Retail Marketing
Magic Solutions
RetailLecture7RetailOperationsManagement1412019.pptxLecture Retail Operations Management
NBS-7030B
Retail Marketing & Management
Professor Ratula Chakraborty
Director MSc Programmes
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Lecture Outline
Definition and role of retail operations
Operations objectives
Operations design and strategy
Managing store capacity
Case study: self-service checkouts
Purpose: to explain the operational scope of retail operations management and examine key operating aspects of a retail business
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1. Role of Retail Operations
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Operations Management is
“concerned with the acquisition, deployment and use of the human and physical resources employed in the provision of goods and services” (Harris and Walters, 1992)
“managing the resources which are devoted to the production and delivery of products and services” (Slack et al, 2007)
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Role of Retail Operations
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Shoppers’ benefits
Standards
Stock
Systems
Five S’s of Retail Operations
(Pal & Byrom 2003)
Space
Staff
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Role of Retail Operations
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Five S’s of Retail Operations
(Pal & Byrom 2003)
A cause-effect fishbone diagram to show how potential reasons (causes) can bring about failure (effect)
Three main controllable elements: Space, Stock and Staff
Systems refers to information technology (IT) as well as the general “way things are done around here”
Standards are about adherence to set-down guidelines
How the 5 factors are managed affects customers’ benefits – so it is critical to understand customers’ needs!
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Role of Retail Operations
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1. Stock
Right quantities at the right time at the right price in the right place
In season goods (e.g. clothing and fresh produce)
At a price that will yield a profit
Tailoring stock to local conditions
Taking account of local demand and tastes as well as local competition
Stock control accuracy
Excess stock ties up capital and leads to markdowns and damage
Lack of availability drives customers away to rival stores
https:// www.youtube.com/watch?v=GutCKICOESw
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Role of Retail Operations
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2. Space
Selling areas
Display stock to entice customers
Use space planning guidelines
Layout and merchandising – let display equipment “tell a story”
Fast selling goods: use best selling space for rapid stockturn
Non-selling areas
Fitting rooms, cash desks, return and refund and queuing methods, and non-selling display areas
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Role of Retail Operations
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3. Staff
Staff roles
Advising customers
Replenishing stock
Patrolling parts of the store to protect stock
Processing sales
Range of service levels
Self-service (e.g. Argos catalogue store) vs. Personal-service (e.g. tailor providing customer measuring and fitting and style advising)
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Role of Retail Operations
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4. Systems
Systemisation of operations
Ordering of stock
Display and rotation of stock
Procedures of selling
Banking procedures
Queuing procedures
Staff utilisation
e.g. M&S “power hours” with all staff focused on serving and selling when store traffic is at its highest during the trading day
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Role of Retail Operations
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5. Standards
What standards of service can the customer expect?
Service is more than just serving customers, it also covers:
Opening hours
Credit facilities
Fitting rooms
Returns policy
Stock availability
Special ordering facilities
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Role of Retail Operations
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Example 1: Problems arising from inaccurate inventory systems and misplaced stock in store
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Role of Retail Operations
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Example 2: Improving processes by daily stock checking to curb stock loss from theft
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Questions for Discussion #1
What do customers expect from a retailer beyond finding “the right goods at the right time at the right price in the right place”?
How can store operations play a role in promoting customer loyalty?
Drawing on your own experience, can you recall a shopping experience were you were very dissatisfied with the retail service provided? If so, why were you dissatisfied? What could the retailer have done to avoid this dissatisfaction? Did you complain? Has your experience affected you in using that retailer again?
What frequently annoys you about retailers?
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2. Operations Objectives
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Distinctive competences in retail operations
Effective distribution system
Effective management of service
Effective and well trained staff
Effective communication
http :// www.bbc.co.uk/news/uk-21552159 BBC News (3:02 mins)
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Operations Objectives
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Competitive factors
If the customers value these ...
Performance objectives
Then, the operations will need to excel at these ...
Low price
Cost
High quality
Quality
Fast delivery
Speed
Reliable delivery
Dependability
Innovative products and services
Flexibility (products and services)
Wide range of products and services
Flexibility (mix)
Ability to change the timing or quantity of products and services
Flexibility (volume and/or delivery)
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Operations Objectives
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Determining capacity and capability
Designing and overseeing job roles and work practices
Scheduling activities
Managing and controlling inventory
Controlling quality and delivers customer service
Providing security and protecting health and safety
Scheduling and control of maintenance
Measuring and monitoring performance
Retail operations management tasks
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Operations Objectives
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Experimenting with new ideas
Example: Metro’s Future Store
The Future Store in Germany tries out the latest retail technology on its staff and customers
Is this the supermarket of the future?
BBC News - (4 mins)
- http://www.bbc.co.uk/news/business-12310809
Improving the customer experience
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3. Operations Design & Strategy
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Characteristics of service operations
Service = “A deed, a performance, an effort”
Customer involvement in production => Managing customers
Intangibility of product /process => Measuring output
Inseparability (services can’t be stored) => Managing capacity
Variability across service delivery => Quality impact ?
Front Office / Back Office operations => High / low visibility
Identify the front office and back office elements of a retail store
How does this affect managing and controlling that part of the operation?
