Tag: University of Mumbai BMS Notes

A Customer Database Management System (CDMS) in retailing is a comprehensive software solution that enables retailers to collect, organize, analyze, and utilize customer data for various purposes. It plays a crucial role in building and maintaining customer relationships, personalizing marketing efforts, and enhancing overall customer experience.

A well-implemented Customer Database Management System empowers retailers to create a customer-centric approach, driving customer loyalty, improving operational efficiency, and contributing to overall business success. It serves as a valuable tool for adapting to changing customer preferences and market dynamics.

Components of Customer Database Management System:

Data Collection:

• Customer Profiles:

Create and maintain detailed customer profiles that include demographic information, purchase history, preferences, and contact details.

• Transaction Data:

Capture and store transactional data, including purchase history, order details, and returns.

Data Integration:

• Integration with POS Systems:

Integrate with Point-of-Sale (POS) systems to capture real-time transactional data.

• Integration with E-commerce Platforms:

Connect with online platforms to consolidate data from both in-store and online transactions.

• External Data Sources:

Integrate external data sources, such as social media or third-party demographics, to enrich customer profiles.

Data Storage:

• Secure Database:

Store customer data in a secure and compliant database to ensure the privacy and protection of customer information.

• Scalability:

Design the database to handle the scalability needs of a growing customer base.

Customer Segmentation:

• Segmentation Criteria:

Use segmentation criteria (e.g., demographics, purchasing behavior) to categorize customers into different segments.

• Dynamic Segmentation:

Implement dynamic segmentation that can adapt based on changing customer behaviors.

Personalization:

• Personalized Recommendations:

Utilize customer data to provide personalized product recommendations and offers.

• Personalized Communication:

Customize marketing communication based on customer preferences and behaviors.

Analytics and Reporting:

• Customer Analytics:

Analyze customer data to derive insights into purchasing patterns, trends, and customer lifetime value.

• Reporting Tools:

Provide reporting tools for generating customized reports on customer behavior and campaign performance.

Customer Interaction History:

• Communication History:

Maintain a history of customer interactions, including emails, calls, and in-store interactions.

• Feedback and Reviews:

Capture and store customer feedback and reviews to understand sentiments and improve service.

Marketing Automation Integration:

• Email Campaigns:

Integrate with marketing automation tools to execute targeted email campaigns based on customer segments.

• Promotion Management:

Automate the management of promotions and discounts tailored to specific customer groups.

Customer Loyalty Programs:

• Program Management:

Administer customer loyalty programs by tracking points, rewards, and tier progress.

• Incentives:

Use customer data to design incentives that encourage loyalty and repeat business.

Data Security and Compliance:

• Data Encryption:

Implement encryption protocols to secure sensitive customer information.

• Compliance:

Adhere to data protection regulations and privacy laws to ensure legal compliance.

Functions of Customer Database Management System:

• Customer Acquisition:

Attract new customers through targeted marketing campaigns based on customer profiles and preferences.

• Customer Retention:

Implement strategies to retain existing customers, such as loyalty programs and personalized communication.

• Campaign Management:

Plan, execute, and monitor marketing campaigns by leveraging customer data for segmentation and targeting.

• Customer Service Enhancement:

Provide customer service representatives with access to comprehensive customer profiles to enhance the quality of service.

• Cross-Selling and Upselling:

Identify opportunities for cross-selling and upselling by analyzing customer purchase history and preferences.

• Feedback Management:

Gather and analyze customer feedback to improve products, services, and overall customer satisfaction.

• Customer Journey Mapping:

Understand and map the customer journey based on historical data to optimize touchpoints and interactions.

• Churn Prediction:

Utilize analytics to predict and prevent customer churn by identifying at-risk customers and implementing targeted retention strategies.

• Comprehensive Customer View:

Provide a 360-degree view of each customer by consolidating data from various touchpoints and interactions.

• Real-Time Updates:

Ensure that customer data is updated in real-time to reflect the latest interactions and transactions.

Features of Customer Database Management System:

• Keep Customer Data Current

One of the most critical aspects of managing customer data is ensuring all data remains current. By analyzing outdated data, you’ll be designing a marketing strategy around information that may no longer be relevant, thus inhibiting your marketing campaign. A database management system will make it easier to cleanse your data and keep it organized, so you can minimize the presence of outdated data and act on the most current trends.

• Keep Customer Data Relevant

With data analysis, it’s important to analyze trends within the aggregate data. Yet, none of these trends will remain relevant across your entire consumer base. You need to be able to segment the data into categories, so you can analyze the data of specific customer groups and create marketing campaigns that are more relevant to each unique customer. A database management platform contains a number of tools to improve data analysis, while enabling you to categorize data efficiently. You can group data based on certain marketing targets, like demographics and spending habits, so your ad pitches appeal to customers on a personal level.

• Gain a Deeper Understanding of Your Customers

For a marketing strategy to be effective, you need to be able to see your customer fully. Big data provides all of the information you need on each customer, so you can gain a complete view of individual customers, as well as increase your understanding of the customer base as a whole. By understanding who your target audience is, you can craft more compelling ad pitches, improve customer service, and provide better products and services to customers. Big data management can help you to stay on top of consumer trends, manage and organize big data, and improve data analysis, so you can access a clearer view of your customers.

• Improve Data Cleansing

If you want to have an accurate and up-to-date view of the customer, then routine data cleansing is imperative. Data cleansing allows you to omit any incomplete, incorrect, and outdated data, which can substantially improve data analysis. Database management software helps to manage large quantities of data and makes it easier to stay on top of data cleansing, so you can rid your system of the dirty data that is slowing your analysis down.

