Assignment Code: BRL-11/TMA/2021-22

Course Code: BRL-11

Assignment Name: Retail Operations and Store Management - II

Year: 2021-2022

Verification Status: Verified by Professor

SECTION A

Q1) How does price sensitivity differ for different market segments based on shopping orientation?

Ans) According to Berman & Evans, price sensitivity varies by market segment and shopping orientation. In today's mall culture, there are five key segments, as listed below:

Economy minded Consumers: In the contemporary retail culture, this group is expanding. These customers consider all retailers to be the same and are on the hunt for the best deal on their purchases.

Convenience oriented Consumers: This is the sector that is looking for a store that is close to their home, saving them the trouble of having to travel to a store that is further away. They're fine, even though the prices are a little higher than the store down the street. Generally, daily home needs such as fresh vegetables or cereals are purchased at Kirana stores, which cater to consumers' daily needs, are free of parking and transit issues, and are open till late.

Assortment oriented Consumers: This is the group that is willing to travel to their favourite store to see what new types and collections are available in a given category. Consumers in this category are likely to be aware of the stores in a mall or shopping strip and will go to great lengths to find one that can meet their assortment requirements. This segment's customer is willing to spend a somewhat higher price if they are pleased with the collection and believe the price is reasonable in comparison to other competitive offerings in the same category.

Personalizing Consumers: This group loves to shop at establishments where the personnel or the owner/manager know them personally. This group is willing to pay slightly higher costs for the peace of mind that comes with knowing that the products are of high quality and that they have a strong tie with the store.

Status oriented Consumers: This customer demographic is more concerned with their own status as well as the status of the store from which they purchase. They are also more aware of the brands they purchase because purchasing prestigious brands from a reputable showroom gives them a sense of pride. These customers are likewise concerned about customer service and are willing to spend a greater premium for the products they purchase.

Q2) What is visual communication? Explain its important elements.

Ans) Due to rising labour costs and a scarcity of qualified workers, several retailers are reducing the number of store sales people they employ. This trend may be seen even in department stores, where personal attention to consumers is valued highly. As a result, shops have begun to use other alternative servicing ways to compensate for the loss of personal care, such as good selling communications and high customer service. Visual communication in the form of in-store signage and graphics is the most effective approach. Retailers make sure that the correct signs, posters, photo panels, and other visual impacts are included in the interior and exterior design so that they can work as "silent salespeople."

Customers can get much-needed information and guidance on the kind of items available, their locations, and how to get there from these. The cost of hiring a silent salesperson is one-time, and the ongoing costs are lower than hiring a human salesperson. Such communication methods have a high level of reliability because they are always available to assist customers regardless of their caste or creed. Human behaviours like as indiscipline, rudeness, and other flaws have no effect on them. Visual communications can comprise a variety of messages, some of which are bold and serve as pointers to customers on how to divide the space for various store components. The smaller ones are used to convey detailed messages about the goods and its sub-groups, as well as descriptions and other pertinent information.

Important Elements

Store Signage: The store's signage is the first point of contact with any consumer. This is the store's identity, which includes the name, logo, and accompanying graphic elements. The store name and logo, it is stated, should be memorable and reflect the retailer's merchandising objective. The name and emblem must be visible not only on the storefront, but also throughout the store, in advertising, and in all customer communications. These can take the form of leaflets, newspaper inserts, hoardings, and other materials.

The store name and logo are utilised to create a memorable association for the store. As a result, the logo must graphically express the name in a unique way. It must be straightforward and easy to grasp for the buyer to not only remember the store name or item, but also to form an association with it. The logo is frequently accompanied by a tagline that provides a concise summary of the store concept. Big Bazaar's tagline, for example, is "Isse sasta aur kahin nahin." The store name and logo must be simple, short, easily recognisable, intelligible, and significant, with a short tagline and prominent placement, so that passing cars notice it at first sight.

Institutional Signage: Customers notice institutional signage once they are inside the store, especially in large scale retailers. The merchandising mission, customer service policy, and other messages that define the retailer's philosophy are all stated here. Such signage is typically found at the door to greet customers and explain the company's concept, but it could also be found at service desks, billing counters, and other locations. "Quality assured," "Credit cards accepted," "Lowest price guaranteed," and so on could be written on the signs.

