Unit 2: Retail formats & merchandise planning
Retailing and Logistics Management notes · PTU syllabus (BBA 612-18)
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Unit summary
Retailers differ in what they sell, where they sell and who owns them. This unit covers food retailers, general merchandise retailers, non-store formats, services retailing and types of ownership, followed by merchandise planning — sales forecasting, assortment planning, financial planning and location strategy.
After this unit you can
- Describe food, general merchandise and non-store retail formats
- Explain services retailing and types of retail ownership
- Explain sales forecasting and assortment planning
- Explain the factors and steps in choosing a store location
PTU syllabus topics
- Food retailers
- general merchandise retailers
- non-store retail formats
- services retailing
- types of ownership
- sales forecasting for merchandise plans
- assortment planning
- finance and location strategy
Food retailers
Supermarkets, convenience stores, hypermarkets
General merchandise
Department stores, speciality stores, discount stores
Non-store
E-commerce, catalogues, vending
Services retail
Salons, banks, restaurants
Topic 1
Retail formats
Food retailers
| Format | Features | Example |
|---|---|---|
| Convenience store | Small, near homes, long hours, limited assortment | 24Seven, In & Out |
| Supermarket | Self-service food and household items, 5,000–25,000 sq ft | Nature's Basket, More |
| Hypermarket | Very large, food + general merchandise, low prices | DMart, Reliance Smart, Spar |
| Warehouse club | Bulk packs, membership, very low prices | Metro Cash & Carry, Walmart Best Price |
General merchandise retailers
| Format | Features | Example |
|---|---|---|
| Department store | Many departments under one roof, mid–high service | Shoppers Stop, Lifestyle, Pantaloons |
| Speciality store | Narrow but deep assortment in one category | Bata, Titan, Croma |
| Category killer | Very deep assortment, low prices, dominates a category | Decathlon, IKEA |
| Discount store | Broad assortment, low price, low service | V-Mart, Vishal Mega Mart |
| Off-price retailer | Branded goods at deep discounts | Factory outlets |
| Drugstore | Pharmacy plus health and beauty | Apollo Pharmacy |
Non-store retail formats
E-tailing
Online stores and marketplaces (Amazon, Flipkart, Myntra)
Direct selling
Person-to-person sales at home (Amway, Tupperware)
Catalogue and TV home shopping
Orders from catalogues or TV channels
Automated vending
Machines for snacks, drinks, tickets
Exam tip
Mention omnichannel retailing — integrating stores, website, app and social media so that the customer can buy anywhere and return anywhere.
Topic 2
Services retailing and types of ownership
Services retailers sell services rather than goods — banks, hotels, salons, cinemas, gyms, hospitals, airlines. Features: intangibility, simultaneous production and consumption, perishability and inconsistency — so the store environment and staff matter more.
Independent single-store
Owner-managed, flexible, limited resources
Corporate chain
Multiple outlets under common ownership, economies of scale
Franchise
Franchisee uses franchisor's brand and systems for a fee
Leased department
Space leased inside a larger store (cosmetic counters)
Consumer co-operative
Owned by members (Kendriya Bhandar, Amul outlets)
Topic 3
Merchandise planning: sales forecasting
Merchandise management is the process by which a retailer offers the right quantity of the right merchandise in the right place at the right time while meeting financial goals.
Forecasting sales
- Category life cycle: introduction, growth, maturity, decline — forecasts differ by stage.
- Fashion vs staple merchandise: fashion items have short lives and uncertain demand; staples (basic groceries) have steady, predictable demand.
- Sources of information: past sales data, market research, trend services, vendors, competitors, customer feedback.
- 1
Forecast category sales
- 2
Develop an assortment plan
- 3
Determine appropriate inventory levels
- 4
Develop a plan to manage inventory
- 5
Allocate merchandise to stores
- 6
Monitor and evaluate performance
Topic 4
Assortment planning
Meaning
Number of merchandise categories
Number of SKUs within a category
Wide/deep store
Department store
Speciality store
Example
Clothes, toys, electronics, books
30 brands of jeans in all sizes
- SKU (stock-keeping unit): the smallest unit for inventory control — a specific size, colour and style.
- Product availability (service level): percentage of demand satisfied; higher availability needs more backup stock.
- Factors in assortment: profitability, store image, physical space, complementary merchandise, cannibalisation.
Topic 5
Finance and location strategy
Financial planning
- Merchandise budget plan: planned sales, stock levels, reductions (markdowns, shrinkage), purchases and gross margin by month.
- GMROI (gross margin return on inventory investment) = Gross margin ÷ Average inventory at cost — measures how much gross margin is earned for every rupee invested in stock.
- Open-to-buy: amount of merchandise the buyer can still purchase in a period without exceeding the plan.
Location strategy
- Region
State or metro area
- Trade area
Zone from which customers come
- Specific site
Exact building and spot
- Types of location: unplanned (free-standing, central business district, main street), planned (shopping centres, malls, strip centres), non-traditional (airports, railway stations, hospitals, kiosks).
- Factors: population and demographics, purchasing power, competition, accessibility, visibility, parking, traffic flow, cost of rent, legal restrictions.
- Trade area zones: primary (55–70% of customers), secondary (15–25%), fringe (remaining).
Exam tip
"Location, location, location" — it is the costliest and least reversible retail decision, which is why it is a strategic choice.
Key terms
- Hypermarket
- A very large store selling food and general merchandise at low prices
- Category killer
- A speciality discount store with a deep assortment that dominates one category
- SKU
- Stock-keeping unit, the smallest unit of inventory control
- GMROI
- Gross margin earned per rupee of average inventory at cost
- Trade area
- The geographic zone from which a store draws its customers
Quick revision
- Food formats: convenience store, supermarket, hypermarket, warehouse club.
- General merchandise: department, speciality, category killer, discount, off-price.
- Non-store: e-tailing, direct selling, TV/catalogue, vending.
- Variety = breadth, assortment = depth.
- Location decided at region → trade area → site.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.What is a hypermarket?
- Q2.What is a category killer?
- Q3.Name four non-store retail formats.
- Q4.What is the difference between variety and assortment?
- Q5.Define GMROI.
- Q6.What is a trade area?
Long-answer questions
- Q1.Classify retail formats with suitable Indian examples.
- Q2.Explain the types of retail ownership.
- Q3.Explain the merchandise planning process including sales forecasting and assortment planning.
- Q4.Discuss the factors to be considered while selecting a retail location.
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