Master of Business Administration MBA Semester 3 ML0012 Store Operations- 4 Credits Assignment Set 1 Book ID- B1226.

Q.1 How does store layout and store design contribute in retail business? Explain.
According to Philip Kotler Retailing includes all the activities involved in selling goods or services to the final consumer for personal or non business use. A retailer or a retail store is any business enterprise whose sales volume comes primarily from retailing. So a retail store is where the goods/services are assorted and displayed for easy accessibility of the consumer. Hence it can be stated that a retail store is where the customers buy the products/services for their personnel or for their family use. The following are some of the major store design objectives. 1. Consistent with retailers image, positioning and strategy: Every retailer has his own objective/ strategy based on the product line he deals with, targeted customer base or specialization of the services offered. A retail store design should be in such a way it promotes the store objective by creating a positive image of the retail store in customers mind. 2. Positive influence on Customers purchasing behavior: The design of a retail store should be designed in such a way that it facilitates the customer for easy accessibility within the store. The store design should be customer friendly so that he spends much time in navigating through the store with ease and comfort ability in exploring the different merchandise/sections without feeling bored or confused. Proper care should be taken in designing the interiors so that the ambience, store atmospherics, the aroma, music etc within the store has a positive psychological impact on customers. 3. Safety & security: The store design should take care of all the safety and security measures within and outside the store. (Detailed description of safety and security measures is given in further units)

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4. Cost effective space productivity: Since the store space is limited and expensive, it has to be so designed that maximum utilization of store space takes place. Optimization of the store space by creatively using the selling space to create an appealing store image in customers mind is more important. A good store design should facilitate the traffic of the customers within and outside the store, good parking facilities, proper basic amenities for staff and customer such as rest rooms, trail rooms etc. are to be taken care while designing the store. 5. Flexible and easily accessible to customers: A good retail store design should be supported by the store positioning. There is no matter in having a mall or a multiplex in a remote area which is not easily reachable. So it should be easily accessible with good connection to prime areas of the city/town and it should have lengthy working hours (i.e. 8 am to 8 pm). As most of the customers shop in weekends it should be opened all the 7 days a week with extended working hours to facilitate customer shopping. 6. Prevent shoplifting: Shop lifting (also known as five-finger discount or shrinkage within the retail industry) is theft of goods from a retail establishment. A well-designed store layout will not eliminate all shoplifting but will help to reduce it. Care should be taken in designing the store such that the store design prevents or minimize the chances of shop lifting. A little thought into the store's layout and design can prevent theft. . Now let us discuss the importance of store layout design: Store Layouts and Store Designs Store Design As the store space is fixed, the optimum use of available store space is critical factor in successful retailing. To achieve this it requires balancing the effects of the overall store design and atmosphere with the more direct impact of product layout and merchandising offered within the store. Store layout and design must reflect local requirements, designed to emphasize the impact of an open, bright store. However, optimizing the available space and different fixtures would be necessary in a store
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for retailer to maximize the product range and to offer additional services. 1.5.2 Different Kinds of Store Space Store space Meaning: Retail store space applies to the facility space used to conduct the retail sales. A retail store generally has an open area offering horizontal and vertical space for the stocking of merchandise. Good retail store storage space will convert the available space into highly organized scheme through answers that are easy to assemble, economical, dependable, and innovative. A combination of shelves and sorters will facilitate the raw material, components, and finished products for ready and free accessibility when ever needed. It further complements the free inflow of material at regular interval. Usually retail store storage space will include racks, gal nods, wire/metal storage space, modular drawers, containers, bins, totes, lockers, cranes, and mezzanines. Some of them are complement with ladders, lift tables, hoppers, ramps, and mirrors. As discussed above a store layout should facilitate the customers to move around the store and buy merchandise. It should provide a balance between providing adequate space to shop by creatively utilizing limited store space. Store layout is a plan designating the use of all space in the store, including aisles, fixtures; merchandise displays, and no selling areas. Store layout is a major aspect of retail store design and has a powerful influence on customer traffic patterns and purchasing behavior. A successful store layout guides customers through the store, giving him a chance of seeing and exploring the various types of merchandise offered in the store. A good store layout should facilitate the stores Productivity, operational needs, and personnel requirements. Before planning a layout, the retailer must decide on the desired ratio of selling space to sales support space. This decision is important to the stores long-term success, both financially and operationally. It plays an important role in providing the framework for developing the image and establishing efficient retail operations. There are certain objectives to be attained with which the retailers design the store layout.

