Operating a Retail Business

Dr. Gopal Thapa

Tribhuvan University
Kathmandu,Nepal
Email:thapazee@gmail.com
Operating a Retail Business

 Operations blueprints
 Store format, size and space allocation
 Personnel utilization
 Store maintenance, energy management, and renovations
 Inventory management
 Store security
 Insurance
 Credit management
 Computerization
 Outsourcing
 Crisis management
Operation Blueprint

 An operations blueprint systematically lists all the operating functions to be performed,

their characteristics and their timing.
 While developing a blueprint, the retail specifies, in detail, every operating function
from store’s opening to closing – and those responsible for them.
 E.g. who opens the store? When? What are the steps?
 The performance of these tasks must not be left to chance.
Operation Blueprint

 A large or diversified retailer may use multiple blueprints and have separate blueprints
for such areas as store maintenance, inventory management, credit management and
store displays
 When a retailer modifies its store format or operating procedures, it must also adjust the
operating blueprints.
Store Format, Size and Space Allocation

 With regard to store format, it should be determined whether productivity can be raised
by such tactics as locating in a planned shopping center rather than in an unplanned
business district, using prefabricated materials in construction and applying certain
kinds of store design an layouts.
Store Format, Size and Space Allocation

 A key store format decision for chain retailer is whether to use prototype stores
whereby multiple outlets conform to relatively uniform construction, layout, and
operation standards.
 Such stores make:
 Centralized management control system easier
 Reduce construction costs, standardize operation, facilitate the interchange of employee
among outlets
 Allow fixtures and other materials to be bought in quantity and
 Display a consistent chain image
Store Format, Size and Space Allocation

 Yet, a strict reliance on prototypes may lead to:

 Inflexibility
 Failure to adapt to or capitalize on local customer needs
 To little creativity

 Together with prototype store, some chains use rationalized retailing programs
to combine a high degree of centralized management control with strict
operating procedures for every phase of business.
 Most of these chains’ operations are performed in a virtually identical manner
in all outlets.
 Rigid control and standardization make this technique easy to enact and
manage and a firm can add a significant number of stores in a short time
 They operate many stores that are similar in size, layout and merchandising
Store Format, Size and Space Allocation

 Many retailers use one or both of two contrasting store-size approaches to be distinctive
and to deal with high rents in urban areas
 At the same time, some retailers believe large stores are not efficient in serving
saturated or small markets
 They have been opening smaller stores or downsizing existing ones because of high
rents
Store Format, Size and Space Allocation

 Retailers often focus on allocating store space

 They use facilities productively by determining the amount of space, and its placement,
for each product category
 Sometimes, retailer drops merchandise lines because they occupy too much space
 With top-down space management approach, a retailer starts with its total available
store space, divide the space into categories and then works on product layouts
Store Format, Size and Space Allocation

 In contrast, a bottom-up space management approach begins planning at the individual

product level and then proceeds to the category, total store and overall company levels
 Tactics to improve store space productivity:
 Vertical display, which occupy less room, hang on store walls or from ceilings.
 Formerly free space now has small Point-of-sale display and vending machines
Store Format, Size and Space Allocation

 Sometimes, product displays are in front of stores

 Open doorways, mirrored walls and vaulted ceilings give small stores a large
appearance
 Up to 75% or more of total floor space may be used for selling
 The rest is for storage, rest rooms and so on
 Scrambled merchandising (with high profit, high turnover items) occupies more space
in stores, in catalogs, and at web sites than before
 By staying open longer, retailers use space better
Store Maintenance

 Store maintenance encompasses all the activities in managing physical activities

 These are just some of the facilities to be managed:
Exterior:
 Parking lot

 Points of entry and exit

 Outside signs and display windows

 Common areas adjacent to a store (e.g. sidewalks)

Interior:
 windows, walls, flooring, climate control and energy use, lighting, displays and signs , fixtures and ceilings
Store Maintenance

 The quality of store maintenance affects:

 Consumer perceptions
 The life span of facilities
 Operating cots

 Consumers do not like stores that are decaying or otherwise

poorly maintained
 This means promptly replacing burned-out lamps and
periodically repainting room surfaces
 Thorough, ongoing maintenance may extend current facilities for
a longer period before having to invest in newones
Store Maintenance

 At home centers, the heating, ventilation, and air conditioning equipment lasts an
average of 15 years
 Display fixtures an average of 123 years
 Interior signs an average of 9 years
 But maintenance is costly
 In a typical year, a home center spends $10000 on floor maintenance alone
Inventory Management

 A retailer uses inventory management to maintain a proper merchandise assortment

while ensuring that operations are efficient and effective
 Some operational issues in retail inventory management
 Handling of merchandising from different suppliers
 Size of inventory on sales floor, warehouse and storeroom
 Movement of inventory from non-selling to selling areas
 Trade-offs between faster delivery and higher shipping costs
 Supplier support in storing merchandise or setting up displays
 Acceptable level of in-store merchandise breakage
 Items require customer delivery: which, when and by whom
Store Security

 Store security relates to two basic issues: personal security and merchandise security
 Many shoppers and employees feel less safe at retail establishments, than they before,
with these results:
 Some people are unwilling to shop at night
 Some people age 60 and older no longer go out at all during the night
 Shop shoppers believe malls are not as safe as they once were
 Parking is a source of anxiety
 In response, retailers need to be proactive
 Eg. Camera surveillance, security presence
Store Security

 Uniformed security guards provide a visible presence that reassures customers and
employees.
 It is a warning to potential thieves and muggers.
 Undercover personnel are used to complement uniformed guards
 Brighter lighting is used in parking lots, which are also patrolled more frequently by
guards in team
 TV cameras and other devices scan the areas frequented by shoppers and employees
 Some shopping areas have curfews for teenagers (controversial tactic)
 Bank deposits are made more frequently
 Access to stock backroom facilities has been tightened
Insurance

 Among the types of insurance that retailers buy are workers’ compensation, product
liability, fire, accident, property, and officers’ liability
 Many firms also offer health insurance to full time employees.
 Sometimes they pay the entire premiums; other times, employees pay part or all of the
premiums
Insurance

 Insurance decisions can have a big impact on a retailer

 In recent years, premium have risen dramatically
 Several insurers have reduced the scope of their coverage( do not cover all aspects, they now
require higher deductibles )
 Insurance against environmental risk
 To protect them financially, a number of retailers have enacted costly programs aimed at lessening
their vulnerability to employee and customer insurance claims due to unsafe conditions as well as
to hold down premiums
 E.g. No-slip carpeting, flooring, rubber entrance mats, separate storage area, frequently mopping
and inspecting wet floors, doing more elevator and escalator checks, building more fire-resistant
facilities