Retail management

Document Sample
Retail management Powered By Docstoc
					                Management Research Project
                              On
Studying the Merchandising Strategies used by Retail Outlets
                           of Mumbai




                                                       Submitted to:




                                                       Submitted by:




    1|Page
                               REPORT
                                 ON

   STUDYING THE MERCHANDISING STRATEGIES
        USED BY RETAIL STORES IN MUMBAI




    By

    Nishanth Sudhakaran (95)
Sharath Pattikara (115)
   MBA (2009-2011)




  Faculty:

   Prof. Moumitha Roy
    Faculty, PIMSR NAVI
    MUMBAI




   2|Page
                                Acknowledgement




We take this opportunity to express my gratitude towards certain key people for their constant
guidance and support, without which the project would not have been a success. This project
would have been difficult to complete without the moral support and the opportunity given by
them to be trained and gather knowledge regarding the subject.




We also like to express my gratitude to Prof. Moumitha Roy Marketing Management
Faculty – PIMSR-MUMBAI, Mumbai for providing me with the learning so that we can

work on the project. His teachings have been of great help.




We also like to thank all the employees in the department, my friends, and my parents who helped
Us in successful completion of this project.




3|Page
                              Executive Summary


         In today‟ s competitive scenario where more and more Retail players are coming into the
picture, there is a need to look into the customer or client behavior to know your client well. The
variety and assortment of merchandise offered by a store play a major role in attracting
customers. Merchandise comes in a variety of sizes, colors, makes and models. So any retailer,
big or small, take many decisions regarding what to purchase and what to made the goods
available to customers. This is called systematic merchandise planning. So basically merchandise
decisions are related to what type of product they are going to offer and assortment planning is
related to the varieties of product and goods offered by them in their outlets.

     The main area of the research is to study the Merchandising Strategies used by Retail Outlets
of Mumbai. In this Research Project I will analyze the merchandise planning done by the various
retail stores in Mumbai. Merchandise Planning includes:

         The Right Product
         The Right Place
         The Right Quantity
         The Right Quality
         The Right Price
         The Right Mix or Assortment
         The Right Time


    The Project is based on Merchandise Planning so we will first understand the importance of
Merchandise planning in retail Industry. We will analyze various aspects to be considered while
doing Merchandise planning in Retail Industry. In this we will cover Assortment, Layout
Planning, In-Store Promotions, Merchandise Buying Decisions, Role of Technology in
Merchandise planning etc.

     The Project will be based on Primary as well as secondary Data. The Primary Data will be
collected by interacting with the Store managers, Employees, etc of various Retail stores in
Mumbai while the Secondary data will be collected from Websites, Magazines, Journals, Books
etc.

     After collecting the Primary as well as the Secondary Data, it will be compiled in a Proper
Format and inference will be given regarding the merchandising strategies used by the various
retail stores in Mumbai.




4|Page
                                                                                  Table of Contents


1.      Introduction ........................................................................................................................................... 6

     1.1         Retailing Overview ....................................................................................................................... 6

     1.2         Retail in India ............................................................................................................................... 7

     1.3         Future of Retail Industry............................................................................................................. 10

2.      Merchandise Management .................................................................................................................. 11

     2.1         Steps in the Retail Merchandising Process ................................................................................. 11

     2.2         Category Management ................................................................................................................ 12

     2.3         Assortment Plan.......................................................................................................................... 12

     2.4         Retail Assortment Strategies....................................................................................................... 13

     2.5         Evaluating Merchandise Performance ........................................................................................ 15

3.      Research Purpose and Design process ................................................................................................ 16

     3.1.        Objective of the research ............................................................................................................ 16

     3.2.        Benefits ....................................................................................................................................... 16

     3.3.        Limitations .................................................................................................................................. 16

     3.4.        Research Methodology ............................................................................................................... 16

     3.5         Process Flow of the Research ..................................................................................................... 18

4.      Findings after Data Collection and Data Analysis .............................................................................. 19

     4.1         Response to Questionnaire ......................................................................................................... 20

Conclusion .................................................................................................................................................. 31

Annexure ..................................................................................................................................................... 32

References ................................................................................................................................................... 33

Glossary ...................................................................................................................................................... 35




5|Page
1. Introduction
1.1 Retailing Overview

     It‟ s a human tendency to have a comfort, luxurious life and have all facilities. And as there
is a golden period going on now; anybody can enjoy these benefits. Retailing concept is also
from one of these facilities. Retailing simply provides the end product to customer, so retailers
are directly in touch with customers. Retailing is world's largest private industry with annual
sales over $ 6600 billion. Wal-Mart‟ s annual sales are over $ 250 billion. It has share of 2.3% of
U.S. G.D.P. There are nine retailers in Fortune 100, which highlights the importance of retailing
as category.




6|Page
1.2 Retail in India

         Retailing in India is witnessing a huge revamping exercise. India is rated the fifth most
attractive emerging retail market: a potential goldmine. As per a report by KPMG the annual
growth of department stores is estimated at 24%. Ranked second in a Global Retail Development
Index of 30 developing countries drawn up by AT Kearney.

