FM-AA-CIA-15 Rev.

0 10-July-2020

Study Guide in RETAIL MANAGEMENT Module No. 7

STUDY GUIDE FOR MODULE NO. 7

Chapter 7: Store Audit
MODULE OVERVIEW

Retail audit involves the study of a selected sample of retail outlets, provided as subscription-based
service by market research firms. Retail-audit service providers gather information on a brand’s sales volume,
sales trends, stock levels, effectiveness of in-store display and promotion efforts, and other associated
aspects.
In this unit, we will discuss store appearance and presentation. We will also focus on stock, cleanliness.

MODULE LEARNING OBJECTIVES

After studying this unit, you should be able to:

 Define store appearance

 Discuss presentation
 Describe stock
 Analyze the concept of cleanliness

LEARNING CONTENTS

Concept of Store Audit

Many retail store audit functions, challenged by resource and budget limitations, multiple business
locations, and regulatory reforms, are turning to technology to manage the often-vast quantities of information
associated with store audits. Yet, while audit software has been available for several years and offers a viable
solution for the store audit process, some retail organizations are not ready to implement and manage it.
Other priorities, such as new regulatory processes, annual audit projects and limited man-hours, are keeping
internal audit, loss prevention or store operations functions from venturing into the electronic store audit world.

 Retail Audit
Retail audit is a tool that opens new option for strategic move in the market. It helps every marketer to find
an optimum brand/product portfolio for target segment with finest communication vehicle and the flexible
interiors for high product accessibility.
To perform a retail audit, the marketer should keep the following views in mind.

1. Psychographic of Consumers: The value chain blueprints of retail must be designed with consumer
psychographic in mind.
The following things must be kept in mind while designing the value chain blueprints.

 Lifestyle of your consumers

 The time they plan for shopping
 Key driver for shopping (passing time, Money)
 Vehicle they use usually to travel
 Their disposable income
 Brand, Price or Value consciousness (BPV Analysis) The psychographic of consumers helps
to draft the value chain blueprint for a retail business. Moving further will serve the purpose to
check what brands/product mix we must fill the draft of value chain.

2. Brand Portfolio: It defines the brand/product span with which we must click the consumers. Every
retail product line must have a combination of products for serving the two basic strategic purposes:

 Penetration builders
 Profit builders

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Study Guide in RETAIL MANAGEMENT Module No. 7

Most of brand/product retail portfolio is based on proliferation but if you see the effects in the long
term, it will cause product placement insufficiency. The symptoms can be concluded by the increasing footfall
but stagnation of conversion rate.
A complete psychological process starts when a consumer enters the shop and continues until he
buys and leaves the shop. Your products and brand are in a phase of advertisement for that time. In the first
two minutes consumer views a bunch of products and the combine brand position will create a mindset of
consumers.

3. Retail Format: It must fill the value chain of retail by resources. The main objective of retail format
should be to make consumers process of shopping very cozy. The factors which affect the process
are:

 People involved
 System Involved
 Infrastructure (Show Room space, Parking space, interiors, sitting arrangement).

4. Service Blueprints: It connects the brand or product with the resources for accessibility to
consumers. Service is not only inside the showroom but also outside (parking facilitating and others).

Analyzing Performance of Retail Audit: The result of retail audit must be to increase the profit/square feet.
Behind this figure enhancement, you can guess the mechanism of each unit and factor under a system.

Store Appearance
Store appearances include both interior and exterior look:

Store Appearance – Exterior

 Is the parking lot and sidewalk clean and well-lit?

 Are the windows clean?
 Are there miscellaneous fliers posted on the store front?
 Do any signs convey the correct image?
 Can the business be easily identified from the road?

Store Appearance – Interior

 Is the store’s atmosphere and décor appealing to the consumer?

 Is the floor free of debris and appear clean?
 Are all light fixtures working properly? Does the store appear well-lit?
 Are interior signs consistent in font and color
 Does the store look full of inventory?

Seven Things Your Store’s Appearance Tells Your Customers

1. Is It Worth Going In?

It is being consistently finding that consumers are paying less attention to advertising and
more attention to store appearance. An exterior of a store generates 45% of an entire marketing
image. This includes the building’s appearance, the signage, the landscaping, and the parking area.
Consumers form impressions about the quality and selection of merchandise inside the store based
on what they see the outside of the store. Some retailers are aware of this, and the outside
appearance of their store is carefully thought out. Selection is also critical.
They prefer to go to fewer stores and to go to stores where they know they’re going to get a
great selection. They don’t want to have to look further.
One quarter of a consumer’s decision to enter a store comes from the four-color circulars in
the newspaper. Advertisements like these can help or harm your selection image. You need to show
a big assortment of merchandise in your advertisements and displays. Showing the same old stock
can turn off customers. They’ll think, “Well, that’s all they’ve got.”

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2. Is There Something Happening in This Store That’s Unlike Anywhere Else?

Consumers want a unique shopping experience, and retailers need to understand the
importance of differentiation. One way to do this is to have “showstoppers” that bring customers into
the store. These are items that may not sell well but bring in business.