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Operations Design & Strategy
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Service output
Process
Resources
Customer
Transformation
Time, information, staff
INPUTS
The Service Operating System
Customer value, information
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Operations Design & Strategy
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Resources in store operations
Staff
IT systems
Equipment / machines
Space
Materials
Stock
Time and information
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Operations Design & Strategy
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Customer processing technologies
Back-Office Technology
Front-Office technology with links to the back-office
Front-Office Technology
Back-Office
Front-Office
Customers
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Operations Design & Strategy
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Types of operations layout
| Fixed position layout | Process layout | Cell layout | Product layout | |
| Features | Customers are static – full service | Customers move freely between processes | Self-contained processes in one location | Customers follow a prearranged route |
| Examples | Waited restaurant, Yo Sushi! | Grid – supermarkets Freeflow – department stores | Lunch area within supermarket | Self-service cafeteria |
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Operations Design & Strategy
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Example 1: A Straight (Gridiron) Traffic Pattern
(US Supermarket style)
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Operations Design & Strategy
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Straight Traffic Pattern
ADVANTAGES
An efficient atmosphere is created
More floor space is devoted to product displays
People can shop quickly
Inventory control and security are simplified
Self-service is easy, thereby reducing labour costs
DISADVANTAGES
Impersonal atmosphere
More limited browsing by customers
Rushed shopping behaviour
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Operations Design & Strategy
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Example 2:
A Curving (Free-Flowing) Traffic Pattern (Department Store)
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Operations Design & Strategy
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Curving Traffic Pattern
ADVANTAGES
A friendly atmosphere
Shoppers do not feel rushed
People are encouraged to walk through in any direction
Impulse or unplanned purchases are increased
DISADVANTAGES
Possible customer confusion
Wasted floor space
Difficulties in inventory control
Higher labour intensity
Potential loitering
Displays may cost more
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Operations Design & Strategy
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Examples of how store type and location can influence operations
Large store in retail centre
Open 7 days a week
Long opening hrs – 10 am - 10pm weekdays
Daily deliveries
Deliveries to loading bay at back of store
Stockroom located to immediate rear of store
Stockroom very small – not used to hold stock
Admin offices on 1st floor
Small store in retail centre
Open 6 days a week
Open 9am – 5.30pm
Stockroom located on 1st floor above shop floor - no lift access
Deliveries to loading bay at rear of store
Stockroom used to hold stock
Admin / Manager’s office on 1st floor
Small store in town centre (old building with unusual shaped shop floor with “blind-spots”)
Open 9 -5.30 M-S and 12-4pm on Sundays
Menswear located on 1st floor
Shared stockroom on 2st floor – no lift access
No separate delivery/loading area
Shared store manager
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4. Managing Capacity
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Management challenges
How much capacity to make available = capacity planning
How to utilise the existing capacity = capacity scheduling
How much flexibility is required?
Capacity Management Strategies
Manage / influence demand
Vary capacity to chase demand
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Managing Capacity
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Predictable demand patterns
Peak demand periods: seasonable (e.g. pre-Christmas), pay days (e.g. end of the month), non-working days (e.g. Saturdays), peak trading hours (e.g. during lunch breaks)
Unpredictable demand fluctuations
The influence of the weather on shopper buying behaviour
The benefit of accurate weather forecasts: BBC News (15 August 2011, 3 mins) http://www.bbc.co.uk/news/business-14525366
Why do capacity constraints arise?
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Managing Capacity
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Pricing, advertising and promotion (e.g. “happy hours”)
Developing off peak demand (e.g. special offers)
Developing complementary services (e.g. home delivery)
Using reservation or appointment systems (e.g. segmentation for premium customers rather than “first come, first served”)
Making the customer wait or queue (e.g. checkout lanes for orderly queues)
Question: Why do supermarkets have some checkouts just for customers with baskets and not trolleys? Is this fair?
1. Strategies to Manage / Influence Demand
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Questions for Discussion #2
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Consumers intensely dislike having to wait to be served in shops. When this is unavoidable due to capacity constraints what strategies might a retailer adopt to minimise the discomfort and annoyance for waiting customers?
Hint: In answering this question you might like to take into account the following 8 psychological principles about waiting time:
unoccupied time feels longer than occupied
pre-process waits feel longer than in-process waits
anxiety makes waits seem longer
uncertain waits are longer than known, finite waits
unexplained waits are longer than explained
unfair waits are longer than equitable waits
the more valuable the service, the longer people will wait
solo waits feel longer than group waits
What is the longest time you have waited to be served in a shop? Why did you wait that long? Did you regret it?
Managing Capacity
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Change number and hours of personnel (e.g. employ flexible part-time staff)
Customer participation (e.g. self-service checkout tills)
Resource transfer (e.g. cross-train employees so they can shift to bottlenecks when necessary)
Schedule downtime during periods of low demand (e.g. for repair and maintenance, restocking, etc)
2. Controlling and adjusting capacity: Chase demand strategy
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5. Case Study: Self-Scanning Checkouts
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Self-scanning checkouts have become an increasingly common feature in British supermarkets and convenience stores
There are already more than 15,000 self-scanning tills in use in the UK (e.g. Tesco has in excess of 6,000 in its 1,200 stores)
Do they cuts costs? Asda claims investment in self-checkouts has saved £10m in wages with a reduction in cost to sale of 1%
Which is quicker? Self-service or traditional checkout? Surveys suggest self-checkout is slower despite not having to wait
For many shoppers, self-service tills are one of the most annoying aspects of the contemporary supermarket shopping experience
TV Documentary: “Richard Wilson on Hold (Channel 4, 16th January 2012)
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References
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Varley, R. and Rafiq, M. (2004), Principles of Retail Management, Palgrave MacMillan.
Berman, B. and Evans, J.R. (2010), Retail Management: A Strategic Approach, 11th edition, Prentice-Hall.
Pal, J.W. And Byrom, J.W. (2003), “The Five S’s of Retail Operations: A Model and Tool for Improvement”, International Journal of Retail & Distribution Management, Vol. 31 (10), pp. 518-528.
Articles on Future Store: http://www.bbc.co.uk/news/business-12310810; http://news.bbc.co.uk/1/hi/3712261.stm
Thank You!
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