         According to a market estimate after agriculture, retail is the largest single sector, both in
term of turnover or will as employment in India, with market size of $200 billion. The report said
the Indian retail industry is in revolution phase. Organized retailing in India, which account for
less than 4%, is likely to grow four fold in the next five years. That means it will grow from
current size of around $4 billion (Rs. 17,000 Crores) to around $15 billion (Rs. 66000 Crores)
the neighborhoods corner shops estimated at 70 million across the country, and village Melas
characterize the unorganized and fragmented nature of retailing in India.

       The retail industry in India is largely unorganized & predominantly consists of small ,
independent, owner-managed shops. Retailing is INDIA‟ s largest industry in terms of
contribution to GDP & constitutes 13% of GDP. There are around 5 million retail outlets in
India. There are also an uncounted number of low cost kiosks (tea stalls, snacks centre, barber
shops, etc) & mobile vendors. In India the per capita retailing space is about 2 sq. ft, which is
quite low compared to that of developed economies
                                              Retail Sales in India




7|Page
        The above chart is showing three lines mainly, overall retail sales; food, beverages and
tobacco segment sales and clothing sales. The below graph shows contrast between retail
spending between urban and rural households




         The growth of the retail trade in India is associated with the growth in the Indian
economy. Based on the Market Information Survey of Households (MISH) of the National
Council of Applied Economic Research (NCAER), the number of people in the income groups
of “aspirers” and the middle class with annual income ranging from Rs. 90,000 to one million,
more than doubled from 157 million to 327 million during the last decade. The data from the
Central Statistical Organization (CSO) indicate that the growth of real private final consumption
expenditure.

         Retail Sector is the most booming sector in the Indian economy. Some of the biggest
players of the world are going to enter the industry soon. It is on the threshold of bringing the
next big revolution after the IT sector. Although organized retail market is not as strong as of
now, it is expected to grow manifolds by the year 2010. The sector contributes 10% of the GDP,
and is estimated to show 20% annual growth rate by the end of the decade as against the current
growth rate of 8.5%. A CRISIL report says that the Indian retail market is the most fragmented
in the world and that only 2% of the entire retailing business is in the organized sector. This
suggests that the potential for growth is immense. There are about 300 new malls, 1500
supermarkets and 325 departmental stores currently being built in the cities across India.

       Traditionally retailing in India can be traced to the emergence of the neighborhood
„Kiraana‟ stores catering to the convenience of the consumers, an era of government support for
rural retail: Indigenous franchise model of store chains run by Khadi & Village Industries
Commission, 1980s experienced slow change as India began to open up economy. Textiles
sector with companies like Bombay Dyeing, Raymond's, S Kumar's and Grasim first saw the
emergence of retail chains. Later Titan successfully created an organized retailing concept and


8|Page
established a series of showrooms for its premium watches. The latter half of the 1990s saw a
fresh wave of entrants with a shift from Manufactures to Pure Retailers. For example Food
World, Subhiksha and Nilgiris in food and FMCG; Planet M and Music World in music;
Crossword and Fountainhead in books. Post 1995 onwards saw an emergence of shopping
centers, mainly in urban areas, with facilities like car parking targeted to provide a complete
destination experience for all segments of society. Emergence of hyper and super markets trying
to provide customer 3 V‟ s - Value, Variety and Volume. Expanding target consumer segment:
The Sachet revolution - example of reaching to the bottom of the pyramid. India is on the radar
screen in the retail world and global retailers and at their wings seeking entry into the Indian
retail market. The market is growing at a steady rate of 11-12 percent and accounts for around 10
percent of the country‟ s GDP. The inherent attractiveness of this segment lures retail giants and
investments are likely to sky rocket with an estimate of Rs 20-25 billion in the next 2-3 years,
and over Rs 200 billion by end of 2010. Indian retail market is considered to be the second
largest in the world in terms of growth potential.

                       India Retail - Share of Categories (percentage)

                                2005-06                2006-07                2007-08                2008-09
1. Food & grocery                 66.4                   62.5                   61.7                   59.6
2. Beverages                        2                     2.7                    3.1                    3.6
3. Clothing &                      7.3                    8.8                    8.6                    9.3
footwear
4. Furniture,                      4.8                    5.8                    6.2                   6.8
furnishing,
appliances &
services
5. Non-institutional                9                     8.6                    8.5                    8
healthcare
6. Sports goods,                    2                     2.4                    2.6                   2.7
entertainment,
equipment & books
7. Personal care                   3.5                    3.8                    3.9                   4.2
8. Jewellery,                       5                     5.4                    5.4                   5.9
watches, etc
Total Retail                       100                    100                   100                    100




9|Page
1.3 Future of Retail Industry


    The retail sector is expected to grow 40% to $427 billion by 2011.
    By 2017, organized retail will be 15-20% of the total retail market.
    Total retail market $ 800-billion by 2017.
    Impact on rural incomes and urban prices will be real and positive.
    Organized retailing in India will need painstaking, often frustrating, effort to chisel out

