Ultimate Guide to Retail Management- Process, Best Practices, and More
With over one million stores in the United States alone, as stated by the National Retail Federation, the retail industry generates approximately $5.3 trillion annually. As one of the most lucrative and competitive industries, establishments must have proper retail management to promote profitability and longevity.
Retail refers to any organization that sells consumable goods and services to customers for personal, familial, or household use.
There are unique functions pertaining to retailers that set them apart from other providers within the supply chain, including-
- Sells finished goods rather than raw materials
- Buys a variety of similar products from wholesalers and sells range to consumers
- Enhances product availability for consumers by housing products at designated locations to promote sales
What is Retail Management?
Retail management is the workflow of regulating and managing a retail store's daily procedures that involve selling goods and providing customer service. This entails all of the necessary steps from welcoming customers into the store to finalizing their purchases.
This process aims to boost customer satisfaction and provide an enjoyable shopping experience. It also ensures that front-office operations are running smoothly, and the retail business remains profitable.
Retail management members are responsible for a wide range of tasks, including-
- Keeping updated records of products
- Visual merchandising
- Labeling items
- Resource management
- Customer assistance
- Designating tasks to employees
- Store cleanliness
- Daily sale management reports
- Counting cash drawers
Without retail managers on-site, customers may experience elongated wait times, become frustrated, and abandon their shopping carts. Operations, such as stocking shelves and layouts, may also suffer, creating a disorganized workspace and unappealing storefront.
Therefore, store managers should possess an array of skills to promote productivity and customer satisfaction, such as-
- The ability to motivate team members
- Excellent people skills
- Problem-solving skills
- The ability to work under pressure
- Work-ethic and positive outlook
- Quick decision-making skills
- Critical thinking and analyzing skills
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Steps for Successful Retail Management
The retail management process is extensive, as it must cover the various facets of the retail industry. Generally speaking, there are four main components that businesses must perform to run a successful retail operation-
As there are many tasks retailers perform daily, management must plan each procedure thoroughly to ensure the desired outcome is achieved. A detailed outline prevents the misuse of resources, unnecessary expenses, and risks. A lot of time and energy is spent in the planning phase but this step is vital for proper execution.
The planning stage can be further broken down into six groups-
1. Market Research
Profitable stores have well-planned retail marketing strategies and campaigns that promote products in a targeted way. This requires extensive research on not only the item itself but the market and competitors as well. When beginning market research, management should ask themselves-
- What items are available on the market?
- Who are the available vendors for this product?
- What is the growth trend in the respective industry?
- What are the typical expenses with the product?
After the products have been selected, retail management must then find the means to transport the goods from the supplier to the store. Aside from the physical transportation, the deliverer must be able to meet deadlines. Finding a company that falls within budget while providing prompt deliveries is crucial for successfully executing dependent operations, such as stocking and fulfillment.
Internal logistics is just as important, as team members should understand how the size of retail locations impacts how much supply they can store and showcase. Receiving more products than the establishment can handle may require extra expenses for additional storage.
Budget planning should thoroughly outline how much revenue a company generates so management can determine which expenses are necessary. Without a budget, businesses risk reaching a deficit from overspending.
Beyond purchases and investments, retailers should consider operational costs, hourly wages, utility bills, rent, and other financial obligations. For startups, expenses often exceed profits until the business gains recognition. However, budget planning can determine how long it will be until the company breaks even.
4. Profit Margins
Once the products, logistics, and expenses are accounted for, management must determine their desired profit margins to set prices. Retailers must consider what customers are willing to pay for each product. However, businesses should prepare for the fact that rates may need to change depending on the demand. Therefore, setting a minimum profit percentage that can maintain income ensures that companies can meet financial obligations.
New businesses may need to significantly lower prices to attract buyers and build a stable clientele. Then once customer retention is established, management can reevaluate prices to boost profit margins.
Store size and company budget affect the staffing needs to adequately run internal processes, from stocking to customer service. Often, retailers begin with the minimum number of workers and hire as needed to save on labor costs.
Management needs to consider the many positions to fill within the store, such as stockers, sales representatives, and cashiers. Insufficient staffing can lead to poorly run operations and unhappy customers, hindering the store image and profitability.
Retail management should focus on building comradery between employees to ensure smooth workflow. When team members are not working in unison, productivity, and operational efficiency decrease. Therefore, proper training, human resource management, and team-building exercises are essential for a healthy work environment, promoting employee retention and satisfaction.
Implementing an incentive program can also boost morale. Recognizing top performers, giving bonuses, and evaluating workers for promotions shows team members that they are valued.
6. Inventory Control
As the main asset, inventory must be optimized and protected to secure profitability and longevity. Many retail companies experience inventory loss from instances such as theft. If merchandise is not closely monitored, the cost of shrinkage can accumulate, negatively impacting profits. Therefore, actively regulating and surveilling products can protect a business from internal and external theft.