Managing your customer data is imperative in order to create highly effective and targeted ad campaigns. Yet, big data is vast and complicated, making it difficult to manage on its own. A database management system allows you to store and manage your data easily and cost-effectively, while accessing tools that improve analysis. This will lead to better customer insights, enabling you to optimize your marketing strategy to produce the greatest number of leads.

Legal aspects in retailing in India encompass a wide range of regulations and laws that govern various facets of the retail industry. Compliance with these legal provisions is crucial for retailers to operate lawfully, protect consumers, ensure fair competition, and maintain the integrity of business transactions.

Retailers in India operate within a complex legal framework that encompasses diverse areas, ranging from consumer protection and intellectual property rights to taxation and environmental compliance. Navigating these legal aspects requires a comprehensive understanding of the regulatory landscape and a commitment to ethical business practices. Adherence to legal norms not only ensures legal compliance but also contributes to the establishment of a trustworthy and responsible retail sector that protects consumers’ rights and fosters fair competition. Retailers must stay informed about evolving regulations and seek legal counsel to navigate the dynamic and challenging legal environment in the Indian retail sector.

Business Registration and Compliance:

• Business Structure:

Retailers must choose an appropriate business structure, such as a sole proprietorship, partnership, private limited company, or limited liability partnership, and register accordingly.

• Shops and Establishment Act:

Compliance with state-specific Shops and Establishment Acts is mandatory, detailing regulations related to working hours, holidays, and employment conditions.

Consumer Protection Laws:

• Consumer Protection Act (CPA), 2019:

This Act establishes the rights and responsibilities of consumers and sets up mechanisms for redressal of consumer grievances. Retailers must ensure fair practices, transparent pricing, and adherence to quality standards.

• Labelling and Packaging:

Compliance with regulations regarding accurate product labelling, including information on ingredients, expiry dates, and nutritional content, is essential.

Contractual Agreements:

• Supplier Contracts:

Retailers must establish clear contractual agreements with suppliers, covering terms of payment, quality standards, delivery schedules, and other relevant terms.

• Franchise Agreements:

For franchised retail models, adherence to the Franchise Agreement and compliance with the Franchise Disclosure Document (FDD) is crucial.

Intellectual Property Rights (IPR):

• Trademark Registration:

Retailers must protect their brand names, logos, and product names by registering trademarks. Infringement of trademarks can lead to legal actions.

• Copyright and Design Protection:

Ensure that product designs and creative content are legally protected through copyright and design registrations.

Employment Laws:

• Shops and Commercial Establishments Acts:

These acts prescribe rules regarding working hours, overtime, leave policies, and other employment-related matters.

• Minimum Wages Act:

Compliance with minimum wage requirements is mandatory to ensure fair compensation for employees.

Taxation:

• Goods and Services Tax (GST):

Retailers must adhere to GST regulations, including proper invoicing, filing returns, and compliance with tax rates applicable to various products.

• Income Tax:

Compliance with income tax regulations for the business and employees is essential.

Competition Law:

• Competition Act, 2002:

Retailers must ensure fair trade practices and avoid anti-competitive behavior. This includes preventing unfair business practices, abuse of dominant market positions, and anti-competitive agreements.

Real Estate Laws:

• Lease Agreements:

Compliance with lease agreements is crucial for retailers renting commercial spaces. Adherence to lease terms, rent payments, and maintenance obligations is essential.

• Municipal and Zoning Laws:

Retailers must comply with municipal and zoning regulations related to store locations, signage, and other aspects of physical establishments.

E-commerce Regulations:

• Consumer Protection (E-commerce) Rules, 2020:

E-commerce platforms must comply with rules related to product information, return policies, and grievance redressal mechanisms.

• Foreign Direct Investment (FDI) Regulations:

Retailers engaged in e-commerce must adhere to FDI regulations governing their business models.

Data Protection and Privacy:

• Personal Data Protection Bill (PDPB):

Once enacted, the PDPB will regulate the collection, processing, and storage of personal data by retailers. Compliance with data protection standards is essential.

Environment and Sustainability:

• Plastic Waste Management Rules:

Compliance with rules related to the use, collection, and disposal of plastic is crucial for retailers.

• Eco-friendly Practices:

Retailers must adopt eco-friendly practices and comply with environmental regulations to minimize their ecological impact.

Food Safety and Standards:

• Food Safety and Standards Authority of India (FSSAI):

Compliance with FSSAI regulations is essential for retailers selling food products. This includes obtaining FSSAI licenses and adhering to food safety standards.

In the fierce competition of retail, it is very crucial to attract new customers and to keep the existing customers happy by offering them excellent service. Merchandising helps in achieving far more than just sales can achieve.

Merchandising is critical for a retail business. The retail managers must employ their skills and tools to streamline the merchandising process as smooth as possible.

Merchandising

Merchandising is the sequence of various activities performed by the retailer such as planning, buying, and selling of products to the customers for their use. It is an integral part of handling store operations and e-commerce of retailing.

Merchandising presents the products in retail environment to influence the customer’s buying decision.