         India ready business models, retail formats and delivery models.
    Products, Properties, People and Profitability are going to be huge challenges.
    The real estate prices and shortage of talented staff, the run-up expenses for growth are

         going to shoot up sharply.
    Significant delay in completion of shopping malls by developers and unreasonably high

         property prices is adversely affecting the growth of the sector.
    By the year 2010, it is expected that there will be around 500 shopping malls, adding over

         250 million square feet of retail space.
    Understanding, interpreting and catering to Indian consumer behavior, taking into

         account the social diversity in the country will be crucial to the success of new players.
    New formats in specialty retail, wholesale retail and luxury retail are expected to emerge.
    By 2010 a conclusion on the consumption potential in India can be reached.
    No one can stop the growth of modern retail and the consequent impetus to consumption

         and development in India.




10 | P a g e
2. Merchandise Management
    For every industry, its product range and varieties are the best way to attract and retain
customers. That‟ s why this concept of merchandise and assortment planning emerged and now
most of retail organizations focusing on this for being alive in the market. The retailer must make
decisions regarding the merchandise offered depending on the sales targets and financial
objectives of the store. Merchandise comes in a variety of sizes, colors, makes and models.
Retailers should be very careful while deciding on the amount of stock to be maintained in each
category, if large stocks are maintained in a particular category, there may not be sufficient
resources left for providing a deeper assortment of goods. Hence, the retailer should establish a
trade-off between the type of categories or assortment and the inventories being maintained. This
is called merchandise assortment planning.


2.1 Steps in the Retail Merchandising Process

    1.   Develop the merchandise mix and establish the merchandise budget.
    2.   Build the logistic system for procuring the merchandise mix.
    3.   Price the merchandise offering.
    4.   Organize the customer support service and manage the personal selling effort.
    5.   Create the retailer‟ s advertising, sales incentive and publicity programs.


Retail merchandising also includes:
    Planning Merchandise Variety
    Controlling Merchandise Variety
    Planning Merchandise Assortment/Support
    Controlling Merchandise Assortment/Support
    Merchandise Mix Strategies i.e.
               1. Merchandise Variety (No. of product lines)
               2. Merchandise Assortment (No. of product items)
               3. Merchandise Support (No. of product units)

As seen in first step of merchandising process it requires management of Merchandise Budget
which includes:
    Planning And Controlling Retail Sales
    Planning And Controlling Inventory Levels
    Planning And Controlling Retail Reductions
    Planning And Controlling Purchases
    Planning And Controlling Profit Margins




11 | P a g e
2.2 Category Management

         A category is a distinct, group of products or services, which are perceived by customers
to be interrelated and suitable. For example, men‟ s jeans and girl‟ s jeans are two categories,
which have similar characteristics. The pricing and promotional aspects of these two
merchandise categories are targeted at similar customers.

        Category management involves the management of price, shelf-space, merchandise
category, promotional efforts and other elements of the retail mix with in the category, based on
firm‟ s goals, the changing environment and the consumer behavior. In majority of retail
organizations, the responsibility for purchasing merchandise is shared by a category manager and
a merchandise planner. Merchandise planning is handled differently by different retailers.
Typically it is the category manager who looks after all the functions of merchandise
management. The responsibilities of a category manager include:
    Interacting with the vendors
    Merchandise selection
    Merchandise Pricing
    Developing various promotional schemes etc.

2.3 Assortment Plan

     An assortment plan depicts what should be carried in a specific category of merchandise. An
assortment plan for a merchandise category based on fashion will not identify particular stock
keeping units, because fashions vary from year to year and sometimes, from season to season.
The more fashion-oriented the merchandise category is, the more necessary it is for the
merchandise planner to accommodate changes in fashion, and hence, the lower the level of detail
in the assortment plans. The starting point for developing an assortment plan for a given season
is the historical data for a particular merchandise category. Apart from the assortment plan for a
merchandise category in the previous season, sales, inventory turnover and GMROI (Gross
margin return on inventory investment) figures are used to develop an assortment plan for the
current season. The merchandise planner then makes the required changes according to his
expectations of what products or fashions will be really significant for the coming season.

                                      Assortment Plan for Boy’s Jeans
Style                    Straight-leg Straight-leg         Straight-leg         Loose-fit            Loose-fit
Retail Price (in Rs.)    999              1399             1799                 1299                 1599
Type of Fabric           Regular          Stone Washed Tinsel-Lycra             Broken twill         Over Dyed
                         Denim            Denim            based Denim
Colors                   Light Blue       Dark Blue        Light Blue           Light Blue           Blue
                         Black            Indigo           Black                Black                Black
                                          Black            Deep Blue

12 | P a g e
This plan describes general styles, price levels, fabric composition and colors. The process of
developing an assortment plan can be quite complex, especially in multi-store chains like
Shoppers‟ Stop, Pantaloons or Food World. An effective assortment plan requires equal or more
effective sales, inventory turnover and GMROI forecasts, to complement the experienced
judgment of the merchandise planner.