Directional, Departmental, and Category Signage: In the overall signage strategy, these signs serve as the greatest level of organisation. As these signs represent the overall layout of the store in terms of numerous departments, product categories, and access routes. As a result, they are often huge and situated at a good height to be visible from all areas of the store. Such signage are required in a large department store or supermarket, especially one that is more than 10,000 square feet. The signs are situated in such a way that when a customer enters a specific department, he or she may quickly discover the category signage and proceed to the appropriate counter. Because category signage is frequently near to or on the fixture itself, it may be smaller than department signage.

Point – of - Sale Signage: This signage, which is positioned very close to the goods and reveals the name of the merchandise or brand as well as the price, is located very close to the merchandise.

Since of its extremely particular duty – to convey goods details – and because it contains more words and is attached directly on the racks of the fixture where the merchandise is located, these signs are referred to as point-of-sale signage. Sign holders that can be changed from one fixture or rack to another and are designed to be kept closer to the item are also included in POS signage. There may be printed signs that may simply be inserted into hardware components to keep them safe. Some POS signs are made for specific events, such as sales, clearing, or new arrivals and debuts. To distinguish them from ordinary goods and pricing signage, such signs are frequently made in different colours and lettering styles.

Lifestyle Graphics: These are huge graphics that represent scenes or images to assist in projecting items in the appropriate context or reflecting a background image that complements the object on display. The lifestyle graphics should be created with the majority of customers in mind when they come into the store to buy a product, and they should match their taste and self-image without offending any particular set of customers. The visuals assist in not just transmitting lifestyle imagery, but also in generating interest and excitement for the merchandise on the sales floor. A mountain backdrop, for example, will be displayed in a sports shoes area, with a focus on rope and a sport's axe used for hiking or trekking.

Q3) Describe the eight-step process in category management.

Ans) The Partnering Group's 8-step process, or 8-step cycle, is the industry standard approach for Category Management.

Define the Category: This is characterised in terms of which items are included and which are removed in order for them to be interconnected or interchangeable in addressing consumer needs. The definition should ensure that all products in the category share a common attribute that can be used to group or align them.

Define the Role of the Category within the Retail Store: The function could be classified as niche, staple, or fill-in. A category could also play additional roles, such as being a destination, preferred, or convenient purchase, or a once-in-a-while or seasonal purchase.

Assess the Current Performance: You must first analyse the category's current performance in terms of sales, billing value per client, number of products purchased each bill, footfalls, conversion ratio, and category profitability, among other things.

Set Objectives and Targets for the Category: After you've gathered data on current performance, you'll need to set goals for the future season or period based on the many characteristics described in point.

Develop an Overall Strategy: It's not enough to just set goals; you also need to figure out what tactics or activities you'll take to meet those goals across a variety of performance metrics.

Develop Specific Tactics: The strategies must be accomplished through the use of a variety of short-term approaches. For example, achieving high footfall would be a strategy for growing sales, but in order to accomplish so, we would use a strategy of offering big price reductions on specific things on certain days of the week.

Implement: You won't be able to measure performance unless you act on our plans, therefore you may need to refer to the action calendar, which includes milestones for attaining results on various metrics and taking appropriate steps.

To Undertake Review of the Above Steps: This returns you to step 1, because you won't be able to reach an ideal level where you know the category has started producing the intended outcomes unless you assess the category's performance on a frequent basis.

Q4) Distinguish between the following:

(a) Knowledge Gap and Communication Gap

Ans) Knowledge Gap: It's the difference between a customer's expectation and a retailer's perception of that expectation. An electronic goods vendor, for example, may direct his sales staff to deliver customised service and accurate product information to customers, but the consumer may perceive the salesman as over-influencing and meddling with unsolicited advice. Such a chasm can be bridged using thorough market research into target customers' expectations, as well as observational studies and sales force feedback.

Communication Gap: It's the disconnect between service delivery and retailer service quality communication. A department shop may advertise its devotion to customers and quality delivery, yet it may lack a defined structure or protocol for dealing with legitimate concerns. The best method to close the gap is for the retailer to make reasonable commitments that he or she can keep.