There are several other key aspects to proper inventory management, including-
- Reorder Points - Item stock depletes at different rates depending on their popularity and demand. Therefore, management must determine the optimal stock level for each product to promote sales while minimizing inventory costs. Established businesses have years of stock data stored in information technology, such as inventory control software, that calculates reorder points. These are indicators that trigger reorders when stock volumes dip below the minimal level. However, startups with limited data should research market turnover to determine the product's turnover rate.
- Understocking - Inadequate stock preparation can lead to stockouts and backorders, which can cause a retailer to miss out on sales.
- Overstocking - Excess stock can equally impact a store's profits by hindering cash flow. Slow-moving items can take up valuable floor and storage space, adding holding expenses, and reducing operational efficiency. Overstocked perishable goods can expire, and items with a sudden influx in demand can quickly go out of style. This requires the business to discount items as a last-ditch effort to try to generate some revenue or discard stock, wasting valuable capital.
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Purchasing merchandise and systems that streamline operations is an essential step in the retail industry.
1. Back-Office Systems - By automating back-office systems, such as record keeping and purchase orders, businesses can streamline the clerical process. Instead of manually passing order requests through each department, the software can make documents virtually available to all relevant stakeholders.
2. Point-of-Sale Software - Point-of-sale (POS) systems streamline transactions through payment terminals and provide access to all product information. However, integrating POS and back-office solutions allows all business employees to have access to real-time inventory levels. This ensures that stock levels are always optimized.
The moving stage refers to preparing items and making them available for purchase.
1. Receive Goods
Whether a business has hired a shipping company to deliver the stock or collects products directly from the supplier, receiving the goods is the first step. Once the items are in the retailer's possession, a thorough quality and quantity check should be conducted to ensure no goods are damaged or missing. Management should cross-examine the purchase order, shipping label, invoice, and physical products to ensure everything has been delivered.
After all of the items are accounted for, management must determine where to store the stock after shelves are filled. For some businesses, a back-storage room may suffice, while others may need additional warehouses or third-party facilities that require holding fees. Regardless of how the stock is held, items should be organized and easily accessible for when it is time to restock the store.
3. Product Presentation
Products should be grouped and placed where customers can easily see and grab them. Items should also be arranged next to similar products, such as shampoo, conditioner, and hair accessories. This not only streamlines the buyer's shopping experience but prompts additional purchases as well.
Besides determining pricing strategies, retail managers must ensure that all price tags display the correct cost. If a full-cost item is placed in an aisle with a promotional discount, customers may become agitated at checkout when they discover the item is more expensive than they were led to believe. These types of events can decrease customer satisfaction and trust.
The last stage of retail management is to finalize customer purchases. A company's profitability solely depends on how well they can market and sell their products. There are a few ways management can enhance their retail sale-
1. In-Store Help
Often times, customers have questions regarding product location, quality, and price. However, if there is no employee present to address these concerns, the consumer is more likely to desert their shopping carts. Designating employees for in-store assistance to welcome people and answer questions shows customers the company values their business.
2. Customer Service
A major element to retail is providing excellent customer service. Retailers that prioritize building customer relationships rather than pushing products find greater success than those looking for a quick sell. Customers that feel pushed to buy a product don't feel valued and often seek alternatives. Employees should take a genuine interest in the buyer's problem and seek the best possible solution.
3. Complaint Management
In the event where a customer makes a complaint, management should stay calm and listen to their concerns. If the issue stemmed from poor customer service, management should speak with employees to pinpoint any problems. However, if the complaint concerns an item, employees need to be well versed in the store's return and refund policy. Regardless of the matter, it is important to assure the customer that their feedback is appreciated and being taken seriously.
Retail Management Best Practices
To optimize operational efficiency, businesses should consider implementing some of retail's best practices, including-
1. Promote Communication
Prioritizing information exchange between internal and external parties ensures all stakeholders are on the same page and working toward the same goals. Employees should understand their daily objectives, suppliers should know their commitments, and business partners should understand what is expected of them.
2. Understand Competition
In addition to understanding the business's strengths and weaknesses, management should have a thorough knowledge of their competitors. When companies understand competitors' strategies, they can develop a plan of action to benefit from their weaknesses. Therefore, retailers should investigate other company's pricing methods, business models, customer service, partnerships, and internal processes.
3. Utilize Key Performance Indicators
Key performance indicators (KPIs) are metrics that show the performance of internal operations, from purchases to employee productivity. This allows management to monitor performance efficiently and set benchmarks for workers to achieve. Utilizing KPIs makes it easy to track the company's progress towards short and long-term goals.
4. Prioritize Tasks
Within the retail industry especially, where multiple processes are operating simultaneously, time is precious. Therefore, store managers need to possess the time management skills to prioritize necessary over unnecessary tasks.
Management should have each week outlined with what needs to be completed to designate employees for each function. This prevents certain team members from multitasking and being overworked, which can lead to increased human error.
Retail is a competitive industry that requires thorough preparation and capable management for companies to be successful. Therefore, businesses should prioritize assembling a driven retail management team that can handle the various internal and external processes of the supply chain.
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