retail strategy chapter 9

interconnected groups in retail
all are very intertwined:
– employee needs
– management needs
– target market/customer needs
employee productivity
the retailer’s sales/profit divided by the number of employees – can be improved by increasing the sales generated by employees or reducing the number of employees
employee turnover
number of employees leaving their job during the year divided by the number of positions
downward performance spiral
– three components: financial performance problems, retailer’s response, employee’s response
– sometimes when a retailers’ sales/profits decline due to increased competition, retailers respond by decreasing labor costs – reduce number of sales associates in the store, hire more part-timers, and spend less on training – these might increase short term productivity and profits, they have an adverse effect on long-term performance because employee morale and customer service decline
financial performance problems
– low profits
– high costs
– could be due to increased competition
retailer’s response
– Layoffs
– Freeze on hiring and promotion
– Reduced training
– Salary freeze
– Greater use of part-time employees and more outsourcing
employee’s response
– Decreased motivation and effort
– Poor customer service
– Lower job satisfaction/morale (which is closely linked to customer satisfaction)
– Greater turnover
Then the cycle starts again – depressed employees make sales and profits drop
how do you stop the downward performance spiral
Next time when sales go down, you shouldn’t cut help – look at your customer satisfaction and if that’s the problem, hire more people, add merchandise to make the best assortment, etc
emphasis on expense control
– inventory, then payroll are the biggest expenses
– Retailers are cautious about paying high wages to hourly employees who perform-low skill jobs
balancing the human resource triad
three elements work together: HR professionals in corporate office, store managers, and store employees
heavy turnover
– Average retail store: over 100%
– Most positions turn more than once a year – tough environment (low pay, bad hours (nights/weekends/holidays), few benefits), hire a lot of temporary/unskilled workers especially over the holidays, and lots of part time workers (can be inconsistent, have loyalties elsewhere – focusing on college, have another job – they’re probably going to leave)
true cost of employee turnover
It’s expensive because:
– Recruiting and hiring new employees
– No experience/knowledge – can make mistakes to add to their costs
– Training costs – including management time
– Full pay and benefits during training
– Loss of customers loyal to departing employees (only come to a store because you love one employee)
– Lost or damaged relationships with suppliers
– Employee morale and customer perceptions of that morale
large numbers of inexperienced workers
– To control costs, retailers hire people with little/no experience to work as salesmen, bank tellers, and waiters – but using these inexperienced, low-wage employees result in high turnover, absenteeism, and poor performance
– Lack of experience and motivation among retail employees is troublesome bc they are often in direct contact with customers – poor appearance, manners, and attitudes can have a negative effect on sales and customer loyalty
managing part-time and minimum-wage earning workforce
– Part time workers are used to complement full time workers – they are less expensive, offer no health/retirement benefits and little job security
– Part time workers can be inconsistent, have loyalties elsewhere – focusing on college, have another job – they’re probably going to leave
long hours
tough environment – low pay, bad hours, nights/weekends/holidays, few benefits
changing employee demographics
– Have 5 generations in the workforce right now (15 to 70ish)
– Changing demographic pattern will result in a chronic shortage of qualified sales associates – increase efforts to recruit/train/manage/retain mature, minority, and handicapped workers
– Younger employees want more flexibility, meaningful jobs, professional freedom, and a better work-life balance than older employees do.
– So retailers turn to older employees because they’re more reliable, have lower turnover rates, and often better work performance – lower training costs
international human resource issues
– Different laws in each country, amount of vacation time
– Differences in work values, economic systems, and labor laws
– ex: US retailers rely heavily on individual performance appraisals and rewards tied to individual performance – this is against collectivistic cultures like China/Japan who use group-based evaluations and incentives instead
critical to customer service
– Employees are in direct contact with customers
– Directly responsible for customer satisfaction
organizational structure
– identifies the activities to be performed by specific employees, and determines the lines of authority and responsibility in the firm
– Must match retail strategy
decision-making authority design
– Challenge for large retailers is to balance bulk buying/distribution efficiencies w/ the need to localize assortments
– Use of information systems is helping retailers to cost-effectively tailor products/services to local/regional needs
centralized decision-making
the authority for retailing decisions is delegated to corporate managers rather than to geographically dispersed managers
– low cost, low price retailers, like Walmart, Macy’s: centralized – can get bulk discounts, only have to hire one buyer, can have cookie cutter stores, lots of cost savings, need a lot less people
decentralized decision-making
the authority for retail decisions is assigned to lower levels in the organization
– differentiated/niche/localized – push all decisions out to each stores – buy locally, hire locally, use local architect to design store to fit that community
coordinating merchandise and store management
– easier for small, independent retailers – owner/managers are in close contact with customers so they know what they want
– large retail firms organize buying/selling functions into separate division – harder to understand customers’ needs
– Improving appreciation for the store environment (mgmt. trainees work in store first before they become buyers)
– Making store visits
– Assigning employees to coordinating roles
strategic management
Small silo but huge impact- top management: CEO, CFO, board of directors
– Develop the overall retail strategy
– Identify the target market
– Determine the retail format
– Design organizational structure
– Develop private-label merchandise
– Develop internet/catalog strategy
– Develop global strategy
merchandise management
Merchandise division: Buyers, planners, pricing, category management
– Buy merchandise (select/negotiate with vendors, select merch and place orders)
– Control merchandise inventory (develop budget plans, allocate to stores)
– Price merchandise (set initial prices and adjust)
store management
Stores division: Has most people in silo – store managers, district managers, regional managers, store employees
– Recruit/hire/train store personnel
– Plan labor schedules
– Maintain store facilities
– Locate and display merchandise
– Sell merchandise to customers, repair and alter it
– Handle customer complaints
administrative management (operations)
Corporate specialists such as:
– Marketing (ad promotions/PR)
– Human resources
– Supply Chain/Logistics
– Financial Performance
– Visual Merchandising
– Information Systems
– Legal
– Real Estate
policies and supervision
– written behavior for employees that’s enforced by managers, ex: return policies
– Doesn’t work very well as motivation/control – strict reliance on written policies can reduce employee motivation, find their jobs uninteresting, leads to a lot of red tape
used to motivate/control employees – compensation based incentives like: commission, bonus, stock options
organization culture
– The set of shared attitudes, values, traditions, and practices that characterizes a company or corporation and guides employee behavior
– Written and unwritten, spoken and unspoken – passed down from experienced to new employees, symbols and stories to reinforce values
– This is influenced by organizational structure
communicating organizational culture
– formal: mission statements, operating principles, employee manual/code of conduct
– informal: myth/stories, observation, interaction with otheres
people as a source of a long-term competitive advantage
– Empower employees to solve problems at every level of the organization
– Employee satisfaction (reduced turnover and training costs)
– Prevent negative employee behavior (theft/shrinkage and absenteeism)
– Translates to better customer relations and higher customer satisfaction

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