(b) Institutional Signage and Point-of-Sale Signage

Ans) Institutional Signage: Customers notice institutional signage once they are inside the store, especially in large scale retailers. The merchandising mission, customer service policy, and other messages that define the retailer's philosophy are all stated here. Such signage is typically found at the door to greet customers and explain the company's concept, but it could also be found at service desks, billing counters, and other locations. "Quality assured," "Credit cards accepted," "Lowest price guaranteed," and so on could be written on the signs.

Point – of - Sale Signage: This signage, which is positioned very close to the goods and reveals the name of the merchandise or brand as well as the price, is located very close to the merchandise.

Since of its extremely particular duty – to convey goods details – and because it contains more words and is attached directly on the racks of the fixture where the merchandise is located, these signs are referred to as point-of-sale signage. Sign holders that can be changed from one fixture or rack to another and are designed to be kept closer to the item are also included in POS signage. There may be printed signs that may simply be inserted into hardware components to keep them safe. Some POS signs are made for specific events, such as sales, clearing, or new arrivals and debuts. To distinguish them from ordinary goods and pricing signage, such signs are frequently made in different colours and lettering styles.

(c) Value Merchandise Planning and Unit Stock Planning

Ans) Value Merchandise Planning: Merchandise planning is the most important procedure, so deciding what to bring and how much to bring becomes quite important. Choosing what to carry is one of the key challenges that retailers must address before entering the retail industry. Whereas, deciding how much to carry and of what worth becomes a component of the store's operation process and must be handled carefully. Merchandise planning is critical since both over and under procurement of merchandise have an impact on the business' profitability and, as a result, the return on investment. The success or failure of the merchandising department within the retail operation is largely determined by the degree and quality of merchandise planning.

Unit Stock Planning: Unit stock planning is an alternate strategy that employs units as the basis for planning. When employing the value technique, as demonstrated in previous merchandise planning methods, we may know the worth of the commodities in stock but not the type of physical inventory we have. For example, in the case of clothes, where a single sub product category may have numerous characteristics such as price range, colour, size, design pattern, styling, and so on, the inventory value may not indicate the numbers or units available under various dimensions. Knowing unit-wise inventory under various dimensions is useful in such a case.

Many sales are lost simply because the store does not have stock of specific sizes, design patterns, or styles/cuts. In this case, the value of inventory may not reveal much; we may record the value of inventory at the required level, but we may miss the point about the quantity or number of options we need in stock to meet the sales requirement. As a result, if we have a unit-by-unit plan, it may indicate the inventory that has to be ordered against various dimensions to match the customer's needs.

Because of the reasons stated above, unit planning is particularly useful for planning the purchase of fashion goods, but it can also be utilised for other types of items that fit into the staple or basic categories. Fashion items must be divided into sub-categories based on the aspects that are significant to the consumer of such things or categories. This division into different dimensions might subsequently be used when ordering new goods.

(d) Job Description and Job Specification

Ans)

Once the retailer has a clear understanding of the types of jobs or sub-duties that must be completed by an employee, the retailer can broaden the job description and identify the abilities required to do the specified tasks as part of the requirements. As a result, job descriptions and specifications inform recruiters about the sources to be used, the qualifications and experience required for the job, the remuneration to be offered, and the selection criteria to be used for candidate evaluation. It also gives the HR department a clear picture of the training and development requirements for a certain job position.

For example job description and specification for the position of Billing Clerk

Q5) Write short notes on the following:

(a) Customer Pyramid

Ans) The store can also organise the clients into a pyramid structure to determine the percentage of customers who fall into each section. In general, the pyramid is divided into three parts: the most valuable or profitable segment, known as the platinum group; the next, the growable segment, which offers a medium level of profitability and is known as the gold group; and the third, the low value segment, which offers low profitability and is known as the silver group.

The diagram below depicts the pyramid structure for a better understanding of customer grouping based on the current value of different customers in terms of their lifetime value. The customer grouping can also be done making use of data derived from RFM model.

The distinction in the pyramid structure, as seen above, gives the retailer information like the size of the segment representing each part. As a result, the merchant has a better idea of what strategic inputs are needed to raise the size of the second and highest sectors.