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The main objectives can be put together as under: 1. To guide the customer around the store and facilitate increased purchases. The retail store should be designed in such a way that the customer visits every part of it. It should make it easy for the customer to move through the store and obtain the desired merchandise with a minimum of confusion, congestion and delay. 2. To create balance between sales and shopping space. (Improve store efficiency) It should minimize labor and handling needed in moving merchandise through the store while satisfying the merchandising objectives. 3. To create effective merchandise presentation. (Maximize sales) It should provide for a merchandising arrangement which assures maximum exposure for all merchandise carried, considering space costs while facilitating the product movement keeping in mind their profitability and perish ability. 4. Use multi-levels to provide a sense of variety (Implement the desired image) it should provide space and an arrangement of the departments consistent with the desired image goals. It should create good ambience i.e.; an overall feeling or mood projected by the store through its aesthetic appeal to human senses. In order to give proper attention to these functions, it is necessary that considerable time should be spent in planning the layout. 5. Design the store to reduce shoplifting: Shoplifting is the biggest setback for a retailer. Its the biggest challenge faced by the present day retailers. The easiest way for retailers to discourage theft in a store is by taking away opportunities to steal. A well-designed store layout will not eliminate all shoplifting but will help reduce it. Steps in Planning a Store Layout Keeping in mind the above discussed objectives of a store layout design, the following care should be administered in each department to get the maximum enhancement of the store image and the merchandise offered by it.

