Retail operations

STORE PLANING AND OPERATION MANAGEMENT

Preeti Nigam

UNIT 1

OPERATIONS MANAGEMENT Operating a Retail BusinessOperation blue printPersonal utilizationStore maintenanceEnergy management and renovationsInventory managementStore security & InsuranceOutsourcingCredit managementComputerizationCrisis Management.

Retail Industry Definition

The retail industry is a sector of the economy that is comprised of individuals and companies engaged in the selling of finished products to end users in the general public.

Two Types of Retailers in the Industry1. Store Retailers – Those engaged in the

sale of products from physical locations which warehouse and display merchandise with the intent of attracting customers to make purchases on site.

2. Non-Store Retailers – Those engaged in the sale of products using marketing methods which do not include a physical location. E.g.s

Infomercials Direct Response television advertising Catalogue Sales In-Home Demonstrations Vending Machines Home Delivery E-commerce Multi-Level Marketing

Size of the US Retail Industry

According to the U.S. Census Bureau, the total sales for the U.S. Retail Industry in 2007 (including food service and automotive) was $4.48 trillion.

Types of Businesses in the Retail Industry

Generally, any business that sells finished merchandise to an end user is considered to be part of the retail industry. Sales figures and economic data is sometimes reported separately for restaurants and automotive-related businesses, but by definition they are considered to be members of the retail industry as well.

Global Retailing

Of the world’s 10 largest retailers, six of the companies are from the US and four are from European countries. These top ten had combined sales of $978.5 billion in 2007, according to international consulting group, Deloitte.

Retail Industry Outlook- Strategies to be adopted

Lean inventories and strong cash flow Lower payroll Increase share of wallet with existing customers Improve the customer experience and customer loyalty Use multi channel shopping (in-store, kiosk, online) Reintroduce coupons Create private label brands

ARTS

The Association for Retail Technology Standards (ARTS) is an international membership organization dedicated to reducing the costs of retail technology through standards

Operations Blueprint

An operations blueprint systematically lists all the operating functions to be performed, their characteristics and their timing.

While developing a blueprint, a retailer specifies in detail every operating function from the store’s opening to closing and those responsible for them. E.g. who opens the stores, alarms etc.

Operations Blueprint

A large or diversified retailer may use multiple blueprints and have separate blueprints for areas like store maintenance, inventory management, credit management and store displays.

Whenever a store modifies its store format or operating procedures, it must also adjust the operations blueprint.

Store Format, Size and Space allocation

1. Tactics- store located in a planned shopping center or unplanned business district

2. Usage of Prototype stores whereby multiple outlets conform to relatively uniform construction, layout and operation standards.E.g.s- Pep Boys, Office Depot,Starbucks, McDonalds and most supermarket chains are prototype stores

Advantages of Prototype stores

1. Easy centralized management control2. Reduce construction costs3. Standardize operations4. Facilitate the interchange of

employees among outlets5. Allow fixtures and other materials to

be bought in quantity6. Display a consistent chain image

Disadvantages of Prototype stores

A strict reliance on Prototype stores may lead toInflexibilityFailure to adapt to or capitalize on local customer needsToo little creativity

Rationalized Retailing

Together with Prototype Stores, come chains use rationalized retailing programs to combine a high degree of centralized management control with strict operating procedures for every phase of business. Rigid control and standardization make this technique easy to enact and manage and firm can add a significant no.of stores in a short time. E.g Radio Shack, Starbucks and Toys “R” Us use rationalized retailing. They operate many stores that are similar in size , layout and merchandising

Store Space

Retailers focus on allocating store space. They use facilities productively by determining the amount of space and its placement for each product category.They can drop merchandise lines as they occupy too much space. E.g. JC Penny home electronics, large sporting goods and photo equipment from its stores

Store Space

With top-down space management approach, a retailer starts with its total available store space, divides the space into categories and then works on product layouts.A bottom-up space management approach begins planning at the individual product level and then proceeds to the category, total store and overall company levels.