Types of Merchandise

There are two basic types of merchandise:

1. Staple Merchandise

• It has predictable demand
• Fashion Merchandise
• It provides relatively accurate forecasts

2. Fashion Merchandise

• It has unpredictable demand
• Limited past sales history is available
• It is difficult to forecast sales

Factors Influencing Merchandising

The following factors influence retail merchandising:

1. Size of the Retail Operations

This includes issues such as how large is the retail business? What is the demographic scope of business: local, national, or international? What is the scope of operations: direct, online with multilingual option, television, telephonic? How large is the storage space? What is the daily number of customers the business is required to serve?

2. Shopping Options

Today’s customers have various shopping channels such as in-store, via electronic media such as Internet, television, or telephone, catalogue reference, to name a few. Every option demands different sets of merchandising tasks and experts.

3. Separation of Portfolios

Depending on the size of retail business, there are workforces for handling each stage of merchandising from planning, buying, and selling the product or service. The small retailers might employ a couple of persons to execute all duties of merchandising.

Functions of a Merchandising Manager

A merchandising manager is typically responsible to:

• Lead the merchandising team.
• Ensure the merchandising process is smooth and timely.
• Coordinate and communicate with suppliers.
• Participate in budgeting, setting and meeting sales goals.
• Train the employees in the team.

Merchandise Planning

Merchandise planning is a strategic process in order to increase profits. This includes long-term planning of setting sales goals, margin goals, and stocks.

Step 1: Define merchandise policy

Get a bird’s eye view of existing and potential customers, retail store image, merchandise quality and customer service levels, marketing approach, and finally desired sales and profits.

Step 2: Collect historical information

Gather data about any carry-forward inventory, total merchandise purchases and sales figures.

Step 3: Identify Components of Planning

• Customers: Loyal customers, their buying behavior and spending power.
• Departments: What departments are there in the retail business, their subclasses?
• Vendors: Who delivered the right product on time? Who gave discounts? Vendor’s overall performance with the business.
• Current Trends: Finding trend information from sources including trade publications, merchandise suppliers, competition, other stores located in foreign lands, and from own experience.
• Advertising: Pairing buying and advertising activities together, idea about last successful promotions, budget allocation for Ads.

Step 4: Create a long-term plan

Analyze historical information, predict forecast of sales, and create a long-term plan, say for six months.

Merchandise Buying

This activity includes the following:

• Step 1 Collect Information: Gather information on consumer demand, current trends, and market requirements. It can be received internally from employees, feedback/complaint boxes, demand slips, or externally by vendors, suppliers, competitors, or via the Internet.
• Step 2 Determine Merchandise Sources: Know who all can satisfy the demand: vendors, suppliers, and producers. Compare them on the basis of prices, timeliness, guarantee/warranty offerings, payment terms, and performance and selecting the best feasible resource(s).
• Step 3 Evaluate the Merchandise Items: By going through sample products, or the complete lot of products, assess the products for quality.
• Step 4 Negotiate the Prices: Realize a good deal of purchase by negotiating prices for bulk purchase.
• Step 5 Finalize the Purchase: Finalizing the product prices and buying the merchandise by executing buying transaction.
• Step 6 Handle and Store the Merchandise: Deciding on how the vendor will deliver the products, examining product packing, acquiring the product, and stocking a part of products in the storehouse.
• Step 7 Record the Buying Figures: Recording details of transactions, number of unit pieces of products according to product categories and sub-classes, and respective unit prices in the inventory management system of the retail business.

Merchandise Performance

The following methods are commonly practiced to analyze merchandise performance:

ABC Analysis

It is a process of inventory classification in which the total inventory is classified into three categories:

• Extremely Important Items: Very crucial inventory control on order scheduling, safety, prompt inspection, consumption pattern, stock balance, refill demands.
• Moderately Important Items: Average attention is paid to them.
• Less important Items: Inventory control is completely stress free.

This approach of segregation gives importance to each item in the inventory. For example, the telescope retailing company might be having small market share but each telescope is an expensive item in its inventory. This way, a company can decide its investment policy in particular items.

Sell-Through Analysis

In this method, the actual sales and forecast sales are compared and the difference is analyzed to determine whether to apply markdown or to place a fresh request for additional merchandise to satisfy current demand.

This method is very helpful in evaluating fashion merchandise performance.

Multi-Attribute Method

This method is based on the concept that the customers consider a retailer or a product as a set of features and attributes. It is used to analyze various alternatives available with regard to vendors and select the best one, which satisfies the store requirements.

Space planning is an art and practice that refers to the manner in which you utilize the space in your store, and how you place your merchandise. It is about using your space efficiently to meet your sales goals and create a great retail experience for your customers. Retail space planning is concerned with factors such as store fixture layout, product placement, and cross-merchandising.

Space planning had been in the retail structure since the time of inception of the retail business, but its applications, benefits, and dimensions keep evolving, reaching new heights with the passage of time. A well arranged store display attracts the shoppers, making them to check out the apparel merchandise, and influencing them to buy the clothing. Using the available space in a right manner will enable the retailer to accentuate his merchandise and arrange them in an optimum position.

A retailer’s goal is to drive sales and improve the customer’s shopping experience. They use a mixture of aisle navigation, product displays, and shelving to maximize sales per square meter while creating the ultimate shopping destination.

Space Planning Techniques get shoppers

1. Enter the Decompression Zone

The first space you step into when you enter the store is designed to open your mind to the shopping experience, inviting you to browse and explore. A place designed to make you feel safe and secure. The decompression zone prepares you for what lies ahead, helping you focus.