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1. Designing the store front: Attention should be paid in designing a store front. It should be graphically strong and descriptive enough for any one driving by to know what is sold inside the store. The sign should be big, bright, multi-layered and create brand awareness throughout the shop. 2. The entry of the store: The front door should quickly be transported and sensory loaded. It should be designed in such a way that sound, light, sight and motion should be strong with inviting store atmosphere. 3. Flooring: Now-a-days different types of flooring material are used to create the texture in the store. Commercial vinyl flooring with inlaid laser cut logos and icons can be used in aisles. These enhance the store image and add value to the ambiance of the store. 4. Ceiling and lighting: Decorated Ceiling with dropped soffits, space frames, trusses, neon and graphics enhance the store image. Lighting will have more impact. Lighting arrangements should be in such a way that it enriches the shopping experience. Different lights like adjustable halogen lamps, neon lights etc are available in markets. Lighting effect such as moving lights, color screens create theatrical effects that will enhance the shopping experience. 5. The POS counter: The POS counter should be designed so that the traffic patterns allow entry into the store without being immediately confronted by cash register or by a line of customers waiting to check out. Care should be taken that the counter is clearly marked with an overhead display or soffit to avoid confusion and should be provided with point of sale merchandise opportunities. These might include bins holding small impulse items as well as showcases that serve as counter tops so that customers have to see whats in them as they make their purchase while they are waiting to pay the bill. 6. Wall Fixtures: Care should be administered not to pack the walls with shelves. Instead they can be used to display merchandise, graphics, photo boxes, videos etc. Division and color are important so the walls are to be
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segmented into sections which provoke customer interest. Different types of merchandising systems: Slat wall, grids, recessed standards and wall cases are commonly used. The variety of visual presentation will provoke additional interest which results in sales. 7. Floor fixtures: The floor fixtures should also be flexible. Long runs of gondolas should be limited because they will bind the store into an immovable pattern. Care should be taken that the sales floor is wired for electric and computer cables. Fix Turing will become much more customer interactive and future displays will incorporate video and computer technologies to impact sales at the point where the purchasing decision is most often made. 8. Sound and Music: Sound is known to be worlds single most powerful emotional element. Sound encourages customers to stay in the store longer and to come back more often, Care should be taken that music in the store is effectively and consistent. 8. Signs and graphics: Signs and graphics will help customers find their way through the store and will add to the overall ambiance of the shop. In-store graphics should be large and distinctive and should include a combination of photo blow ups, back lighted transparencies and props that all promote the shops identity and theme. 9. Video: Video monitors can serve as an entertainment back drop and provide information about a variety of subjects. For instance, in a mall video displaying different products, their features and their promos will educate the customer about the product line which makes the customer to stay long and the shop. This technique will capture your clients attention and keep them in the shop for a longer time. 10. Kiosk/Computers: In-store interactive computers will really separate future planning stores from those in operation today. They can be extensively used to facilitate the customers and in other hand capture the information which can otherwise used for further Customer Relationship programs, market survey etc. 1.5.5 Steps in Selecting a Store Layout
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The basic arrangement of the selling space is of primary importance, because it effects all other design decisions. Each type of layout has inherent strengths and weaknesses. With changing formats and increasingly sophisticated store design research and techniques, retailers have been experimenting with many combinations of these plans. Though there exist number of layout formats, which are adopted by the retailer based on the product line, store design, choice of retailer etc, Layouts may be categorized into three basic types: Grid Free flow Loop/boutique Grid Layouts It is a linear design for a selling floor where fixtures are arranged to form vertical and horizontal aisles throughout the store. Supermarkets, discount stores, grocery, drug store and other convenience oriented retailers, typically use it. This layout is mostly of the stores convenience and facilities a lot of products out on display. Advantages The basic advantages of using this kind of layout are: 1. It efficiently uses the store space 2. It allows orderly stocking 3. Helps shoppers to see a great number of items easily 4. It is simple and predictable to navigate 6. In a self-service format, this arrangement permits customers to shop in a quick and in a routine manner. 7. Strategic location of departments ensures that customers are drawn through the store and exposed to all merchandise categories. 8. Simplify the inventory maintenance.

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Disadvantages Weaknesses of the layout include: 1. This model creates a psychological effect on customers that it is constraining and rushed, which may reduce the time spend by customer in browsing. 2. It is not aesthetically pleasing. 3. As it contains long gondolas of merchandise and aisles in a repetitive pattern, it creates a monotonous effect that makes the customers feel bored after a certain time. 4. It is not necessarily convenient for all consumers or the most effective selling approach. Certainly the main aisles will get lots of exposure, but the secondary aisles are often over looked and as a result sales are missed out. Loop or Boutique or Racetrack Layouts A race track layout is also called as boutique or loop layout. This model display is in the form of loops with major aisle running through the store. The aisle provides access to various shop-in-shop or different departments of the shop. It exposes shoppers to a great deal of merchandise as they follow a perimeter traffic aisle with departments on the right and left of the circular, square, rectangular or oval racetrack. This layout is employed in a discount or a department store. Advantages The major strengths of this kind of layout can be summed up as under: 1. This layout facilitates the shoppers to a great deal of merchandise. 2. It forces the customer to visit multiple departments as they pass through. 3. As it is in loop pattern it takes the customer to all departments which may lead to impulse buying. 4. 4. The newest merchandise is prominently displayed on these main aisles so that it catches the customer eye. 5. Overhead directional signs and departmental graphics provide visual cues to the location of other departments, helping shoppers while shopping

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6. Construction, interior design and security costs are substantial in this model. Disadvantages: The main drawback of this layout is that a customer has to pass through all the sections which may not be of his interest. Free-flow Layouts It is an asymmetrical arrangement of merchandise that encourages an unstructured traffic flow. It is mainly used in specialty stores and within departments of department stores that emphasize mainly on ambiance and personal selling Advantages The main advantages of this layout are: 1) It does not restrict the customers who do more browsing and unplanned purchasing. 2) It also enhances interior design, as the individual departments are more easily distinguished. 3) It tends to provide a more relaxed atmosphere. 4) Personal selling is emphasized