Tactics in Using Store Space

Vertical displays- occupy less room Free space has small point-of-sale displays and

vending machines Product displays are in front of stores

Open doorways,mirrored walls and vaulted ceilings give small stores large appearance 75% or more space can be used for selling, rest for

storage and restrooms

Scrambled merchandising with high profit, high turnover items occupies more space in stores, in catalogs and at websitesStaying open longer

Personnel Utilization- Need1. Labor costs are high (one half of operating cost)2. High employee turnover means increased

recruitment, training and supervision costs3. Poor personnel may have weak sales skills,

mistreat shoppers, missing transactions, and make other errors

4. Many retailers are labor intensive5. Labor scheduling is often subject to

unanticipated demand. They can be under or over staffed.

6. There is less flexibility for firms with unionized employees

Tactics to Maximize Personnel Productivity

Careful screening of candidates during the hiring processWorkload Forecasts- for each time period the no.and type of employees are pre-determined. In doing workload forecasts, costs must be balanced against the possibilities of lost sales if customer waiting time is excessive. The key is to be efficient and effective.


Job Standardization and cross training- Job Standardization ensures jobs are uniform at similar levels in different departments. Cross training ensures learning multiple skillsEmployee performance standards- each worker is given a clear goal and is made accountable to them. E.g. cashiers are judged on transaction speed


Compensation- Financial remuneration, promotions and recognition that rewards good performance help to motivate employees.Self-service- costs are reduced but requires better displays, avoid feeling of understaffed and ensure cross sellingLength of employment- Full time workers are more productive than part-time ones.

Store Maintenance, Energy Management and Renovations

Store maintenance encompasses all the activities in managing physical facilities. Exterior- parking lot, points of entry and

exit, outside signs and display, windows and common areas adjacent to a store (sidewalk)

Interior- windows, walls , flooring, climate control and energy use, lighting, displays and signs, fixtures and ceilings


The quality of store maintenance affects consumer perceptions, the lifespan of facilities and operating costs. Customers don’t like decaying stores. Replace burn out bulbs Repaint room surfaces


Heating, ventilation, air-conditioning equipment lasts an average of 15 yearsDisplay fixtures- 12 yearsInterior signs – 9 years

Energy Management- e.g Giant Eagle Store 30% less energy

1. Use better insulation in constructing and renovating stores

2. Adjust interior temperature levels during non-selling hours

3. Use computerized systems to monitor temperature levels

4. Substitute high efficiency bulbs and fluorescent ballasts for traditional lighting

5. Install special air conditioning systems that control humidity levels sp. In freezers

Checklist for Store Maintenance

Level of responsibility in maintaining outside facilities?Store maintenance activities be done by retailer’s personnel?Emergency repairs?Frequency of store maintenance?Seasonal variation?Usage duration of stores?Performance stds for each element?

Inventory Management

A retailer uses inventory management to maintain a proper merchandise assortment while ensuring that operations are efficient and effective.

Operational IssuesHow can the handling of merchandise from different suppliers be coordinatedHow much inventory should be on the sales floor vs. in a warehouse or storeroomHow often should inventory be moved from non-selling to selling areas of a storeWhat inventory functions can be done during non-store hoursWhat are the tradeoffs between faster supplier delivery and higher shipping costsWhat supplier support is expected in storing merchandise or setting up displaysWhat level of in store merchandise breakage is acceptableWhich items require customer delivery?> When ? By whom?

Store Security

Personal SecurityMerchandise security

Personal Security At night Parking lots E.g. Jersey Gardens Outlet Mall has 220 cameras Uniformed security guards and horse mounted

guards Undercover personnel Brighter lighting in parking lots TV cameras and other devices scan the areas

frequented by shoppers e.g 711 store has in store cable tv

Some shopping areas have curfew for teenagers (controversial tactic)

Access to store backroom facilities has been tightened

Bank deposits are made more frequently by armed security guards

Merchandise security

Each year $30 billion to $35 billion

Insurance

Worker’s compensation, product liability, fire, accident, property and officer’s liability.Many firms also offer health insurance

Impact on Retailer

Premiums have risenMany insurers have reduced the scope of their coverage or require higher deductiblesThere are fewer insurers servicing retailers todayInsurance against environment risk is more imp due to govt. regulations

Retailer Protection

Costly programs like- No-slip carpeting, flooring and rubber entrance mats Frequent mopping and inspecting wet floors Doing more elevator escalator checks Have regular fire drills Building fire-resistant facilities Setting up separate storage areas for dangerous

items Discussing safety in employee training Keeping records that proper maintenance has been

done

Credit Management

The retailer must weigh the ability of credit to increase revenues against the cost of processing payments-screening, transaction and collection costs plus bad debts

Operational Decisions to be Made- Credit Management

What form of payments is acceptable?Who administers the credit plan?What are customer eligibility requirements for a check or credit purchase?What credit terms be used?How are late payments or non-payments to be handled?