2.4 Retail Assortment Strategies

There are 4 types of assortment strategies. They are:
   1. Wide & deep
                     - Many categories & large assortment in each category
   2. Wide & shallow
                     - Many categories & limited assortment in each category
   3. Narrow & deep
                     - Few categories & large assortment in each
   4. Narrow & shallow
                     - Few categories & limited assortment n each

    1. Wide and Deep

    Advantages
        -      Broad market
        -      Full selection of items
        -      High level of customer traffic
        -      Customer loyalty
        -      One-stop shopping
        -      No disappointed          customers
    Disadvantages
        -      High inventory investment
        -      General image
        -      Many items with low turnover
        -      Some obsolete merchandise

    2. Wide and Shallow

    Advantages
       -       Broad market
       -       High level of customer traffic
       -       Emphasis on convenience        customer
       -       Less costly than wide and deep

13 | P a g e
    Disadvantages
        -      Low variety within product line
        -      Some disappointed customers
        -      Weak image
        -      Many items with low turnover
        -      Reduced customer loyalty

    3. Narrow & Deep

    Advantages
        -      Specialist image
        -      Good customer choice in category(ies)
        -      Specialized personnel
        -      Customer loyalty
        -      No disappointed customers
        -      Less costly than wide and deep
    Disadvantages
        -      Too much emphasis on one category
        -      No one-stop shopping
        -      More susceptible to trends/cycles
        -      Greater effort needed to enlarge the size of the trading area

    4. Narrow & shallow

    Advantages
       -       Aimed at convenience customers
       -       Least costly
       -       High turnover items
    Disadvantages
        -      Little width and depth
        -      No one-stop shopping
        -      Some disappointed customer
        -      Weak image
        -      Limited customer loyalty
        -      Small trading area




14 | P a g e
2.5 Evaluating Merchandise Performance

   There are 3 different ways to evaluate the performance of the merchandise for any retailer.
They are:
   ABC Analysis
   Sell through Analysis and
   Multi- attribute method


1. ABC Analysis

         In this method merchandise is ranked according to its sales. ABC analysis is based on 80-
20 rule, which says that only 20% of total merchandise bring 80% of the total revenues. In this
method first of all parameters are chosen based on which merchandise is to be categorized or
ranked for e.g. contribution margin, sales etc. After that the next step is to define criteria to place
merchandise in A, B or C category. For e.g. A category consists of only top 5% items which
bring 70% of total revenue, B category consists of 10% of merchandise which contribute 20% of
total revenue and rest are placed in category C.

2. Sell through Analysis

        A sell through analysis helps determine the requirement for early markdowns or the
requirement of more merchandise to fulfill the demand by comparing the actual sales with the
planned sales.

3. Multi-attributes method

   In this method the vendors are assigned weighted average scores based on certain parameters.
The vendors are evaluated based on these scores only. The parameters may include Reputation,
Promotional assistance, delivery time, selling history etc.




15 | P a g e
3. Research Purpose and Design process
3.1. Objective of the research

      Merchandising Strategy plays a very important role in success of a retail outlet. It helps to
attract more and more customers as well as retaining the old customers by adopting customer
centric approach so the main Objective of the research is to study the Merchandising Strategies
used by Retail Outlets of Mumbai.

3.2. Benefits

    To Self-
       Knowledge earning.
         Gaining practical exposure to Merchandise Assortment Planning.

    To companies-
        This report will be beneficial for companies and outlets too because from this report
           they get to know what merchandising trends are prevailing in the industry.
         From this report they will get the knowledge about required changes in their
               strategies.

    To customers-
        They will get to know about retailer‟ s strategies and their work process.



3.3. Limitations

The following limitations may arise during the study:

         Time constraint
         Money constraint
         The pace of technological changes.


3.4. Research Methodology

     For this project one has to know each and every aspect of the concept thoroughly. And then
for merchandise assortment planning one has to get updated with the latest trends and all factors
which are continuously affecting these decisions. So acquiring the data regarding this I have
gone through several sources like Books, Magazines, Journals and Web site.




16 | P a g e
     In order to understand the merchandise assortment planning process, as per the objective
stated, the various steps which are to be followed are given below:

    1.   Planning the research design.
    2.   Selecting the research method.
    3.   Selecting the sampling procedure.
    4.   Data collection.
    5.   Evaluating the data.
    6.   Preparing and presenting the research report.


1. Research Design:

         The research design will be Descriptive studies. Descriptive studies are well structured,
they tend to be rigid and its approach cannot be changed every now and then. The objective of
this kind of study is to answer the why, who, what, when and how of the subject under
consideration.

        I will be taking descriptive because my research includes understanding Merchandising
Strategies adopted by various Retail Stores. I will be working on to know how Manager of
Various Retail Stores develop a merchandise plan, what things do they consider while
developing it and how do they modify the same as per customer‟ s preferences

2. Research Method

        After developing an appropriate research plan, it is important for the researcher to select a
proper research method. For this research, the research methods chosen by the researcher are
secondary data and survey methods.

Secondary data studies: This is concerned with the analysis of already existing data that is
related to the research topic in question.