A good decompression zone:

• Provides a wide, open space, that’s free from clutter;
• Allows easy entrance into the store with an overview of the merchandise;
• Has no distracting marketing or advertising gimmicks;
• Welcomes you by giving you a little space; and
• Flower displays at the entrance that usually entice customers to come inside

Nordstrom, an upscale fashion retailer, rolls out a long red carpet from their decompression zone, guiding customers to their merchandise.

2. Clockwise vs Counter-clockwise

It’s critical for retailers to make it easy for shoppers to find the products they’re looking for. Retail stores opt for space planning that goes counter-clockwise, from right to left, because most of the population is right-handed and will instinctively turn to the right.

However, recently many stores have opted for the more unfamiliar clockwise layout, left to right, hoping it may arouse shoppers’ attention and stimulate them more than the familiar counter-clockwise layout.

3. Slow Down

Many retailers create little visual breaks, known as speed bumps, to give shoppers the opportunity to make seasonal or impulse buys. “Speed Bumps” are created using signage, specials or placing popular items halfway along a section, so people have to walk all along the aisle looking for them.

Retailers stock the items shoppers buy most frequently (staple items) at the back of the store, to maximise the amount time you spend inside the store, increasing basket size and impulse buying opportunities. This makes it difficult for shoppers to resist grabbing other items when making a quick trip to the grocery store.

Another space planning technique used to slow customers down, is by removing windows. Disconnecting you from the outside world, so you forget that time is passing, essentially keeping you in the store longer.

4. Visual Appeal by Blocking

Retailers create a triangular composition, otherwise known as tiered formation, using style or color, blocking certain products together high at the back, tumbling to low in the front.

They start with a center feature and merchandise out symmetrically, placing best seller items in a prominent visual location, enticing you to buy through visual appeal.

5. Shelf Spacing

Shelf space is positioned to manipulate shoppers into buying more. This is a highly debatable space planning technique amongst retailers, with some believing eye-level to be the top spot for a product while others reckon higher is better. Some retailers prefer the ‘end caps’ where products are displayed at the end of an aisle, believing those products receive the best visibility.

Benefits of Space Planning

By implementing above space planning techniques, retail stores create an aesthetically pleasing layout, allowing shoppers to find the products they’re looking for while eliminating out of stock items.

Products sell at a more even speed, creating less need for product ordering and shelf restocking.

A retail store might opt to first test these techniques by doing realograms beforehand and then once planograms have been implemented, evaluated the two against one another to determine technique effectiveness.

Of course, an increase in sales would also be an indicator of space planning success.

1. It ensures that you use your store efficiently

If you have a small store, for instance, you need to place your merchandise strategically so as to prevent your store from feeling cluttered; if the space feels too small and overloaded with products, the customer may feel uncomfortable and leave before exploring your store. There should be enough space for your customer to browse freely, and there should be enough space for your sales assistants to walk around and assist customers.

2. It ensures that customers feel at home:

One of the major concerns of space planning is the customer’s experience. Your goal as a retailer should be to ensure that the customer feels at home and that they are comfortable from the moment they walk into your store, to the moment they check out. Customers must be able to find what they are looking for easily and quickly.

3. It can improve your revenue

Space planning has the potential to improve shopper spend and basket size. Strategic placement of your products will make it easy for your customers to find what they are looking for and discover something they never knew they needed!

Space planning refers to the efficient flow of used space, ensuring you’re comfortable while shopping and that the overall experience will lead you to linger longer.

Retail stores spend a lot of time creating the perfect flow across different departments and products, persuading you to spend more money.

Planning the layout of your store is both an art and a science it requires creativity, psychological insights, and testing.

1. Use the right floor plan

Your floor plan plays a critical role in managing store flow and traffic. The choice of which one is right for you will depend on a number of factors including the size of your store, the products that you sell, and more importantly, your target market.

What are your customers like? Are they shopping in a hurry or can they take their time? Do they prefer self-service features or will your associates guide them throughout the store? Do want to find exactly what they need efficiently, or are they open to discovering items along the way?

These are just some of the questions you have to ask when deciding on your floor plan.

While there are plenty of store arrangements that you can adopt, here are the most common ones in retail:

• Straight floor plan: This floor plan involves positioning shelves or racks in straight lines to create an organized flow of traffic. It’s one of the most economical store layouts and is mostly used in large retail spaces, supermarkets, and in stores that primarily use shelving to showcase their merchandise.
• Racetrack or loop plan: This layout encourage customers to “loop” your store. You position your fixtures and merchandise in such a way that you create a path to guide that guides shoppers around your shop.
• Angular floor plan: This store layout consists of curves and angles to give off a sophisticated vibe. According to the Houston Chronicle, the angular floor plan is usually adopted by high-end retailers and it “reduces the amount of display area you have but focuses instead on fewer, more popular lines.”
• Geometric floor plan: The geometric floor plan utilizes racks and fixtures to create a unique store feel and design. Go with this layout if you’re showcasing trendy products.
• Free flow plan: A free flow layout affords you the most creativity. You’re not limited to floor patterns or shelves that have to be placed at certain angles. And unlike the other layouts, you’re not prodding people to use a path around your store; instead, shoppers are encourage to browse and go in any direction.

2. Be aware of where you “lead” shoppers

There’s quite a bit of debate about whether or not retailers should lead customers in a clockwise or counter-clockwise fashion inside their stores.

On one hand, some claim that since most people are right-handed, they instinctively turn to the right and explore the store in a counter-clockwise direction.

However, other studies indicate that shopper direction has more to do with their vehicle traffic patterns. Consumers in the UK and Australia for instance, drive on the left side of the road so they have a tendency to explore stores in a clockwise manner while consumers from right-hand driving countries like the US usually turn right when they enter a shop.