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Disadvantages The major disadvantages of this layout can be summed up as under: 1) Its main weakness lies in the inefficient use of space and customer disorientation. 2) Since it is not symmetric, it requires higher labor and security expenditures. 3) Lends itself to higher rates of theft because of blocked vision. Setup is expensive because the setup is custom made. 4) Critical factor is providing enough room between fixtures to allow traffic to flow smoothly. 5) It has selling fixtures arranged in loosely grouped, informal formations. Designers can use various combinations of the three layouts to increase flexibility or improve traffic flow. This practice is prevalent in multilevel stores and large, power assortment formats. A combination of formats may improve productivity as well as aesthetics and visual effectiveness. The other ways of store layouts can be discussed as under: Soft Aisle Layout This layout treats merchandised walls as some of the most important sales generators in the store. Floor fixtures are arranged into groups with a 5-foot aisle along merchandised wall sections. This encourages customers to shop and move easily around the store. Minimal floor Layout It is almost gallery-like in its simplicity, shows small selections of handcrafted or very exclusive merchandise. This layout is used in very high-end retail stores products which are presented dramatically on the walls of the store much like the art objects- with a minimal use of selling fixtures on the floor. It allows for wide-open spaces in the center of the store. Combination floor Layout It has the best features of several floor layouts in an overall plan that suits a retailers specific strategy .It is a blend of a free-flow layout in the first third of the store and a grid layout for a clearance department

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in the rear of the store. Universal Access Layout The main principle of universal access layout is that it should be useful and marketable to people with diverse abilities. It should also provide line of sight to important elements for any seated or standing user making them reach to all components comfortably. To conclude with, suitable layout should be opted by the retailer according to his needs and objectives and should be adapted to the best way that it enhances the store image, merchandise and services offered resulting in best turnover of the retail store.

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Q.2 What is demand forecasting? Explain. A demand forecast is the prediction of what will happen to your company's existing product sales. It would be best to determine the demand forecast using a multi-functional approach. The inputs from sales and marketing, finance, and production should be considered. The final demand forecast is the consensus of all participating managers. You may also want to put up a Sales and Operations Planning group composed of representatives from the different departments that will be tasked to prepare the demand forecast. Determination of the demand forecasts is done through the following steps: Determine the use of the forecast Select the items to be forecast Determine the time horizon of the forecast Select the forecasting model(s) Gather the data Make the forecast Validate and implement results The time horizon of the forecast is classified as follows: Description Short-range Duration Medium-range Forecast Horizon Long-range More than 3 years Usually less than 3 3 months to 3 years months, maximum of 1 year Job scheduling, worker Sales and production assignments planning, budgeting

Applicability

New product development, facilities

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planning

How is demand forecast determined? There are two approaches to determine demand forecast (1) the qualitative approach, (2) the quantitative approach. The comparison of these two approaches is shown below: Description Applicability Qualitative Approach Quantitative Approach

Used when situation is vague & little Used when situation is stable & data exist (e.g., new products and historical data exist technologies) (e.g. existing products, current technology) Involves intuition and experience Jury of executive opinion Sales force composite Delphi method Consumer market survey Involves mathematical techniques Time series models Causal models

Considerations Techniques

Qualitative Forecasting Methods Your company may wish to try any of the qualitative forecasting methods below if you do not have historical data on your products' sales. Qualitative Method Jury of executive opinion Description The opinions of a small group of high-level managers are pooled and together they estimate demand. The group uses their managerial experience, and in some cases, combines the results of statistical models. Each salesperson (for example for a territorial coverage) is asked to project their sales. Since the salesperson is the one closest to the marketplace, he has the capacity to know what the customer wants. These projections are then combined at the municipal, provincial and regional levels. A panel of experts is identified where an expert could be a decision maker, an ordinary employee, or an industry expert. Each of them will be asked individually for their estimate of the

Sales force composite

Delphi method

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demand. An iterative process is conducted until the experts have reached a consensus. Consumer market survey The customers are asked about their purchasing plans and their projected buying behavior. A large number of respondents is needed here to be able to generalize certain results.