Surveys: This is a research technique, which is used to gather information from a sample of
respondents by employing a questionnaire.

3. Sampling Procedure

        Sampling is generally a part of the research design but is considered separately in the
research process. Sampling is a process that uses a small number of items or a small portion of a
population to draw conclusion regarding the whole population. For this research the sampling
method chosen is simple random sampling and Convenient Sampling.




17 | P a g e
4. Data Collection

        After preparing a suitable sample, the researcher collects the data from the units in this
sample. As stated above that research method which will be used in the research comprises of
surveys therefore data collected will be of primary in nature and partly secondary since
secondary data will also be taken.

5. Evaluating and analyzing the data

        This step includes editing, coding, tabulation and processing of collected data. The
Schedules are required to be edited during the field survey for necessary corrections. After the
survey was complete they are required to be checked again for completeness, accuracy and
uniformity. The data is then arranged in a particular fashion for better understanding.

3.5 Process Flow of the Research



                                 Design of Questionnaires


                                      Getting Response


                                            Data Entry


                              Data Cleaning and Analyzing


                            Findings and Recommendations




18 | P a g e
4. Findings after Data Collection and Data Analysis
         The question given in the annexure were orally asked to store managers, management etc.
of various retail outlets across Mumbai. In order to get proper and true data regarding merchandise
management practices in retail stores of Mumbai; care was taken that all different types of retail
store formats are included as sample unit. The various formats include:

    Chain stores like More, Reliance Fresh, Lifestyle, Big bazaar etc.
    Franchise Stores like Belmonte, Reebok etc.
    Single stores owned by local Businessmen like Mansi Fashions, S-mart etc.
    Unorganized Retail stores
and various others.




19 | P a g e
4.1 Response to Questionnaire

Q.1. Tell me something unique about your outlet and brand and about your vision and
mission?

          This was a general question just to start the interview smoothly and also to know what
positioning strategy the retail store managers are adopting and to know the Brand Identity of the
retail stores.

          In response to this Question the Managers told various things that they thought are unique
in their retail outlet and which attracts the target customers towards their store instead of their
competitors like:

        Brand name
        Store location
        Store‟ s presence in the city
        Able to understand customer demands and their need patterns
        Store‟ s Exterior design
        Promotion strategy
        Merchandise Assortment
        Depth of Products
        Customer service
        Aesthetics inside the store i.e. store ambience
        Store layout
        Visual merchandising within the store
        Pricing policy
        Various loyalty programs
        Procedure of handling customer complaints and queries etc.




20 | P a g e
Q.2. Which is your target market and what you doing to capture it?

         This Question was to know the target market of various retail stores and the customer bas
they are focusing on. All retailers have their own target markets and their all efforts are focused
on capturing as high market share as possible. They use various tools for the same like Pricing
Strategy, Promotional strategy and more importantly merchandise assortment planning decisions.

          Different stores have different target market segments and their basis of segmenting also
differs like let‟ s take an example:

    Big Bazaar through the introduction of “SABSE SASTE DIN” focuses on the middle
      class and the lower class of the society, who is very conscious about the price and decide
      on the basis of the value the merchandise provides them.
    Retailers like Blackberry, Levis and other brands they focus on the upper middle class
         and the upper class of the society whose needs fall in the category of Self-esteem and
         Self-actualization. This class don‟ t care about the price they have to pay but they want to
         buy those merchandise which suites their status and is noticed by everyone.

        Let us take another example of apparel retail stores which have different target segment
to focus on which is shown in the table below:

Target Segment                                           Retail Brands/Stores
Formals                                                  John Players, Peter England etc.
Casuals                                                  Adidas, Reebok, Spykar, Lee, Levi‟ s,
                                                         Wrangler, Gas, Tommy Hilfiger etc.
All family apparel market                                Sportking, Monte Carlo, Priknit, Cotton
                                                         County, Koutons, Lee, Allen solly etc.
Children‟ s market                                       Gini & Jony, Lilliput etc.




21 | P a g e
Q.3. Before taking decisions about your product varieties and range (Merchandise
Assortment Planning), what factors you considered?

        The variety and assortment of merchandise plays an important role in attracting the
customers. There is a difference between variety and assortment of merchandise. Variety means
number of different categories of merchandise within a store while assortment means the number
of stock keeping units within a merchandise category. In short one can say variety means breadth
and assortment means depth of merchandise. So before deciding the amount of merchandise to
be purchased, its variety and its assortment the stores take various factors into consideration like:

        Corporate philosophy of brand
        Physical characteristics of the store i.e. size etc.
        Degree to which merchandise complement each other
        Financial Objectives
        Customer‟ s preferences and demand
        GMROI figures
        Retail brand‟ s image and good will
        Seasonal demand and fashion etc.




22 | P a g e
Q.4. Do you make assortment plan for your merchandise?

        As explained earlier assortment plan is an important feature of category management.
Every retail store whether it be a single store, franchise store, chain stores etc., they all use
category management as one of their strategy whereby they maintain stock keeping unit of each
category but all of them do not utilize category management to the fullest i.e. they don‟ t use each
and every aspect of category management .