So which shopping direction theory should you believe? It looks like there is stronger evidence supporting the theory about driving behavior. As Herb Sorensen, author of Inside the Mind of the Shopper noted:

The pattern of movement in the supermarket is counterclockwise in the United States, but PathTracker studies in the UK, Australia, and Japan show a much greater tendency for shoppers to move in a clockwise pattern there… traffic patterns in the store may also be affected by vehicle traffic patterns outside. In these small studies, we noted that in countries with right-hand driving, where traffic circles move in a clockwise pattern, shoppers in stores may be more comfortable moving in the same direction.

3. Ensure that your product quantities are appropriate

The question of how much merchandise to have on display is an important one and the answer is not clear-cut.

Having too much product on the sales can lead to a decline in brand perception, especially if you’re trying to position yourself as a boutique or high-end retailer.

The amount of stock to display in your store will depend on the size of your shop, the image you want to project, and the type of experience you want to create.

If you’re a discount retailer who wants to make the most out of your store space, then packing your shop with merchandise could be a good strategy for you. But if you’re a high-end boutique, then it’s best to keep your selection curated and just put a few select items up for display.

4. Have enough space between products and fixtures

It’s ok to have shelves that are packed with merchandise (if that’s what you’re going for) as long as you still give your customers their personal space.

You want to avoid the butt-brush effect, which according to Underhill, is a phenomenon where shoppers would abandon a display or product they were looking at when they were bumped once or twice from behind.

5. Freshen up your displays regularly

The rules around how often to change up your displays will vary depending on who you’re talking to and the type of store you run.

That said, most experts recommend changing some part of your store around once a week. You could, for example, change the outfits of your mannequins or feature a different upsell every week.

And for obvious reason, you want to switch up your merchandising whenever new products come in.

Also take into account the amount (and nature) of traffic that you’re getting in your store or shopping center. Do you get a lot of the same shoppers walking by? Are you on a busy street corner that’s on the way to people’s work locations? If so, then you’ll need to change up your displays more frequently in order to grab people’s attention on a consistent basis.

The last thing you want is for customers to get too accustomed to your store that it doesn’t even register when they pass by.

6. Find ways to appeal to multiple senses

While the majority of a location’s design is made up of visual components, other factors including scent, touch, sound, and taste can also make an impact on a store’s look and feel. If you wish to create a truly immersive in-store experience, design your store to appeal to as many shopper senses as possible.

Here are a few ideas on what you can do:

• Sound: Pick your playlist wisely. Determine the atmosphere that you want to create and pick songs that enhance (and not overpower) the ambiance. Volume and beat can influence behavior, depending on who you’re selling to. For instance, while loud music may work well for retailers that target younger shoppers, the same thing can’t be said for merchants catering to adults.
• Scent: Bakeries and cafes may have a slight edge here, as they can use the smell of their products to draw customers in. But you can still cater to people’s sense of smell even if you aren’t in the food industry.
• Touch: Having a “hands-on” vibe can enhance shopper experience. One way of doing this is to take out sample products from their boxes to encourage customers to test or play with them. Apple pioneered this approach in the electronics retail space when they launched stores that had their products out in the open instead of being inside big brown boxes (which was the norm at the time).
• Taste: If you sell food in your store, see if you can have taste testing stations. Again, this encourages a more hands-on shopping experience and makes it less intimidating for people.

7. Don’t forget to cross-merchandise

Grouping your merchandise into neat categories or departments is a great strategy, but see if you can find room to cross-merchandise different items. Identify products in your store that would go well together and put them in a single display.

View your merchandise from a customer’s perspective. For example, if you were a shopper looking at a particular dress, is there anything in the store that would go well with it?

8. Make sure your employees are on point

Don’t forget that your staff also plays a role in your store’s design and layout. How they are positioned in your shop can make or break your store’s appeal. Having your employees move around on the sales floor instead of staying behind the counter is a good way to make the place more inviting.

As the Retail Doctor Bob Phibbs said on his blog, “Get your employees out from behind the counter and keep them active, especially if you have windows.”

Consumers looking into your shop will be more enticed to walk in if they see people moving about. That’s why Bob recommends that merchants instruct employees to “act as if they were customers” if a store is empty in order to make it more enticing.

9. Track and measure your efforts

Last not but not least, always ask whether or not you’re making the right floor plan, design, or arrangement decisions. This is critical to making sure that you’re implementing the best strategies possible.

You and your staff should be very observant with how people behave in your store. Pay attention to where they go, where they linger, and what they do while they’re inside. Also ask questions on what they think of your shop and what you can do to improve.

Let’s say you’re implementing a major layout or merchandising change in your store. You want to benchmark metrics like sales, traffic, and dwell time before you make the updates, and then measure the results once the changes are implemented.

Also, consider making use of foot traffic analytics solutions such as people counters, beacons, heat sensors, and more. These tools can give you deeper analytics and insights on shopper habits and behavior, so you can make data-driven decisions.

Finally, you need to ensure that your layouts and displays are being executed correctly, so conduct store audits whenever you make changes to your store. Consider using a tool such as Compliantia to evaluate your stores.

Store layouts speak to the design of a store’s retail floor space and merchandising is the display of items, within the store layout, in such a way that shoppers are enticed to purchase. The layout and the merchandising of a store are both critical and connected. In this post, we will be sharing some basics on store layouts and how they are connected to merchandising.