The company makes every effort to ensure that the platinum group is well-served through its CRM and customer loyalty programmes, so that customers from other groups will want to upgrade to this level as well.

(b) Periodic Replenishment System

Ans) The company will elect to take an actual count of inventory in a particular sub product category at the SKU level, as part of the Unit Planning Method, in order to acquire the appropriate break-up of quantities at all dimension levels.

Unit OTB or OQ: This is the amount ordered following a periodical inventory count for a concerned sub product category, and the order quantity is placed depending on the maximum quantity decided for a specific sub product category. This is the reorder quantity for fundamental staple products that remain the same season after season.

However, for fashion products, this could include new styles/items as well as break sizes/SKUs to complete the set in a certain sub product category.

The following is the basic formula for determining this quantity:

Quantity on Order = Maximum Quantity – Quantity On Hand – Quantity On Order

1. The reorder period (RP) is the time interval between planned stock counts, measured in weeks.

2. Following each stock count, a reorder will be placed.

3. The delivery period (DP) is the duration in weeks between the count and the date the reordered item is on the selling floor, i.e. the time it takes to deliver the material from the time it is ordered.

4. The average number of units sold every week is known as the rate of sale (RS).

Reserve (R): This is the amount of merchandise to keep on hand in case of a surge in sales or a delay in reorders. This could be expressed as a percentage of sales for a specific time period or as the number of days to expect a delay.

Merchandise on hand (OH): This is the amount of stock in units available at the time of the count.

The number of units of merchandise requested but not yet received is known as merchandise on order (OO).

(M) Maximum (also known as provision) quantity: It's the quantity you can order up to. It is the quantity to be made accessible at any reorder point (on hand plus on order). Because there is a continual activity of receiving items and simultaneous daily sales, the maximum quantity is never on hand at any given time.

Maximum = Rate of Sales (Reorder Period + Delivery Period) + Reserve is the formula for computing maximum quantity.

The "Maximum Quantity" is always kept constant in the above technique. For a given season and sub product category, the quantity ordered is always modified according to the quantity on hand, in order to maintain the maximum quantity bench mark.

(c) Balanced Score Card

Ans) A set of measurements developed from an organization's strategy can be described as a Balanced Scorecard. The Balanced Scorecard measures are an efficient way to communicate to employees and stakeholders the outcomes and performance drivers that will help the organisation accomplish its vision and strategic goals. This instrument is employed on three levels, according to Paul Niven: as a measuring system, a strategic management system, and a communication tool.

The balanced scorecard is a strategic planning and management system that is widely used in business, government, and non-profit organisations around the world to align business activities with the organization's vision and strategy, improve internal and external communications, and track performance against strategic goals. It was created by Harvard Business School professors Robert Kaplan and David Norton as a performance measurement framework that combined strategic non-financial performance measures with traditional financial metrics to provide managers and executives with a more "balanced" view of organisational performance.

(d) Implied Warranties

Ans) Implied warranties are not declared or supplied in writing by the retailer, but are understood and assumed based on custom, norms, or reasonable expectations. There are two sorts of implied warranties, according to Dunne. All retailers who are involved in the selling of items give an implied assurance of merchantability. The term "merchantability" refers to a product's suitability for the purpose for which it was designed. For example, if the apparel gets torn off during the first regular wash as described on the wash-care label of such merchandise or loses its colour, the merchant cannot pass on the duty to the supplier or maker of such apparel. It will be the retailer's responsibility to provide a similar design or value replacement of the apparel.

When a customer purchases a specific item for a certain application based on the retailer's expert advice, an implicit warranty of fitness for a particular purpose is created. For example, if a customer asks a retailer for a blanket that will keep them warm in a temperature of -2 degrees Celsius during the winter season, and the retailer recommends a specific brand of blanket for the same purpose, the retailer is providing an implied warranty of product fitness for a given purpose and cannot be blamed if the customer returns the product unhappy.

Q6) Briefly comment on the following:

(a) “Probably with the success of an isolated store, many others want to open stores selling similar product lines to cash in on the shoppers flow into the area.”