3. Store Pride

When customers look around your store, do they get the impression that someone takes
pride in the store? Is it clean? Is the merchandise well organized and displayed thoughtfully? Are the
clothes on the racks in the correct size category? Not only does this show that staff and owners care,
but it makes it easier for customers to find what they need. Shopping should not be work. An orderly
store helps customers make buying decisions quickly and easily.

4. Financial Stability

One of the first things customers look at is gaps in merchandise displayed. Retailers don’t
always appreciate consumer’s awareness of this. Regular customers will notice gaps the most, and,
ironically, this can cause struggling stores to lose their best customers just when they need them
most. If you’ve gotten some negative press about financial troubles, make sure your shelves are
stocked to the hilt. Try to take the customer’s perspective. Being privy to some one’s financial
struggles is a bummer.

5. Commitment to a Category

This is the single biggest weakness of retailers. When retailers think about adding a category
of merchandise, they usually look at what the other stores are doing, and they devote the same
amount of store space to a product category. To be successful, a retailer should try to be known for
something. Customers know they can find a shoe they like to have. Before you add an additional
product category, you better make sure you have a big enough selection to make a commitment to it.
The display must convince consumers that this isn’t just a fringe category for you.

6. Is This a Store of the Future?

Consumers also make judgments about a store based on signage, display racks, and even
light fixtures. These tell your customers whether you’re a store of today, yesterday, or tomorrow. Has
your building looked the same for 30 years, or does your building’s décor tell your customers that
you’re moving ahead? Are you using the old style fluorescent light fixtures rather than the newer ones
that high light the merchandise? Do your displays and signage fit your customers’ sense of style?

7. Is it Worth Returning?

A consumer is always trying to decide whether you want them to come back or not, and they’ll
make that decision based on their entire shopping experience. Was it easy to get in and out of the
store? Were they able to find items quickly and easily? Were the sale items that were advertised or
displayed available? This can go a lot further than just being the cheapest guy in town.

Presentation
Presentation includes displays that are organized and created to efficiently meet your customers’ needs
will assure continuing business from your existing customers and will entice prospective customers to
purchase from you. It is essential to consider what type of professional image you want to convey to the
customer and your community when creating and organizing your facility. Consider the following questions
when evaluating the image, you want to promote in your community:

 What do I want people to think about first when they think about my store?
 How does my store and displays support this image?
 What do I think of first when I think about my store’s appearance?
 How do other people respond to my store?

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 What do people say when asked about my store’s facility, staff, and service?
 What frustrates me most about my store or product layout?
 What one word best describes my store?
 What excites me about my facility?
 What have I learned from considering these questions?

Product displays should be easy to locate. Proper signage can help guide customers and make it easier
and more pleasant for them to find products and services customers to compare size, price, and features of
products and makes it easier and convenient for your salespeople to sell them. The display should make it
easy to step to logical price points.

Stock
Stock management in the retail supply chain follows the following sequence:

1. Request for new stock from stores to head office

2. Head office issues purchase orders to the vendor
3. Vendor ships the goods
4. Warehouse receives the goods
5. Warehouse stocks and distributes to the stores
6. Stores receive the goods
7. Goods are sold to customers at the stores

The management of the inventory in the supply chain involves managing the physical quantities as well as
the costing of the goods as it flows through the supply chain. In managing the cost prices of the goods
throughout the supply chain, several costing methods are employed:

1. Retail method
2. Weighted Average Price method
3. FIFO (First In First Out) method
4. LIFO (Last In First Out) method
5. LPP (Last Purchase Price) method
6. BNM (Bottle neck method)

Cleanliness
Any store may have fabulous merchandise to sell, but if the store is dirty and cleanliness & hygiene is not
maintained, will leave a very bad impression with the customer. Following are some of the points for
maintaining consistent cleaning and hygiene:

First Impression Counts

 Store name board and logo at the entrance should be neatly maintained
 Parking area should be clean of litter and brightly lit (at nights)
 Entrance should be clean and inviting
 Security check points should be free from litter and should be presentable

Front Door Assumption

 Glass door should be clean and free of fingerprints.

 Customers will assume that if the front door is dirty, rest of the store will also be dirty.

Make it glitter!

 If it’s glass or metal, it must be clean and sparkling.

 Make it a priority to dust and use glass cleaner every morning and after every 2 hours minimally.

Shoulders to Knees

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 Customers notice majority of ‘merchandising’ between their shoulders and knees. Ensure that the
shelves/display in this area should be ALWAYS kept clean.

Behind the scenes

 If the customer uses a trial room, keep it spotless and litter free. Eighty per cent of a customer’s
buying decision happens in a trial room.
 If you have a back stock area, keep it hidden from the customer’s eyes!

Most Neglected Area – Washroom

 Customers can use the washroom anytime.

 Ensure that the washrooms are ‘squeaky clean’. This will leave a positive impression of the company
on the customers.
 Ensure to give utmost care to the staff washrooms as well. This will keep their motivation level high.