Quantitative Forecasting Methods There are two forecasting models here (1) the time series model and (2) the causal model. A time series is a s et of evenly spaced numerical data and is o btained by observing responses at regular time periods. In the time series model , the forecast is based only on past values and assumes that factors that influence the past, the present and the future sales of your products will continue. On the other hand, t he causal model uses a mathematical technique known as the regression analysis that relates a dependent variable (for example, demand) to an independent variable (for example, price, advertisement, etc.) in the form of a linear equation. The time series forecasting methods are described below: Description Time Series Forecasting Method Nave Approach Assumes that demand in the next period is the same as demand in most recent period; demand pattern may not always be that stable For example: If July sales were 50, then Augusts sales will also be 50

Description Time Series Forecasting Method Moving Averages (MA) MA is a series of arithmetic means and is used if little or no trend is present in the data; provides an overall impression of data over time A simple moving average uses average demand for a fixed sequence of periods and is good for stable demand with no pronounced behavioral patterns.

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Equation: F 4 = [D 1 + D2 + D3] / 4 F forecast, D Demand, No. Period (see illustrative example simple moving average) A weighted moving average adjusts the moving average method to reflect fluctuations more closely by assigning weights to the most recent data, meaning, that the older data is usually less important. The weights are based on intuition and lie between 0 and 1 for a total of 1.0 Equation: WMA 4 = (W) (D3) + (W) (D2) + (W) (D1) WMA Weighted moving average, W Weight, D Demand, No. Period (see illustrative example weighted moving average) Exponential Smoothing The exponential smoothing is an averaging method that reacts more strongly to recent changes in demand by assigning a smoothing constant to the most recent data more strongly; useful if recent changes in data are the results of actual change (e.g., seasonal pattern) instead of just random fluctuations F t + 1 = a D t + (1 - a ) F t Where F t + 1 = the forecast for the next period D t = actual demand in the present period F t = the previously determined forecast for the present period = a weighting factor referred to as the smoothing constant (see illustrative example exponential smoothing) Time Series Decomposition The time series decomposition adjusts the seasonality by multiplying the normal forecast by a seasonal factor

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Q.3 How can we classify retail stores? What are the different types of retail store operations? Classification of Stores The retail models can primarily be classified into store based and non-store based retailer. The normal brick and motor stores, is the traditional store based set up. Whereas the non store based retailers contain the direct selling, telemarketing, automatic vending, mail order retailing and internet retailing. The store based retailer can further be classified on the basis of the merchandise they offer, the store formats they observe and manner of their ownership. The following diagram illustrates the basic classification of retail formats.

Format

Target Market

Products Carried

Pricing Strategy

Promotion Emphasis

Distribution

Service Level

Ownership Structure

Mom-andPop

Mass specialty

general specialty

competitive

advertising direct mail

stand-alone strip center shopping area

assorted individually o/o

Mass Discounter

Mass

general

discount

advertising

stand-alone strip-center

self

corp. chain

Warehouse Store

Mass

general

discount

advertising

stand-alone

self

corp. chain

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Category Killer

Mass

specialty discount competitive

advertising

stand-alone strip center

assorted corp. chain

Department Store

specialty

general

competitive

advertising

shopping area shopping mail

assorted corp. chain

Boutique

specialty exclusive

specialty full

selling

stand-alone strip center shopping area

full

Individually o/o chain

Catalog

Mass specialty

general

discount

direct mail

direct marketer

assorted corp. structure

specialty competitive

e-tailer

Mass

general

discount competitive

advertising

online seller self

corp.