Ans) A stand-alone retail business located on a highway or a street is known as an isolated store. Due to the fact that it is a stand-alone store, it has no rivalry from other stores selling the same products or other types of products that could share client traffic. The merchant must first decide on the store's proposed locational format.

It must choose between an isolated store, an unplanned district store, and a planned centre store. The retail company will have to make decisions on two fronts. First and foremost, the company must identify the precise type of solitary business, unplanned district, or planned shopping centre. It must select if it wants to be on a freeway or a side street before deciding on an isolated store. It involves choosing a certain highway or side street for an isolated store. It involves choosing a specific place or district – for example, a downtown area, central area, or suburban region – for an unplanned commercial district or planned shopping mall.

(b) “Financial performance and Customer Satisfaction are based on historical actions.”

Ans) A management technique is the balance score card. This technique is used to see if the company in question is taking the right steps on many strategic and operational fronts. The score card aids in the effective coordination of all of the organization's efforts. This makes it easier to achieve exceptional results in areas like finances and customer happiness. The Balance Score Card is essentially a tool that assists us in determining a company's score based on the four variables listed below.

Financial Performance, Customer Satisfaction, Internal Business Processes, and Employee Development & Growth are the four elements. 'Financial performance' and 'Customer satisfaction', on the other hand, are historical elements because they are founded on prior activities. The Lead Elements are 'Internal Business Processes' and 'Employee Development,' which lead to results on the other two factors listed earlier.

(c) “Retailers of present world must take care of various laws.”

Ans) It is critical for merchants to be aware of the state's national and local laws in order to ensure that all statutory rules and regulations are obeyed. This will keep them out of trouble with national and state legislation, which may be a major hindrance to the retail organization's day-to-day operations. Noncompliance can sometimes lead to a retailer's closure or the payment of hefty fines to the government. Thus, in order to conduct its business smoothly, the retail firm should maintain track of new and existing laws, as well as the changes that occur to existing national, state, and local or municipal laws in order for the national, state, and local/municipal governments to keep the laws current.

Retailers who operate on a global scale must be aware of the various laws (national, state, and local) that exist in the countries in which they operate. Let's look at some of the most important rules governing price, promotions, products, channel restrictions, and retailing ethics. When it comes to making business decisions, today's retailers must be aware of a variety of laws.

(d) “Price penetration strategy may achieve the sales revenue.”

Ans) This strategy entails a shop setting high or premium pricing for its products while focusing on clients who value individualised service, a diverse choice, and the store's renowned image. When the skimming pricing approach is used, it is effective when:

1. The target customers are less sensitive about the price.

2. The product in question is being just introduced in the market or newly launched,

As a result, the competition is unlikely to enter the market with a competitive offer anytime soon.

Retailers could also base their pricing strategy on the goal of making the most profit or getting the best return on inventory investment. Retailers seeking bigger profits are more interested in obtaining large amounts of liquid cash to address immediate needs such as opening new locations or investing in inventory. Retailers seeking a high return on inventory investments want to generate higher profits than they would from bank fixed accounts or other investments. As can be seen from the preceding analysis, the price penetration strategy may meet the sales revenue target but not the profitability or return on investment goals.

Q7) Explain the merits de-merits of different advertising media.

Ans)

SECTION B

Q8) What is financial leverage? Explain the same with suitable examples extracted from retail business.

Ans) This is a metric derived from the retailer's balance sheet statement. It calculates the link between a retailer's total assets and net worth. The following is the formula for calculating financial leverage:

Total Assets – Net Worth = Financial Leverage

The following formula is used to calculate financial leverage:

1. 16175000 divided by 8375000 equals 1.93.

2. We can deduct from the aforementioned financial leverage number that net worth accounts for nearly half of total assets, implying that liabilities equal net worth, implying that the issue is under control. It's always useful to determine if the financial leverage is in line with the industry's trend or standard.

3. If the financial leverage is larger than two, it means that the debt is greater than the net worth, limiting the retailer's ability to take on more debt to improve or expand its business. A ratio of one indicates that the debt is zero.

4. When the ratio is high, the retailer is required to focus on cost-cutting initiatives in order to increase cash flow and repay the debt's interest and principal.

