Retail Management Strategies & Store Operations
Retail Management Essentials
Retail 1: Distribution & Store Fundamentals
Modes of Retail Distribution
- Retail (Direct Channel)
- Wholesale (Indirect Channel)
- E-commerce
- Omnichannel Distribution
The Pivotal Role of Physical Stores
The store plays a fundamental role in the creation of the customer experience journey. It is nowadays considered a real temple for the company, where brands communicate values and provide experiences.
ROPO: Research Online, Purchase Offline
It reflects today’s customer preference: conducting online research and then purchasing the product in physical stores.
Evolution of the Retail Store
- From small, secret boutiques to large, monobrand stores with diverse product categories.
- From distant and mythical destinations to accessible and easily visitable locations.
- From being reserved for big occasions to being open for various occasions and frequent visits.
Brand Perception & Identity
Brand perception and identity are shaped not only by the product and communication but also by the store and its management.
Key Elements Shaping Brand Image:
- Store Environment
- Commercial Policies
- Sales Force
- Product Offering
- Communication Strategies
Store Classification Methods
By Channel:
- Directly Owned Stores (DOS)
- Franchising Contracts
- Wholesale Multibrand
By Typology:
- Flagship Stores
- City Stores
- Department Stores
- Seasonal Stores
- Travel Retail
- Outlets
- Corners
- Shop-in-Shops
Commercial Policies & Strategies
Custom-Made Products
Products made to order in unique samples based on a specific customer brief.
Limited Editions
Small sub-series of products characterized by minor variations from the standard version, usually numbered and sold for a limited time only.
Scarcity Marketing
A strategy to increase product demand by deliberately reducing the quantity offered, thereby enhancing its appeal.
Private Sales
Exclusive sales dedicated to a selected group of customers by invitation only. These can feature new products or vintage collections, often with the objective of stock reduction.
Seasonal Sales
Limited-time price reductions, typically occurring during predetermined periods of the year.
Parallel Market (Grey Market)
Penetrating markets with a parallel distribution network, leveraging price and tax differences across various global regions.
Stocklist Operators
Specialized operators who purchase all remaining products, often at a significantly reduced percentage of the retail price.
The Future of Retail Stores
Future retail stores are expected to follow these trends:
- Growing importance of shopping malls.
- Increasing total retail surface area.
- Enhanced focus on entertainment.
- Growth of additional services.
- Increased store segmentation.
Combating Illegitimate Trade
Counterfeiting
(Closely imitating authentic products)
Grey Market
(Unauthorized sales of authentic products)
Supply Chain Infiltration
(Infiltration of counterfeited products into the legitimate supply chain)
Retail Service Copycat
(Copying and imitation of entire store concepts or services)
Factory Overrun
(Overproduction by authorized manufacturers, subsequently sold outside official channels)
Retail 2: Performance & Success Metrics
Tracking Retail Sales Performance
This involves monitoring four key business areas: sales, stock, customers, and staff.
Analyzing Sales Productivity
This allows tracking store productivity by analyzing various key indicators:
Sales per Square Meter (sqm)
SKU per Square Meter (sqm)
Store Entrance & Traffic
Closing Ratio / Conversion Rate
= Number of Transactions / Number of Visitors
Average Ticket Value
= Net Sales / Number of Transactions
Average Discount Percentage
= 1 – (Net Sales / Gross Sales) %
Sell-Through Rate
= Units Sold / Units Received
The Fundamental Retail Equation
This is the basic rule used to monitor sales performance in retailing.
Retail Equation = Traffic x Conversion Rate x Average Ticket (Transaction Size) = Total Sales
Key Store Success Factors
Store success is a combination of both soft and hard elements.
Hard Elements:
- Store Layout
- Location
- Assortment
Soft Elements:
- Sales Force Equity
- Store Climate
- Marketing Plans
Store location is also a determinant factor.
Retail Store Leasing Contracts
Key Elements of a Leasing Contract:
- Duration
- Rent
- Key Money
- Early Termination Clauses
- Radius Clause
Practical Exercise: Calculating the Breakpoint
Breakpoint = Total Base Rent (Square Meters x Base Rent) / Percentage Rent
Retail 3: Customer Experience & Service Excellence
Understanding Consumer Needs in-Store
When consumers are in a store, they generally want to:
- Touch and interact with products.
- See themselves in mirrors (e.g., trying on clothes).
- Feel valued and considered.
They do not want to:
- Queue for long periods.
- Encounter unreadable labels.
- Face intimidating sales staff.
Enhancing Sales Force Quality
Excellence in-store is achieved through continuous improvement in the following sales tasks:
Market & Product Knowledge
Welcoming & Customer Approach
(Especially crucial for luxury experiences, where customer expectations are high)
The Selling Ceremony
(A well-executed selling ceremony can significantly increase conversion rates and enhance customer satisfaction.)
Mystery Shopping for Service Evaluation
Mystery shopping is a periodical survey conducted in stores to track the level of service and overall shopping experience provided by staff.
Key Characteristics:
- Consistency in methodology.
- Results can be random due to a limited number of observations (typically 2-3 per store).
- Frequency (minimum 2 times per year) is important for tracking.
- Useful for identifying long-term trends.
Typical Questionnaire Examples:
- “Did the sales advisor approach you in a timely manner?”
- “Did the sales advisor encourage you to look at yourself in the mirror (e.g., when trying on items)?”