        Store like single stores, which are owned by a fairly literate businessman, do not use
assortment plan as a tool to plan their merchandise management because they don‟ t know the
formal way of making assortment plan as they don‟ t have knowledge regarding the same but
they use some layman techniques to organize each category through their experience from the
market.

         On the contrary big retail stores like Big-bazaar chain, More, Reliance fresh, Lifestyle
etc. they take due care of preparing their assortment plan and maintaining it by updating and
changing it time to time so that they come to know merchandise belonging to which stock
keeping unit should be ordered in advance so that there is no shortage in its supply similarly they
can also decide on which merchandise should be ordered in less quantity as a result of drop in
sales in that particular stock keeping unit, the reason may be change in the trend, fashion change
etc.




23 | P a g e
Q.5. Is there any proper strategy you are adopting for these decisions i.e. Do you use
standard tools like budget plan and open to buy for purchasing?

        In case of franchise stores and chain stores, they have their own strategic plans for
capturing market and company‟ s management also helps these store owners in strategic
planning. As all brands have their own vision and mission so mainly these Retail store owners
are also adopting same strategies for them. While in case of single stores the owner takes all the
purchasing decisions based on the inputs from the store manger regarding purchasing trends and
preferences about the customer for previous month/s. But as all customers have their own
specialties so these retailers also have to change their strategies according to their own localities
and they make some modifications in the plan according to suit the local circumstances.

         When asked about whether they use standard tools like Budget plan or open to buy the
retailers gave different responses. In case of single stores owned by fairly literate businessman
they told that some of them have no idea about such tools but then they were told that a budget
plan contains items like:

        Monthly sales percentage distribution to season
        Monthly sales
        Monthly Reductions percentage distribution of sales
        Monthly reductions
        Beginning of the month inventory to sales ratio
        Beginning of the month inventory
        End of month inventory &
        Monthly additions to inventory

while Open to Buy system consists of calculating difference between actual and the planned
sales and inventory. On hearing that what actually all this standard tools contain they told that
they also make use of all this items but not in standard for as described by us thus we can say
that this businessmen make use of such standard tool but in their own way.

       In case of big retailers like lifestyle, Big-bazaar, More, S-Mart etc. they told that some of
them use this tool while some of them have their own tools which they designed for their store
managers to use and plan their merchandise. Thus we can say every retailer uses proper strategy
while making purchase decisions regarding the merchandise to be offered by the store to the
customers.




24 | P a g e
Q.6. Are all decisions related with your outlet’s merchandise are independently taking by
you or is there any interference or support by company’s side also?

        In case of Retail chain like Reliance Fresh, More, Spencer etc. they get huge support
from the company in taking decisions regarding the merchandise to be offered to their
consumers. Even in some retail chains like Reliance Fresh all decisions are taken by the
company depending on the sales data of the store which is transferred from the store database to
company database regularly but the store manager has the authority to suggest any
recommendation if any, may be regarding some new merchandise to be offered or to increase the
quantity of old merchandise being offered by the store. Mainly based on the sales data the
company makes an estimate about the inventory required at the store and after consolidating
inventory required by all the stores in a region, the inventory is dispatched to regional warehouse
from where the inventory is arranged in groups to cater to particular retail stores and then the
merchandise is finally unloaded at the retail store.

         In single Retail stores like Mansi fashions etc. the decision regarding the merchandise is
entirely taken by the owner in coordination from the store manger if any and from the sales data
regarding the ales of the merchandise in the previous month/s.

         While in case of some franchise store they have liberty to prepare their merchandise
strategy through their own, the company only lends the name to the franchisee. In this case the
franchisee along with the store mangers takes the responsibility to carry out the merchandise
purchasing decisions.




25 | P a g e
Q.7. Do you incorporate category management? If yes do you appoint Category manger for
the same or it is done by store manager only?

        Every Retail store whether small or big, whether single store or chain store they all
incorporate some part of category management in their stores like:

    Dividing merchandise into separate stock keeping units based on category as perceived
      by the customers.
    Allotting different shelf space to merchandise belonging to different categories
    Designing different promotion schemes for different categories
    Deciding price of merchandise belonging to various categories separately etc.

But there are still many other things that the retail stores are not doing in field of category
management like:
    Appointing separate category manager for different categories, who takes care of a
      particular category of merchandise.
    Giving category manger the power to select the merchandise to be offered in the
      particular category.
    Giving category manager the power to negotiate with the vendors directly regarding the
         merchandise purchased from him.

        While in case of some big chains like Big-bazaar super market, Lifestyle they even
appoint special category manger for different categories of merchandise but still they don‟ t give
all power to the category mangers regarding that particular category . As for example category
manger can decide regarding promotion, shelf space etc. but they can‟ t directly negotiate with
the vendors or they can‟ t fix the price etc.

         Thus we can say that category management is in initial stage in Retail market of not only
Mumbai but the whole of India as it is a new concept and it will take time to flourish in Indian
retail industry.