We will also share how you can create efficient retail spaces which attract customers and encourage more purchases.

How store layouts and merchandising mix?

In retail, the speed at which you move merchandise is the name of the game. Moving merchandise effectively is dependent on several things, with the most critical being product placement how and where you place certain items. This is where store layouts and merchandising mix.

Retailers, with the help of space planners, plan out their retail space in such a way that they maximise on floor space yet give customers enough space to easily access merchandise.

Merchandising, which is the display of merchandise in an appealing manner to encourage customers to make purchases, relies on the store layout to have shoppers walk through more than just one section of a store. Smart store layouts also reduct congestion during peak shopping hours. The two are inseparable, and to maximise profit, retailers need to take both into consideration.

Optimal store layouts

To achieve an optimal store layout, there are certain key principles which must be taken into consideration, namely:

When it comes to store layouts, the physical arrangement of items must account for not just the customer who will purchase the item, but also for the “influencer” causing the purchase. For example, parents make a vast majority of purchases with their children in mind, meaning that children are influencing how they shop and what they buy.

A store’s layout and merchandising must take this into consideration and make sure children who accompany parents while shopping, influence them into making purchases ultimately increasing profit.

There are many secrets to successful retailing for retailers, and understanding how to guide customers’ movements through stores is an important one.

Traffic flow, which is the movement of customers through a store, psychologically affects the shopping behaviour of customers. A store’s layout, as well as the merchandising of items in-store, influence not just how customers move through the store, but how they shop too. For example, when grocery shopping, where do you find staples like eggs, bread or milk?

They are often deliberately placed at the back of the store, forcing customers to walk through aisles and past several other items on the way one of the most effective store layout and merchandising strategies in retail.

When it comes to store layouts, the physical arrangement of items must account for not just the customer who will purchase the item, but also for the “influencer” causing the purchase. For example, parents make a vast majority of purchases with their children in mind, meaning that children are influencing how they shop and what they buy.

A store’s layout and merchandising must take this into consideration and make sure children who accompany parents while shopping, influence them into making purchases ultimately increasing profit.

There are many secrets to successful retailing for retailers, and understanding how to guide customers’ movements through stores is an important one.

Traffic flow, which is the movement of customers through a store, psychologically affects the shopping behaviour of customers. A store’s layout, as well as the merchandising of items in-store, influence not just how customers move through the store, but how they shop too. For example, when grocery shopping, where do you find staples like eggs, bread or milk?

They are often deliberately placed at the back of the store, forcing customers to walk through aisles and past several other items on the way one of the most effective store layout and merchandising strategies in retail.

Store layout

It is the process of managing the floor space adequately to facilitate the customers and to increase the sale. Since store space is a limited resource, it needs to be used wisely.

Space management is very crucial in retail as the sales volume and gross profitability depends on the amount of space used to generate those sales.

Optimum Space Use

While allocating the space to various products, the managers need to consider the following points:

(i) Product Category

• Profit builders: High profit margins-low sales products. Allocate quality space rather than quantity.
• Star performers: Products exceeding sales and profit margins. Allocate large amount of quality space.
• Space wasters: Low sales-low profit margins products. Put them at the top or bottom of shelves.
• Traffic builders: High sales-low profit margins products. These products need to be displayed close to impulse products.

(ii) Size, shape, and weight of the product.

(iii) Product adjacencies − It means which products can coexist on display?

(iv) Product life on the shelf.

Retail Floor Space

Here are the steps to take into consideration for using floor space effectively:

• Measure the total area of space available.
• Divide this area into selling and non-selling areas such as aisle, storage, promotional displays, customer support cell, (trial rooms in case of clothing retail) and billing counters.
• Create a Planogram, a pictorial diagram that depicts how and where to place specific retail products on shelves or displays in order to increase customer purchases.
• Allocate the selling space to each product category. Determine the amount of space for a particular category by considering historical and forecasted sales data. Determine the space for billing counter by referring historical customer volume data. In case of clothing retail, allocate a separate space for trial rooms that is near the product display but away from the billing area.
• Determine the location of the product categories within the space. This helps the customers to locate the required product easily.
• Decide product adjacencies logically. This facilitates multiple product purchase. For example, pasta sauces and spices are kept near raw pasta packets.
• Make use of irregular shaped corner space wisely. Some products such as domestic cleaning devices or garden furniture can stand in a corner.
• Allocate space for promotional displays and schemes facing towards road to notify and attract the customers. Use glass walls or doors wisely for promotion.

Store Layout and Design

Customer buying behavior is an important point of consideration while designing store layout. The objectives of store layout and design are −

• It should attract customers.
• It should help the customers to locate the products effortlessly.
• It should help the customers spend longer time in the store.
• It should motivate customers to make unplanned, impulsive purchases.
• It should influence the customers’ buying behavior.

Store Layout Formats

The retail store layouts are designed in way to use the space efficiently. There are broadly three popular layouts for retail stores

Grid Layout: Mainly used in grocery stores.

Loop Layout: Used in malls and departmental stores.

Free Layout: Followed mainly in luxury retail or fashion stores.

Design and Visual Merchandising, Atmospherics

Visual Merchandising

It is the activity of developing floor plans and three-dimensional displays in order to engage customers and boost sales. Both, products or services can be displayed to highlight their features and benefits.

It is based on the idea that good looks pay off. It requires creativity and an eye for presenting the products or services aesthetically so that the customers find it appealing and are motivated towards buying. Visual merchandising involves displaying products or services aesthetically using various objects, colors, shapes, materials, designs, and styles to attract the customers.

