Organization Structure in Retail: Meaning, Factors Influencing Designing Organization Structure, Organization Structure for Small Stores/Single Stores/Independent Retailers and Retail Store Chain/Department Store

14th November 2021 1 By indiafreenotes

Understanding a retail store’s organizational structure is important when creating a business plan to determine its customers and appeal to them. Many retail businesses rely on a structure that places emphasis on three areas: centralized operations, store operations, and regional operations.

Centralized operations include duties such as store planning and human resources. Store operations include merchandising and marketing and are performed daily by retail stores. Regional operations refer to distribution and warehousing. This organizational retail structure is beneficial because it encompasses all areas of a business.

Executive

The executive module of a retail company structure will include the department heads who exercise ultimate control over their area of responsibility. Department designations may include operations, finance, sales, marketing and human resources. The title of director or officer will depend on the structure of the company and executive ownership options. The president or chief executive officer serves as the head of the entire company structure.

Operations

Operations can refer to a wide range of responsibilities within a retail company structure, such as store operations, warehousing and shipping, security, logistics and facility maintenance. These functions are responsible for the physical aspects of a retail store operation.

Finance

The accounting and bookkeeping arm of a retail store company structure is responsible for all financial issues. This may include numerous employees, located in the retail stores and within the corporate structure. Retail store employees are responsible for daily accounting and record keeping, which is then passed to the corporate level. This information is combined with corporate accounting to create an overall picture of the retail store company’s financial health.

Sales

Sales is typically a store-level part of a retail store structure but may also include regional or district sales managers for multi-unit companies. The sales force also may be divided up into departments or product-specific areas of expertise.

Factors Influencing Designing Organization Structure

Organizational size

The larger an organization becomes, the more complicated its structure. When an organization is small such as a single retail store, a two‐person consulting firm, or a restaurant its structure can be simple.

In reality, if the organization is very small, it may not even have a formal structure. Instead of following an organizational chart or specified job functions, individuals simply perform tasks based on their likes, dislikes, ability, and/or need. Rules and guidelines are not prevalent and may exist only to provide the parameters within which organizational members can make decisions. Small organizations are very often organic systems.

Organization life cycle

Organizations, like humans, tend to progress through stages known as a life cycle. Like humans, most organizations go through the following four stages: birth, youth, midlife, and maturity. Each stage has characteristics that have implications for the structure of the firm.

  • Birth: In the birth state, a firm is just beginning. An organization in the birth stage does not yet have a formal structure. In a young organization, there is not much delegation of authority. The founder usually “calls the shots.”
  • Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on becoming larger. The company shifts its attention from the wishes of the founder to the wishes of the customer. The organization becomes more organic in structure during this phase. It is during this phase that the formal structure is designed, and some delegation of authority occurs.
  • Midlife: This phase occurs when the organization has achieved a high level of success. An organization in midlife is larger, with a more complex and increasingly formal structure. More levels appear in the chain of command, and the founder may have difficulty remaining in control. As the organization becomes older, it may also become more mechanistic in structure.
  • Maturity: Once a firm has reached the maturity phase, it tends to become less innovative, less interested in expanding, and more interested in maintaining itself in a stable, secure environment. The emphasis is on improving efficiency and profitability. However, in an attempt to improve efficiency and profitability, the firm often tends to become less innovative. Stale products result in sales declines and reduced profitability. Organizations in this stage are slowly dying. However, maturity is not an inevitable stage. Firms experiencing the decline of maturity may institute the changes necessary to revitalize.

Environment

The environment is the world in which the organization operates, and includes conditions that influence the organization such as economic, social‐cultural, legal‐political, technological, and natural environment conditions. Environments are often described as either stable or dynamic.

  • In a stable environment, the customers’ desires are well understood and probably will remain consistent for a relatively long time. Examples of organizations that face relatively stable environments include manufacturers of staple items such as detergent, cleaning supplies, and paper products.
  • In a dynamic environment, the customers’ desires are continuously changing the opposite of a stable environment. This condition is often thought of as turbulent. In addition, the technology that a company uses while in this environment may need to be continuously improved and updated. An example of an industry functioning in a dynamic environment is electronics. Technology changes create competitive pressures for all electronics industries, because as technology changes, so do the desires of consumers.

Strategy

How an organization is going to position itself in the market in terms of its product is considered its strategy. A company may decide to be always the first on the market with the newest and best product (differentiation strategy), or it may decide that it will produce a product already on the market more efficiently and more cost effectively (cost‐leadership strategy). Each of these strategies requires a structure that helps the organization reach its objectives. In other words, the structure must fit the strategy.

Companies that want to be the first on the market with the newest and best product probably are organic, because organic structures permit organizations to respond quickly to changes. Companies that elect to produce the same products more efficiently and effectively will probably be mechanistic.

Organization Structure for Small Stores/Single Stores/Independent Retailers and Retail Store Chain/Department Store

Independent, Single Store Establishments:

These are generally located in localities where population is higher. They can be a specialized apparel store to MBO or a grocery store. Owned by a family or individual with operations limited lo the area where store is located with direct personal relationship with customers.

The essence is that they have better understanding of their customers and supported by long standing patronage as they can revert to their needs within short span of time.

Unlike others they pay less attention to Store Design, Merchandise Mix, Employee Trainings, Book Keeping etc. This category of course re­quires very less capital to start, thus are major drivers to entrepreneurship in the retail category.

They also have very low credit rating in the market or almost nil past records to prove their goodwill or financial health; thus working with them or engaging with them, as supplier or tenant would require other party to be careful and safeguard all their interest.

Corporate Retail Chains

As the name suggests, these well-known brands may specialize in a form of retailing (like super market, hypermarket, apparel store) with multiple stores across the state, country or even in the world. They have centralized decision-making body that may take decision for all its stores and then executed by respective city heads or unit heads.

The number of stores may vary from 10 to over 300 (such as Safeway, Wal-Mart, Target). They can be part of large corporation also like Target Corporation owns Target, Dayton’s and Hudson’s. Thus, they may have multiple stores for multiple brands and multiple categories.

These stores employ large number of people and also sometimes become bureaucratic due to complex and multi-level decision-making process but sell product at lower price due to economies of scales attained through wide distribution channel and mass buying of products. They have same merchandise mix and merchandise across all stores.

In India, Shopper’s Stop, Big Bazar, Pyramid, Shubiksha, Music World, Planet Sports, etc., are examples of this kind of stores.

Franchise Stores

Franchising is an agreement between a franchiser and a franchisee that allows the franchisee to operate a retail outlet using a name and format developed and supported by the franchiser. These stores can be restau­rants, fast food outlets, apparel outlets, sports goods outlets, hypermarkets etc.

In this kind of an arrangement generally franchiser charges franchisee a lump sum fees towards usage of brand names, retailing expertise plus a royalty and franchisee has to bear all operation cost along with above and has to earn profit.

Though in recent times franchiser also underwrites the losses if it occurs to avoid high attrition and motivate franchisee to invest as these kinds of arrangement require high investment. Franchisers support franchisee with merchandise planning, store management, training, man­power sourcing, IT support, interiors and advertising at national and re­gional level.

This format fuels growth faster as franchiser does not need to block huge capital, employ more people and hold huge stock. This model has helped people with adequate capital but without any technical knowledge to enter into retail trade. In India, UCB, Reebok, Adidas, Lee are examples for this kind of retailing.