26 | P a g e
Q.8. Before buying merchandise for the coming month do you analyze the merchandise
performance of the previous month? If yes, which tool do you use for the same i.e. ABC
analysis, Sell through analysis etc.?

        Every Retail store whether big or small, whether chain stores or a single store; they all
thoroughly analyze the performance of merchandise during previous months and based on that
and certain other criteria they take decision regarding buying merchandise for the coming month.

         When further asked about whether they take help of standard tool for analyzing the
merchandise performance like ABC analysis, Sell through analysis, Multi attribute model etc.;
the retailers gave different responses. In case of single stores owned by fairly literate
businessman they told that some of them have no idea about such tools but then they were told
that what actually this various tool contains then they told that they all use such strategies but
only the thing is that they don‟ t know this standard tools.

         In case of big retailers like Big-bazaar, Reliance Fresh etc. they told that some of them
use this tool while some of them have their own tools which they have designed for their store
managers to use and evaluate the performance of the merchandise.

         Every Retail store uses Price mark-up in case of cost of raw material increases and if
merchandise does not sell they even use mark-downs based on the merchandise performance this
is nothing but the Sell-through analysis. Similarly every retailer assign some rating to the vendor
based on certain attribute it possesses like fast delivery, low price etc this is nothing but the Multi
attribute model and so on. So we can say that analyzing of merchandise performance of previous
month/s is a very important aspect for a retailer while purchasing merchandise for coming month
and every retailer whether big or small uses this strategy.




27 | P a g e
Q.9. How is the price of the merchandise Fixed in your store?

          Different retailers use different strategies for fixing their price. The Pricing decision of a
retailer is influenced by:

        Target Market i.e. Market Skimming, Market penetration or Market holding
        Corporate philosophy of brand
        Physical characteristics of the store i.e. size etc.
        Financial Objectives
        Retail brand‟ s image and good will etc.

The various pricing strategies which retailers in Mumbai use are:
   Market skimming for brands like Levi‟ s, Blackberry etc.
   Market Penetration for brands like More, Reliance fresh etc.
   Market holding and
   Cost based Pricing

         For retail chains like More, Reliance Store, Big-bazaar etc., the store manager have very
less or even negligible power in pricing decision of the merchandise. All pricing decisions
regarding the price are taken by the mangers at corporate headquarters.

        While in case of Small Retailers having single store like Mansi Fashions, S-mart etc., the
pricing decisions are taken by the management with due inputs from the store managers and
based on the discussion the price of the merchandise is fixed in this stores.




28 | P a g e
Q.10. How do you handle the logistics for the procurement of the merchandise from
vendors?

        The way of handling the logistics for the merchandise differs for every retail store. Some
develop their own logistic system and some use outside logistic service provider‟ s facility.

         For Big Retailers like Big-bazaar, More etc. they have their own logistic system designed
by the company and these fleet works only for their retail stores. They have their own vehicles,
warehouses etc. even in many cases the company leases the warehouses, vehicles etc. for
particular time period.

      In case of small and medium retailers they take use of logistic service providers like Gati,
DHL, TNT express etc. Even for very small retailers they don‟ t even have any permanent
logistic service provider they use different services at different time as per the availability of the
logistic service provider.




29 | P a g e
Q.11. What factors do you consider while opting for in- store advertising, sales promotion
etc.? Do you perform all these promotional activities by yourself or use external assistance
for the same?

         Different Retailers have different philosophy regarding promotions of their merchandise
as well as the store. Big Retail giants like Big-bazaar, Lifestyle, More, Vishal Mega mart etc they
spend huge amount of money for the promotions. Even these retailers apart from various Medias
also launch private labels whereby along with other brands they also launch their own brand of
merchandise and they compete with other brands. The main aim of using the private labels is to
achieve economies of scales by high profit margin. They generally use PUSH strategy for private
labels. In order to promote the private labels many retailers they keep their products just besides
the well known brands and they promote then in such a way that instead of choosing the regular
brand consumers prefer the private label because of the price difference, the assortment, the
aesthetics etc.

        Small retailers like S-mart, Mansi fashions etc. they also use private labels to increase
market share as well achieving the economies of scale. Many small retailers apart from using
conventional media like TV, Radio, Print etc. they also use unconventional media which suit the
local consumers preferences of Mumbai like Bill board in camel cart, bullock cart, Gas balloon tied
at some point, microphone and loudspeaker in auto rickshaws etc. Because of this innovativeness
and unconventional methods used by the small retailers many a time customer gets attracted
towards them instead of big retailers; this is the main aim of using such media.

        For in-store promotions many retailers like big-bazaar, more etc. either they have
category mangers looking for the same or they hire external assistance by service providers. If
they don‟ t have category mangers than the store manger along with the assistance from the
company headquarters design the promotions, the store manager has very limited role in such
case i.e. only to give suggestions regarding preference of local community. Even now-a-days
small stores are also hiring external promoters for in-store promotions. Otherwise in case of
small retailers the responsibility of making in-store promotions rests in the hand of store manger
but he has to consult the owner before implementing it.




