Retail Management - Business Operations

Customers remember the service a lot longer than they remember the price.

− Lauren Freedman (President, E-tailing Group)

The retail business operations include all the activities that the employers perform to keep the store functioning smoothly. The shopping experience of a customer is planned before the customer enters, shops, and leaves the store with a smile or with agony by carrying a perception about the store. This experience drives the customer’s decision of visiting the store in future.

Let us see, what efforts retail business operations executives put in to make the shopping experience memorable for the customer.

Store Management

The retail store being the fundamental source of revenue and the place of customer interaction, is vital to the retailer.

The store manager may not himself perform, but is responsible for the following duties −

• Maintaining cleanliness in the store.

• Ensuring adequate stock of merchandise in the store.

• Appropriate planning, scheduling, and organization of staff, inventory and expenses, for short and long-term success.

• Monitoring the loss and taking preventive measures to protect the company’s assets and products in the store.

• Upgrading store to reflect high profitable image.

• Communicating with head office/regional office when required.

• Conducting constructive meetings with staff to boost their morale and motivate the staff to achieve sales goals.

• Communicating with customers to identify their needs, grievances, and complaints.

• Ensuring that the store is in compliance with employment laws regarding salary, work hours, and equal employment opportunities.

• Writing performance appraisals for assisting staff.

The store manager ensures that these duties are performed according to the guidelines set by the company.

Premises Management

The store premises are as important as the retail store itself. Managing premises includes the following tasks −

Determining Working Hours of Store. It majorly depends upon the target audience, retailed products, and store location.

For example, a grocery store near residential area should open earlier than a fashion store. Also, a solitary store can be open as long as the owner wants to but a store in a mall has to adhere to working hours set by the mall management.

Managing Store Security. It helps avoiding inventory shrinkage. It depends upon the size of store, the product, and the location of store. Some retailers attach electronic tags on products, which are sensed at store entrance and exits by sensors for theft detection. Some stores install video cameras to monitor movement and some provide separate entry and exit for personnel so that they can be checked.

For example, a large departmental store needs high security than the grocery store located near residential area.

Here are some basic formulae used while managing premises −

Transaction per Hour = No. of Transactions/Number of Hours

The retailer keeps track of the number of transactions per hour, which helps in determining store hours and staff scheduling.

Sales per Transaction = Net Sales/Number of Transactions 

The result gives the value of the average sales and net return, which is used to study sales trends over time.

Hourly Customer Traffic = Customer Traffic In/Number of Hours

This measure is used to track total number of customer traffic per unit time. It is then applied to schedule hours and determine staff strength.

Inventory Management

Merchandise manager, category manager, and other staff handle the inventory. It includes the following tasks −

• Receiving products from the vendor.

• Recording inward entry of the products.

• Checking the products against quality norms laid by the retail company and for details such as colors, sizes, and styles. In case of large stores, this task is automated to a large extent.

• Separating and documenting the faulty or damaged products for returning.

• Displaying the products appropriately to gain customers’ attention. Heavy products are kept at the lower level. Most accessed products are kept at the eye-level and the less accessed products are kept at high level of shelves. On-the-fly-purchased products such as chocolates, candies, etc. are placed near payment counters.

Here are some formulae used for inventory control −

Inventory Turnover Rate = Net Sales/Average Retail Value of Inventory

It is expressed in number of times and indicates how often the inventory is sold and replaced during a given period of time.

Cost of Goods Sold/Average Value of Inventory at Cost

When either of these ratio declines, there is a possibility that inventory is excessive.

% Inventory Carrying Cost = (Inventory Carrying Cost/Net Sales) * 100 

This measure has gained importance due to rise in inventory carrying cost because of high interest rates. This prevents blockage of working capital.

Gross Margin Return on Inventory (GMROI) = Gross Margin/Average Value of Inventory

The GMROI compares the margin on sales on the original cost value of merchandise to yield a return on merchandise investment.

Receipt Management

Managing receipt is nothing but determining the manner in which the retailer is going to get the payment for the sold products. The basic modes of receipt are −

• Cash
• Credit card
• Debit card
• Gift card

Large stores have the facility of paying by the modes listed above but small retailers generally prefer accepting cash. The retailer pays card fees depending upon the volume of transactions with the suppliers, manufacturers, or producers.

The staff responsible for accepting payment needs to clearly understand the procedure for accepting payment by cards and collecting the amount from the bank.

Supply Chain Management and Logistics

Supply Chain Management (SCM) is the management of materials, information, and finances while they move from manufacturer to wholesaler to retailer to consumer. It involves the activities of coordinating and integrating these flows within and out of a retail business.

Most supply chains operate in collaboration if the suppliers and retail businesses are dealing with each other for a long time. Retailers depend upon supply chain members to a great extent. If the retailers develop a strong partnership with supply chain members, it can be beneficial for suppliers to create seamless procedures, which are difficult to imitate.

Customer Service

The top management of a retail business decides the customer service policy. The entire retail store staff is trained for customer service. Each employer in the retail store ensures that the service starts with smile and the interacting customer is comfortable and has a pleasant shopping experience.

The promptness and politeness of the retail store staff, their knowledge about the product and language, ability to overcome challenges, and rapidness at the billing counter; everything is noted by the customer. These aspects build a great deal of customer’s perception about the store.

Many retail stores train staff members to handle the cash counter. They have also introduced a concept of express billing where customers buying less than 10 products can bill faster without having to stand in the regular payment queue.

During festivals and markdown periods, the trend of shopping increases.

Customer Conversion Ratio = (Number of Transactions/Customer Traffic) * 100

The result is the retailer’s ability to turn a potential customer into a buyer. It is also called “walk to buy ratio”. Low results mean that promotional activities are not being converted into sales and the overall sales efforts need to be assessed afresh.