Evaluation of Retail Trade Area

To begin the evaluation of retail opportunities, the market analysis study should be done to understand demand and supply of major catego­ries to determine market potential. Demand refers to the amount of retail space (in square feet) that could be supported by consumers residing in the trade area, based on estimates of their spending potential.

Supply refers to the actual square feet of retail space, sometimes called Gross Leasable Area (GLA), that currently exists in the trade area. A comparison of demand and supply by store type can help identify gaps (demand exceeds supply).

After considering other more qualitative market factors including how and where local residents/people shop, conclusions can be drawn regarding potential business categories worthy of business expan­sion or recruitment efforts.

A flowchart describing this method is presented below:

Estimating Retail Demand:

Estimating Retail Supply

To analyze supply, a database of existing businesses needs to be con­structed for each of the store categories under investigation. The database for each store category should include all of the retail businesses within the trade area used to calculate demand. The database should include a list of the names and addresses of all the current retailers in the primary trade area.

For each retail store, include a reasonable estimate of store size in square feet. For general merchandise stores, include the approxi­mate number of square feet devoted to that product line. While calcula­tions of retail space in a market area are often based on observation and rough estimates, they do provide a reasonable and important “ballpark” figure for this analysis.

Square feet of store space is often called gross leasable area (GLA). It can be estimated by actual measurement of a building’s street-front width and estimate of its depth.

Other Market Considerations

Examining quantitative aspects of demand and supply is only part of the analysis. There are also a number of qualitative considerations that require local knowledge and insight about the market. The previously calculated differences in retail space demand and supply need to be analyzed in context of other market factors.

The following provide additional consid­erations that add to the analysis of each category.

1. Survey and Focus Group Findings

What have we learned from local research about consumer behaviour and perceptions of the downtown? We must use findings from “Study of Con­sumer Attitudes”.

2. Trade Area Demographic and Lifestyle Findings

Does lifestyle segmentation data indicate that local residents are more likely to purchase goods within this store category? Use findings from “Study Customer Demographics and Lifestyles”.

3. Analysis of Non-Local Market Segments

Is there significant market potential from non-resident customer segments such as tourists and commuters?

4. Retail Mix Analysis

How many businesses in the category are located in the downtown areas of comparison communities?

5. Competitiveness of Existing Stores in Trade Area

Are existing stores/markets/malls in this category providing the merchan­dise and service local shoppers demand?

6. Competitiveness of Existing Stores Outside of the Trade Area

Do surrounding communities with regional shopping centers and big box stores siphon business in this category out of the trade area?

7. Consumer Behaviour and Trends in Store Category

Are purchases driven by convenience or comparison-shopping? Do stores of this type locate in downtown districts anymore?

8. Drawing Conclusions

The quantitative comparison or retail space demand and supply by store type provide an initial measure of market opportunities (i.e. demand greater than supply). However, demand and supply must be analyzed in combi­nation with many other market considerations.

If there appears to be a significant amount of unmet demand, there may be opportunity for an existing business to expand or a new business to be recruited. Business development opportunities may also exist in areas where supply is greater than demand, especially in those communities that are successful in draw­ing customers from outside their trade area because of a special product niche they have created.

Analyzing Trade Area

A trade area is simply the geographic area that generates the majority of the customers for a community, business district or downtown. Knowing the boundaries of the trade area defines the number of potential custom­ers that may patronage your downtown.

Furthermore, knowing the trade area allows for demographic and lifestyle information to be gathered from a variety of public and private sources. This information provides insight into the people in the trade area and eventually will allow consumer demand for products and services to be calculated.

Therefore, defining the trade area is an important step in market analysis. A trade area often extends beyond the municipal boundaries of a community. Defining this extent is important, but it is also necessary to recognize how a trade area can vary.

In other words, a downtown may have a number of different trade areas depending on a variety of factors. Often, the variability can be attributed to either different types of products and businesses, or different market segments of customers.

How Trade Areas Differ?

Different business types will have different trade areas, that is, people will travel from greater distances to purchase certain goods and services than others. While each individual store may have its own unique trade area, these areas can often be generalized into two different types: convenience shopping trade areas and comparison shopping trade areas.

Local convenience trade areas are based on the ease of access to these types of products. That is, people will obtain these products (apparel, groceries, etc.) based on travel distances or travel time.

Conversely, comparison shopping trade areas are based on price, selec­tion, quality and style. People are more likely to compare these types of goods (appliances, furniture, etc.) as well as travel longer distances for their purchase. Subsequently, the trade area will shrink or grow depending on the products sold. In addition to different types of shopping goods, there are also different types, or market segments, of customers frequent­ing a downtown.

Three common market segments are local residents, day­time employees and tourists. Local residents live within the trade area. As they reside year-round, they provide the majority of spending potential for most downtowns. Daytime employees may live in the trade area, but may also commute from other outside areas.

However, while these employees are in the downtown, they provide the potential to stay and make pur­chases. Furthermore, depending on the community, tourists can provide a large amount of spending potential. While they are not permanent cus­tomers, tourists make purchases while they visit the area.

Simple Methods of Trade Area Definition:

Even though trade areas vary by store type and market segment, one or possibly two general trade areas are needed to proceed with the market analysis. To define these trade areas, there are several techniques avail­able. These techniques have different uses as well as their own advantages and disadvantages.

Each of these methods is described in detail below.