Debit Card System

The retailer’s risk of non-payment is eliminated and its costs are reduced with debit rather than credit transactions.For traditional credit cards monthly billing is employed; with debit cards monetary account transfers are made at the time of purchase.

New Operational Issues

1. Retailers have more options for processing payments- credit cards, gift certificates, electronic checks, instant credit, own credit cards. For store based retailers, training cashiers is more complex.

2. Paper checks are processed electronically.3. Retailers have to carry both credit + debit

cards for Master card and Visa4. Non-store retailers have less protection

against credit card fraud than store retailers that secure written authorization

5. Credit card transactions on the web must instantly take into account different sales tax rates and currencies

6. In Europe, retailers have to convert to common euro-currency

Computerization

With declining costs of computers and software, small firms have improved their operations productivityRetailers such as Home Depot, Wal-Mart and JC Penney use video-conferencingIn-store telecommunications aid operations by offering low cost, secure in-store transmissions. Spectra Link Corporation markets light weight pocket phones

Computerization

Software provides computerized inventory control and customer order trackingComputerized check-out is used by both large and small retailers so they can efficiently process transactions and monitor inventoryComputerized registers instantly record and display sales, provide detailed receipts and store inventory dataWireless scanners let workers scan heavy items without lifting them, radio-frequency identification tags (RFID) and emit a radio frequency code when placed near a receiver (faster than UPC codes and better for harsh climates) and speech recognition ( that can tally an order on verbal command)

Computerization

Electronic point-of-sale system performs all the tasks of a computerized checkout and verifies check and charge transactionsToday's scanners are faster and more versatile, more durable and more accurateHand-held scanners, hands free scanners and miniaturized data transceiversSelf-scanning where consumers himself scans the items

Outsourcing

A retailer pays an outside party to undertake one or more of its operating functions e.g. Limited Brands use outside firms to oversee its energy use and facilities maintenance, Kmart uses logistics firms to consolidate small shipments and process returned merchandise

Crisis Management

In-store fire or broken pipeAccess to a store blocked due to picketing by striking workersCar accident in the parking lotBurglarySudden illness by employerStorm knocking out powerUnexpectedly high or low demand for a good or serviceSudden increase in suppliers pricesNatural disaster like flood

Principles

There should be contingency Plans. The firm can have a checklist to follow.Essential information should be communicated to all affected parties- police, fire etc as soon as crisis occursCooperation and not conflict among the involved partiesResponses should be swiftThe chain of command should be clear and decision makers should have adequate authority

Challenges & Barriers in the Retail Operation

Forms or templates are outdated and require workarounds System glitches, slowdowns, malfunctions, complications Equipment is broken or inadequate Cleaning or office supplies don’t exist or are frequently out of stock Supplies aren’t easily accessible when and where needed Don’t have the right tool for the right job (hammering with shoes, opening boxes with keys, box cutters as screwdrivers)


Distractions and constant interruptions Conflicting priorities Cumbersome and inefficient processes Overcomplicated Procedures Busy work Too many duties assigned No guidelines about which tasks can wait


Answering inbound phone calls while running the cash register Walking with customers to find merchandise while stocking shelves Assisting customers to their car with purchases when you can’t leave the store/register unattended Monitoring dressing rooms while working the sales floor Cleaning restrooms and anything else Paperwork and anything else


No telephone book, mall directory, street map, or GPS to give directions assistance No “cheat sheets” for unusual transactions No FAQ’s documented with accurate, up-to-date answers No helpline, or emergency contact numbers easily available No on-call staff, or negative consequences for utilizing them No employee contact information to clarify specific transactions No system for capturing and documenting the knowledge and experience of senior employees

Retail operations

Documents

Transcript of Retail operations