.

Integrating Marketing Communication - Integrated marketing communication includes all tactics utilized to inform, persuade, and remind the target market about any aspect of the retailer thorough advertisement, public relations, personal selling, sales promotion, direct marketing and cyber marketing. The plan for marketing communication must be integrated within itself and with other retail management variables. Objectives, strategies and short term plans should be designed to carry out the various communication mix in an effective manner.

Customer Service- Customer service includes anything a retailer provides in addition to the core product or service and adds value. The customer service tactics plays a crucial role in differentiating a retailer from the competitors. The customer service offering may range from basic to additional or luxury services. Basic services include providing convenient location, clean facilities, security and variety in product. Any services provided over and above the basic services are called as luxury services. It is not enough for a retailer to just develop a customer service; the feedback should be obtained from the customers so as to ascertain the satisfaction level. Excellent customer service leads to happy customers, increased sales and profits which in turn contribute to increasing the stakeholders’ satisfaction.

Evaluation and Control

The evaluation and control is not an isolated process. It has to undertaken in a continuous manner throughout the various steps in the retail management process. Evaluation refers to continuous monitoring of the retail plan to ensure that the activities are performed up to the expectations. The evaluation process involves assessing the various plans in terms of achieving the objectives. If the objectives are not achieved the reasons for the same are analyzed and alternative plans are arrived at. The retailers can also develop the contingency plans. The contingency plans consist of alternative strategies or tactics to achieve the objectives. The contingency plan is used in case of uncontrollable environmental changes. The retailer can make use of quantitative and qualitative techniques to enable evaluation and control. The retail information system and the financial statements can be used for evaluation and control. Due to high cost involved in retail business, the evaluation and control is a must and not an option. A retailer can depend on proactive measures rather than tackling the problems.

Retail Information System (RIS)

In the present information era, the retail information system is critical for survival of retailers. Retailers play a major role in collection of information as they the most direct contact with the shoppers. The retailer requires data for developing new strategy or for modifying an existing one. Good data reduces the retailers’ chance of making incorrect decision and thereby contributes to the success of the retailers. A retail information system anticipates the data needs of retail managers, continuously collects, organizes and stores relevant data and directs the flow of information to decision maker. The RIS can be manual or electronic. Even small retailer will be able to purchase computer and hence most of retailers depend on electronic RIS. A good RIS provide data based on marketing research.                     

The data can be primary or secondary. Primary data are collected specifically to address a particular problem whereas secondary data are already collected.                     

Laws and Ethics

The retail setting is subjected to control under many rules, laws and ethics. The retailer must be aware of these laws and rules for every geographical area in which it is functioning. In addition to the Central government regulation, the local rules and regulation and international laws should also be known if the retailer has global operations. Several laws affect retailing. Breaking the laws lead to consequences ranging form paying fine to imprisonment. The retail laws have impact on retail tactics like pricing, integrated marketing communication and customer service. Situational analysis is a major area where laws and ethics have serious implications. Ethics involve concepts of what is right and wrong and are often based on moral and religious beliefs. The ethical conflicts in retailing occur between profit and principles.