5. Additionally, the shop must take steps to generate cash flow, which is typically accomplished by offering additional discounts and markdowns in order to attract customers and increase sales income.

6. However, such steps reduce the profit margin and force the shop to take out more loans to cover everyday demands like paying employees' salaries and other operating expenses, such as paying suppliers. As a result of getting caught in a vicious spiral, all of these actions compel the retailer to declare bankruptcy.

7. As a result, retailers must keep a careful eye on their financial leverage and take prompt action if it becomes unmanageable.

8. Low financial leverage is also bad because it suggests a conservative stance by the shop, which could lead to non-expansion and stagnation. Such a retailer is content with current growth rates and does not take any aggressive initiatives to improve current operations, expand current operations, or enter new markets.

9. As a result, competition will have a clear road to take the lead or attract a larger number of competitors to cut into its market share, perhaps resulting in a reduction in sales revenue and profitability over time. A financial leverage of 2 to 3 is thought to be fair.

Q9) Explain the compensatory and non-compensatory models in the consumers’ decision-making process for evaluating brands on multiple attributes.

Ans) To evaluate brands on many attributes, there are compensatory and non-compensatory models. When a model evaluates a brand's preference among competing brands based on the aggregate sum of weighted ratings on all relevant criteria for each of the brands, it is referred to as compensating. It's called compensatory because a low score on one trait can be made up for by a high score on another. A non-compensatory attitude model is based on a single feature that is more essential or relevant at a particular time or in a particular situation. In a low-involvement product, for example, a consumer might take the straightforward method of comparing competing brands on a single quality at a time. It is non-compensatory since a low rating on one cannot be made up for by a high rating on another.

These models can be used to create marketing plans that address specific consumer concerns. The multi-attribute model depicts consumers' ideal product/service combination as well as the relative value of each attribute. The essential characteristics on which these sets of consumers differ from each other can be identified by clustering groups of consumers on similar sets of attributes. This may aid in the development of a marketing mix that will attract the larger groupings of these individuals to the product category. The research also aids in determining the relative position of brands (within a category) in relation to the "ideal qualities" chosen by the majority of consumers. These models are quite useful in putting together marketing plans for product features, price, and advertising.

The following are some of the steps done by product category marketers to improve consumers' attitudes toward their product category or brand in comparison to competitor categories or brands:

• Changing attitude toward the product class or type to increase the total market: In this case, the producer or retailer may try to establish a main demand or change an existing need in order to channel it via its outlets. For example, when Big Bazaar first opened as a hypermarket, it ensured relatively low prices in order to generate demand for grocery and food items. To attract clients and gain their trust, some things are kept far lower than those accessible in the open market.

• Giving more importance to attributes as desired by consumers: Many grocery retailers are advertising the brands and goods that provide health benefits, particularly in the cooking oil area, where many brands offer cholesterol-lowering benefits.

• Adding a salient product characteristic to the existing ones: This can be seen in many FMCG items that, after a few months, introduce a new benefit to their existing brand in order to rejuvenate its presence and sales. For example, the detergent brand 'Tide' offered a new aroma feature in addition to the other features.

• Improving ratings of the salient product characteristics of a particular brand:

1. Many lasting products, with the help of their R&D, are able to come up with some dazzling product qualities, resulting in such drastic alterations. Refrigerators with two compartments and a water dispenser, as well as the latest models of cellular phones, are on display.

2. Lowering the ratings of the salient product characteristics of competing

• Brands: This can be evident in some brands' comparative advertising, which uses direct or indirect comparison, especially in the food and health categories.

  Attitudes toward a new brand can also be influenced by a significant price decrease; celebrity endorsement of a product, such as Shahrukh Khan supporting Fair & Handsome fairness lotion for males; or free product trials.

• Fair and Handsome: Emami has developed a revolutionary fairness lotion for men in partnership with Activor Corp, USA, herbalists, and dermatologists from India. This is the Five Power Fairness System, which promises to make your skin fair and attractive in just four weeks. It also aids in the reduction of stress and exhaustion symptoms, as well as giving men's tough skin a tighter appearance. Emami is lovely and attractive. The world's most popular fairness lotion shields men's faces from the sun's UV rays.