30 | P a g e
                                              Conclusion
         From the research conducted, the researcher has reached to the conclusion that in this
quick-moving world, now retailers have also realized that they need to work more strategically
for their survival. That is the reason why now they are taking merchandise assortment decisions
seriously and are spending huge amount of time and efforts for such decisions.

        The scenario has changed totally. Earlier Markets used to be Product-centric but now
market is totally customer-centric and highly competitive. So if any company wants to survive in
this competitive environment then they have to fulfill the changing demands of their customers
whether it is a big giant or a small business unit. That is a reason why in a city like Mumbai also,
which is considered as a historic place, retailers are adopting new techniques to fulfill their
customer‟ s need. And hence here also customer can get all those qualities and varieties of
merchandise which earlier were not possible to find.

         Although Merchandise management is not a new concept here but the systematic
planning procedure is yet not been adopted by many retailers because of lack of knowledge
about modern merchandise management tools which help to take such decisions more efficiently
and effectively and many other reasons like lack of infrastructure, finance, skilled manpower etc.
The full fledged blooming of Modern Merchandise Management will take some time in Mumbai
but big Retailers like Big-Bazaar, Lifestyle, More etc. have started moving on that path of
success.

        We can say that in present Scenario also Darwin‟ s Law (on Evaluation Theory) is
applicable on retailers as, “Only the most powerful and quick updating creature, according to the
circumstances will remain alive and others, who couldn‟ t adopt themselves according to the
changing environment, will be finished.”




31 | P a g e
                                              Annexure
Following is the Questionnaire which will be asked to Retailers during the research.

                                            Questionnaire

Q.1. Tell me something unique about your outlet and brand and about your vision and mission?

Q.2. Which is your target market and what you doing to capture it?

Q.3. Before taking decisions about your product varieties and range (Merchandise Assortment
Planning), what factors you considered?

Q.4. Do you make assortment plan for your merchandise?

Q.5. Is there any proper strategy you are adopting for these decisions i.e. Do you use standard
tools like budget plan and open to buy for purchasing?

Q.6. Are all decisions related with your outlet‟ s merchandise are independently taking by you or
is there any interference or support by company‟ s side also?

Q.7. Do you incorporate category management? If yes do you appoint Category manger for the
same or it is done by store manager only?

Q.8. Before buying merchandise for the coming month do you analyze the merchandise
performance of the previous month? If yes , which tool do you use for the same i.e. ABC
analysis, Sell through analysis etc.?

Q.9. How is the price of the merchandise Fixed in your store?

Q.10. How do you handle the logistics for the procurement of the merchandise from vendors?

Q.11. What factors do you consider while opting for in- store advertising, sales promotion etc.?
Do you perform all these promotional activities by yourself or use external assistance for the
same?




32 | P a g e
                                            References

Faculty Guide:

Prof.Moumitha Roy



Websites:

www.indiainbusiness.nic.in

www.google.com

www.wikipedia.com

www.researchindia.org

www. bigbazaar.futurebazaar.com

www.morestore.com

www.adidas.com

www.priknit.com

www.rbk.com

www.lilliput.com



Books and Articles:

Cases of Retail Management, Prentice-Hall Publications.

Retailing Environment in India, Tata-McGraw Hill Publications.

Retail Management, ICFAI University Press

Nordstrom‟ s Perpetual Inventory System, Page No. 245-260

Turnaround of JC Penney, Page No. 261-274

Big Bazaar: Serving the Classes, Page No. 275-276


33 | P a g e
Journals:
Darley, W.K. & Su Lim, J(1999), “Effects of store image and attitude toward secondhand stores
on shopping frequency and distance traveled”, International Journal of Retail & Distribution
Management, Vol.27, pp311-318

Gerth, K.C. (2004), “Situational, consumer, and retailer factors affecting Internet, catalog, and
store shopping”, International Journal of Retail & Distribution Management, Vol.32, pp5-18

Mattila, A.S. & Wirtz, J. (2001), “Congruency of scent and music as a driver of in-store
evaluations and behavior”, Journal of Retailing

Paulins, V.A. & Geistfeld, L.V. (2003), “The effect of consumer perceptions of store attributes
on apparel store preference”, Journal of Fashion Marketing and Management, Vol. 7, pp371-
385




34 | P a g e
                                               Glossary
Chain Stores- Stores that have two or more retail outlets that are commonly owned and
controlled. These stores have a centralized buying, and merchandising system and sell similar
lines of merchandise.

Combination Store- A blends of a super market and a general merchandise store, where the
general merchandise contributes more than 40 percent of the sales.

Franchise Store- A store based on a contractual arrangement between a franchiser
(manufacturer) and a retail franchise, which allows the franchise to conduct a given form of
business under as established name and according to a given pattern of business.

Customer service- A set of activities and programs taken up by a retail organization to offer
their customers a rewarding shopping experience.

GMROI- Gross Margin Rate on Investment.

Market Positioning- The kind of image the retailer wants to establish among its target group
and the group of firms with which it wishes to compete and coexist.

Market Segment- A group of customers whose needs will be satisfied by the same retail
offering because they have similar needs and go through similar buying processes.




35 | P a g e