specialty

specialty full

structure

Franchise

Mass

specialty

competitive

advertising

stand-along assorted strip center

Contractual

Convenience

Mass

general

full

advertising

stand-alone self

individually o/o corp. chain

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Vending

Mass

specialty

full

none

vending

self

corp. structure

Different Type of Retail Verticals Operating in India. In the above paragraphs we have discussed the different types of retail stores based on the type of ownership, types of formats adopted etc. Now let us briefly discuss the type of retail verticals that are operative in India. Different verticals of retail: Food retailers There are a large variety of retailers operating in the food retailing sector. Traditional types of retailers, who operate small single outlet businesses mainly using family labor, dominate this sector. Modern food retailers now consist of supermarkets, food chains etc. The strong competitive strengths that traditional retailers possess include low operating costs and overheads, low margins, proximity to customers, long opening hours, and additional services to customers (such as home delivery). Ex: Haldiram eating joints, KFC, cafe coffee day etc. Health and beauty products retailers With growth in incomes, Indians have been spending more on health and beauty products. As in the case of other retailing sectors, small single-outlet retailers also dominate sales of health and beauty products. However, in recent years, a couple of retail chains specializing in health & beauty products have sprung up. At present, they account for only a tiny share of sales of these products. However, as Indians spend more on such products in future; their business will undoubtedly expand substantially. There is also scope for entry of more such chains. Ex: Health and glow, VLCC, Manipal Care & Cure etc Clothing and footwear retailers Numerous clothing and footwear shops are to be found in Indian cities and towns, especially in shopping centers and markets. These are a mix of traditional and modern stores. Traditional outlets are small and cramped with little emphasis on alluring displays. They basically stock a limited range of cheap and
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popular items. In contrast, modern clothing and footwear stores are spacious with sample products attractively displayed in windows, sometimes with mannequins. Ex: Cluster of shops in Chandini chowk, Dharmathala (new market) in Kolkata, west side outlets etc Home furniture and household goods retailers The home furniture and household goods retailing sector in India is dominated by small retailers. Despite the large size of this market, very few modern and large retailers have established specialized stores for these products. However, there is considerable potential for the entry or expansion of specialized retail chains and it is likely that this will happen during the next few years. Ex: Durian furniture, furniture bazaar etc. Durable goods retailers The entry of a large number of foreign consumer durable companies into the Indian market during the 1990s after the government liberalized its foreign investment and import policies transformed this sector dramatically. A much larger variety of consumer electronic items and household appliances became available to the Indian customer. Competition among companies to sell their brands provided a strong impetus to the growth for retailers operating in this sector. Ex: e-Zone, Girijas, Pai showrooms etc Leisure and personal goods retailers Rising household incomes due to economic growth spurred consumer expenditure on leisure and personal goods in India. There are specialized retailers for each category of products in this sector. A few retail chains also emerged particularly in the retailing of books and music products. Another key feature of this sector is the popularity of franchising arrangements between established manufacturers and retailers. Ex: planet M, Higgis bottams etc

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Q.4 Is strategic planning helpful for a retail store? Justify. What are the steps involved in it? Strategic Planning in a Retail Store Strategy in simple means planning and coordinating the activities sequentially. In case of Retailers planning is required in every step of their business. In general it is outlining of retailers mission, goals, predicting the consumer base, overall activities and control mechanism. In simple Retail strategy is the perspective, position, plan and pattern of a retailer. It can also be stated as a long term, broad base intention of a Retailer to aim at the success of his business. In simple it is the process of planning the organization, implementation, and control of the entire firms activity. In this competitive world, retail strategy is a fundamental tool to a retailer to position his/her business at par from its competitors. Each aspects of retail business such as merchandising, sales, operations, service and finance which of course constitute the major portion of store operations have to be well planned in order to support the main business strategy. The following are the some of the important tasks that a retailer should bear in his mind to accomplish the stores profitability: Develop a mission statement for the firm Define specific goals and objectives of the firm Develop basic strategies to reach objectives and fulfill mission Identify Strengths, Weaknesses, Opportunities and Threats Clear vision of the mission statement enables the retailer to list down the specific goals and objectives of
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the store. Once the goals and objectives are clearly stated it enables the retailer to develop the basic strategies that are to be implemented to reach the objectives in fulfilling the mission. This clear vision helps to identify the strengths, weaknesses, opportunities and treats that exists and thus enables the retailer to successfully run the business. It should be noted that the goals are usually different for each strategic business unit within the overall retail organization. So it is clearly understood that the retailers mission and strategies depends upon many variables like nature of business, retail format adopted, and type of merchandise/product dealt with etc. Retail operational strategy: The main purpose of a strategy in any business is to provide a method, route, way or channel with a direction to follow in managing a business. A successful retail strategy should satisfy the following three requirements: 1. The strategy of a store should achieve co ordination amongst various functional areas in the organization. 2. The strategy must clearly define how resources are to be allocated. Since resources are limited the strategy should be framed in such a way that it achieves the objectives within the time frame. 3. Thirdly it has to lead to superior market position facing the competitors.