1. Reilly’s Law of Gravitation:

Reilly’s Law of Retail Gravitation is a theoretical means of trade area definition. It is based on the premise that that people are attracted to larger places to do their shopping, but the time and distance they must travel influence their willingness to shop in a given city.

In other words, people are more likely to travel shorter distances when possible. Addition­ally, customers are more likely to shop in larger communities, as they provide a greater opportunity for goods and services.

Reilly’s Law provides a mathematical formula that can be used to calculate hard numbers relating the distance people will travel. However, a simple map and commonsense can be combined to use the concepts behind Reilly’s Law and generate general trade area boundaries.

2. Pin code Tabulation:

Another simple method for trade area definition is to tabulate the number of customers by their pin codes. As later explained, pin code data can be collected using a variety of methods and sources.

However, regardless of how the data is obtained, there are a number of advantages to the pin code tabulation method:

1. Collecting information from customers allows the trade area to be based on real business data, instead of created from a theoretical basis.
2. Comparing the trade area maps of different businesses can identify opportunities to increase market size and penetration. For instance, the trade areas for businesses that primarily sell convenience items can be compared with each other to identify differences. These differences could indicate potential market expansion opportunities for some of the businesses. The same can be done for comparising shopping businesses.

iii. Trade areas for different market segments can be compared. Businesses serving residents can be compared to the origins of employees at a major employer. Furthermore, pin codes are ideal for tracking the origins of non-local tourists.

While tabulating customer zip codes has the ability to capture trade area variability, an appropriate sample of participating businesses must be incorporated. For instance, stores that serve both convenience and com­parison shopping segments are necessary to understand the local market. Businesses that serve tourists are needed to examine the tourist market

Implementation is the process that turns strategies and plans into actions in order to accomplish strategic objectives and goals. Implementing your strategic plan is as important, or even more important, than your strategy. The video The Secret to Strategic Implementation is a great way to learn how to take your implementation to the next level.

Critical actions move a strategic plan from a document that sits on the shelf to actions that drive business growth. Sadly, the majority of companies who have strategic plans fail to implement them. According to Fortune Magazine, nine out of ten organizations fail to implement their strategic plan for many reasons:

• 60% of organizations don’t link strategy to budgeting
• 75% of organizations don’t link employee incentives to strategy
• 86% of business owners and managers spend less than one hour per month discussing strategy
• 95% of the typical workforce doesn’t understand their organization’s strategy.

A strategic plan provides a business with the roadmap it needs to pursue a specific strategic direction and set of performance goals, deliver customer value, and be successful. However, this is just a plan; it doesn’t guarantee that the desired performance is reached any more than having a roadmap guarantees the traveler arrives at the desired destination.

Getting Your Strategy Ready for Implementation

For those businesses that have a plan in place, wasting time and energy on the planning process and then not implementing the plan is very discouraging.  Although the topic of implementation may not be the most exciting thing to talk about, it’s a fundamental business practice that’s critical for any strategy to take hold.

The strategic plan addresses the what and why of activities, but implementation addresses the who, where, when, and how. The fact is that both pieces are critical to success. In fact, companies can gain competitive advantage through implementation if done effectively.  In the following sections, you’ll discover how to get support for your complete implementation plan and how to avoid some common mistakes.

Avoiding the Implementation Pitfalls

Because you want your plan to succeed, heed the advice here and stay away from the pitfalls of implementing your strategic plan.

Here are the most common reasons strategic plans fail:

• Lack of ownership: The most common reason a plan fails is lack of ownership. If people don’t have a stake and responsibility in the plan, it’ll be business as usual for all but a frustrated few.
• Lack of communication: The plan doesn’t get communicated to employees, and they don’t understand how they contribute.
• Getting mired in the day-to-day: Owners and managers, consumed by daily operating problems, lose sight of long-term goals.
• Out of the ordinary: The plan is treated as something separate and removed from the management process.
• An overwhelming plan: The goals and actions generated in the strategic planning session are too numerous because the team failed to make tough choices to eliminate non-critical actions. Employees don’t know where to begin.
• A meaningless plan: The vision, mission, and value statements are viewed as fluff and not supported by actions or don’t have employee buy-in.
• Annual strategy: Strategy is only discussed at yearly weekend retreats.
• Not considering implementation: Implementation isn’t discussed in the strategic planning process. The planning document is seen as an end in itself.
• No progress report: There’s no method to track progress, and the plan only measures what’s easy, not what’s important. No one feels any forward momentum.
• No accountability: Accountability and high visibility help drive change. This means that each measure, objective, data source, and initiative must have an owner.
• Lack of empowerment: Although accountability may provide strong motivation for improving performance, employees must also have the authority, responsibility, and tools necessary to impact relevant measures. Otherwise, they may resist involvement and ownership.

It’s easier to avoid pitfalls when they’re clearly identified. Now that you know what they are, you’re more likely to jump right over them!

Covering All Your Bases

As a business owner, executive, or department manager, your job entails making sure you’re set up for a successful implementation. Before you start this process, evaluate your strategic plan and how you may implement it by answering a few questions to keep yourself in check.

Take a moment to honestly answer the following questions:

• How committed are you to implementing the plan to move your company forward?
• How do you plan to communicate the plan throughout the company?
• Are there sufficient people who have a buy-in to drive the plan forward?
• How are you going to motivate your people?
• Have you identified internal processes that are key to driving the plan forward?
• Are you going to commit money, resources, and time to support the plan?
• What are the roadblocks to implementing and supporting the plan?
• How will you take available resources and achieve maximum results with them?