Clutter Free

 Shipping boxes, pallets, rolling racks, shipping materials.... anything needed for the operation of the
store should be out of site or neatly stored away from the traffic flow in the store.

Ease of Shopping

 Overstocking of merchandise can be overwhelming to the customer and they can ‘assume’ your store
is messy merely because of the volume of merchandise. It should be easy to move around in the
store.
 A stroller or wheelchair should easily move around the store.

Sweet Senses

 Does the store ‘sense nice and sweet’? Customers can assume of whether a store is clean based on
what they smell, see, hear & touch.
 A dusty hand-railing, a noisy lift door is a complete no.

Check-out Area

 The most important area of the store, no matter what kind, is the place you exchange the customer’s
hard-earned money for something they value, your merchandise. Present it spotless.

Store Audits: Benefits

 Benefits for Your Business
 Customized audit checks – tailored to your business
 Remove handwritten paperwork – clearer answers and automatic scoring system
 Green technology – stop wasting paper and save a few trees
 Better consistency – standardized questions ensure uniform data collection
 Automatic real-time action points – timely corrective action
 Reduce time spent in the field – increase location coverage
 Eliminate data reentry – save time at head office
 Improve reporting – reduce the time between check completion and data collation
 Web based reporting – access to information wherever you are
 Quick deployment of new checklists – instantly downloaded from HQ
 Store Ranking – compare stores based on points accumulation
 Store Compliance – measure stores against compliance to standards
 Competition – use the data to introduce inter-store competition and rewards
 Expect more – remember, you can’t expect what you don’t inspect

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Study Guide in RETAIL MANAGEMENT Module No. 7

 Tips on Improving Retail Stores

1. Choose Effective Retail Stores. Retailers can improve a store’s appearance and gain a customer’s
attention with retail displays.
2. Evaluate Retail Store Appearance. Take the time to evaluate the interior and exterior appearance of
the retail store. The interior appearance must capture a customer’s attention. An interior checklist can
include the floor plan, mirrors, and light fixtures. Store managers must analyze the exterior
appearance of a retail establishment, such as the windows, window display signs and welcome store
mats. A store manager can keep a copy of the retail store checklist in a safe location.
3. Wholesale Display Racks. Keep employees and supervisors interested in improving the retail store
with meetings. Retail meetings can feel long to employees, so make sure the meeting has a purpose,
and write a brief outline to cover general and specific topics. General retail topics can include store
safety for customers and employees, such as mopping up spilled drinks. Specific retail topics can
involve upcoming product lines or changing store locations
4. Minimize Retail Merchandise Losses. Store managers can learn how to minimize merchandise
losses. One method includes creating and using a retail inventory system, which shows when
inventory sells and the price. This helps store managers recognize a sales pattern and investigate
when too many items sell at once. Additional methods involve keeping small, higher-priced items in
locked cases, placing retail security tags on larger items, and using security cameras near entrances
or exits.
5. Retain Store Employees. Retail managers can retain store employees. Retail store managers face
challenges when hiring and keeping store employees. Employee issues can involve lower paychecks,
limited employer – employee communication and the lack of career growth. Store managers can help
balance lower pay checks with enhanced benefits, such as medical insurance. Create an open-door
policy, so employees can discuss and resolve issues before interfering with job performance. Offer
job training to enhance career growth in similar retail occupations.
ACTIVITY

Review questions:

1. Define the term storer audit?

2. Why is store audit needed?
3. What is internal store audit?
4. What is external store audit?
5. Who are retail audit service provider?
6. What is brand portfolio meant for?
7. What are presentation displays?

SUMMARY

 Retail audit involves the study of a selected sample of retail outlets, provided as subscription-based
service by market research firms.
 Retail-audit service providers gather information on a brand’s sales volume, sales trends, stock levels,
effectiveness of in-store display and promotion efforts, and other associated aspects.
 Selection is also critical.
 One of the first things customers look at is gaps in merchandise displayed. Retailers don’t always
appreciate consumer’s awareness of this.
 Regular customers will notice gaps the most, and, ironically, this can cause struggling stores to lose
their best customers just when they need them most.
 Presentation includes displays that are organized and created to efficiently meet your customers’
needs will assure continuing business from your existing customers and will entice prospective
customers to purchase from you.
 It is essential to consider what type of professional image you want to convey to the customer and
your community when creating and organizing your facility.
 The management of the inventory in the supply chain involves managing the physical quantities as
well as the costing of the goods as it flows through the supply chain.

REFERENCES

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Study Guide in RETAIL MANAGEMENT Module No. 7

Berman B. Evans J. R., (2004), Retail Management, 9th Edition, Pearson Education Berman, Barry. Evans, Joel R.
Mahaffey Tom (2005). Retail Management: A Strategic Approach, Pearson Education
Gopal, R. Manjrekar, Pradip (2010), Retail Management, Excel Books, New Delhi Notes Iyer, B. Sriram (2011). Retail
Store Operations, Tata Mc Graw Hill

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