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Q.5 How does a retailer carry out profit planning in his/her retail stores? What are the key business ratios that would be available for financial analysis? Profit Planning in Stores All the transactions that are taken place in a retail store are recorded and to analyze the financial position of the store these statements are used. One such financial statement which shows the financial position of the store is Profit & Loss Account. A profit and Loss Account (income) statement is the summary of a retailers revenues and expenses over a given period of time. In general they are recorded and analyzed on a fixed period of time (ex. monthly, quarterly, half yearly or annually). It is crucial point that same time periods are used in comparing profit-and-loss performance so that the comparison is even. Theses profit and loss account statements are used for regular monitoring of progress towards goals update performance estimates and revise the existing strategies and methods adopted. As a normal financial statement the following are the major components of a retailers P&L A/C. Lets now examine the major components of profit and Loss account: Net sales it is a figure which shows the revenue received by the retailer during the given period of time after deducting customer returns, markdowns and employee discounts. Cost of goods sold Its the amount a retailer pays to acquire the merchandise sold during a given period of time. Its based on purchase price and freight charges, less all discounts(such as quantity, cash and promotion)

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Total available goods (ready to be sold) = Beginning inventory + purchases. And Cost of goods sold= (Ending inventory-total available goods). Gross profit (margin) it is the difference between net sales and the cost of goods sold. It consists of operating expenses plus net profit. Gross profit= (Net sales-cost of goods sold) Operating expenses these are the cost incurred in running a retail business. Total operating expense is a list of all retailers expenses incurred to run the retail business. Taxes these are the expenses paid by the retailer to the central, state/local government. Net profit after taxes the profits earned after all costs and taxed are deducted. Key Business Ratios The following are some of the other ratios used to determine retailers success or failure. Quick Ratio: It is the ratio of cash plus accounts receivable divided by total current liabilities, those are due within a period of one year. Current Ratio: its the ratio of total current assets divided by total current liabilities. Collection period: It is the ratio of accounts receivable divided by net sales and then multiplied by 365. Accounts payable to net sales: It is a ratio obtained by accounts payable divided by annual net sales. Overall gross profit: It is net sales minus cost of goods sold then divided by net sales.

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Q.6 What tasks does a retailer have to carry out in inventory management? Assess the importance of various inventory levels. Retailers Task in Inventory Management Due to the complexity and the cost associated with inventory management most of the retailers are now expecting the suppliers to perform more tasks or they are out sourcing at least a part of inventory management activities. In older times the manufacturers used to produce the goods and ship the same to the retailer when there order is place. Then the retailer used to repack it by tagging the products with price tags with required quantities and made them ready to source on retail floors. Inventory Levels Having proper inventory on hand is a tough and necessary task for a retailer. It is necessary to have proper inventory levels in the stores because: Customers demand cannot be predicted and it keeps on changing Retailer should never lose a sale due to lack of stock in stores If excess of inventory is stocked in stores, it causes carrying costs Carried over merchandise unsold for a long period results in losses to retailer Shelf space allocation should be linked to current revenues which mean that the allocations must be regularly reviewed and adjusted. In case a retailer is running any promotion or campaign the product on offer need to be displayed
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correctly and replenished once sold.

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