Slides Lecture 1: Introduction to Retail Operations
Retail operations definitions
- The sale of small quantities of items to end consumers, as opposed to (= in tegenstelling tot)
wholesale, which involves selling to business or institutional customers.
- Activities involved in the selling of physical goods or services to ultimate customers for
personal or household consumption.
Purpose of retail (BHOLO)
- Break up bulk
- Holding inventory
- Offer an assortment (provide variety)
- Lower consumer search costs (one stop shopping)
- Offer services (e.g., curation, expertise, returns handling)
Costs of the channel activities
- Increase the costs of products and services
- The costs in the supply chain can be almost as much as the cost to make the product.
Cost of value-added activities
The cost of selling as a fraction of GDP
(Gross Domestic Product = De totale waarde van goederen en diensten geproduceerd binnen de
grenzen van een land gedurende een bepaalde periode). This indicates the portion of the national
economy allocated to sales costs (about .2 or .3 of GDP)
- Cost of wholesaling and retailing + Cost of communication and transportation.
Turnover vs. sales volume
- Turnover is prices times the number of products.
- Sales volume is adjusted with inflation (price changes).
,Some defining characteristics of retail (Huiswerk Leidt Tot Goede Resultaten)
- Highly regulated:
- When shops can open / when trucks can supply the stores
- Low productivity:
- Large amount of employees but this employees don’t
bring much profit
- Thin profit margins:
- Average profit margins: groceries 2,4%, apparel 4,1%,
consumer electronics 13,2%
- Globalizing:
- Chinese & spanish firms coming to The Netherlands
- Rapid influx of technology:
- New machines, drones etc. / Tech industries are also investing in retail.
Introduction to retail operations
What you see: Stores, parcel/grocery delivery, website or app
What you don’t see: Warehousing, order picking, technology, transport, distribution, analytics
Complexity only seen when things go wrong
The forward retail value supply chain
The reverse retail value supply chain
- Is concerned with retrieving, reusing, and recycling
end of life products
- Legislation may force retailers to engage in reverse
supply chain activities
- The WEEE EU Directive mandates online
retailers to collect old electrical appliances
when delivering a new one, providing
customers with options for immediate or
delayed collection or reimbursement of
shipping costs to a designated point.
Online retail
The online retail sector is experiencing a significant surge with promising growth prospects.
Currently, retail e-commerce accounts for 19% of total retail sales, and future projections anticipate it
to reach up to 23%.
,Offline retail
- Scattered inventory problem: Not knowing where the product is going to be purchased
- Online retail eliminates stores, cutting real estate costs and consolidating inventory in a
central warehouse (= inventory pooling).
- Fulfillment from regional warehouse.
Online marketplaces
- Example of an online platform (other are search engines, review platforms etc).
- Allow third parties to sell through its digital channels
- Common that the marketplace also has its own assortment (bol, Amazon etc).
- Retailers and brands are trending towards opening marketplaces for creating more engaging
product ranges for additional revenue streams.
- Regulation tightening: clear seller identification, dissatisfaction resolution, antitrust
compliance, no use of non-public data, unbiased product selection, two purchase options,
equal treatment, free choice of carriers(= transport bedrijven), and an open logistics market.
The effect of Covid-19 on online retail
- E-commerce has grown two to five times faster than before the pandemic.
- Some of this growth isn’t permanent.
- Online accelerated but it didn’t remove physical retail.
, Slides Lecture 2: The omnichannel (r)evolution
The omnichannel (r)evolution
- Single channel: Only one channel to reach the customers, e.g. only a physical store or
website.
- Multi channel: Multiple channels to reach customers, e.g. a store, a website, an app etc. The
channels are not linked.
- Cross channel: The same as multi channel however it also connects the channels, e.g. click
and collect or buy in store and get delivered home.
- Omnichannel: Takes cross channel to the extreme. The customer can use different channels in
their customer journey at any point in time. They may use two channels at the same time.
Common definition of omnichannel retail
Providing customers with seamless(= moeiteloos) journeys across
all available channels.
The omnichannel customer journey
Not all the channels that customers use are under your control
Touchpoints
- Narrow definition: All the moments in which the customer
comes into contact with your brand, directly or indirectly,
throughout his or her customer journey.
- Broad definition: All the interactions customers have
throughout their journey with information and fulfillment
channels.
The M-O interface in omnichannel retail
The set of decisions related to the coordination of multiple channels within or across the same
customer journey, aimed at carefully balancing superior customer journey experience and reliable and
efficient product flow during the customer journey.
Retail operations definitions
- The sale of small quantities of items to end consumers, as opposed to (= in tegenstelling tot)
wholesale, which involves selling to business or institutional customers.
- Activities involved in the selling of physical goods or services to ultimate customers for
personal or household consumption.
Purpose of retail (BHOLO)
- Break up bulk
- Holding inventory
- Offer an assortment (provide variety)
- Lower consumer search costs (one stop shopping)
- Offer services (e.g., curation, expertise, returns handling)
Costs of the channel activities
- Increase the costs of products and services
- The costs in the supply chain can be almost as much as the cost to make the product.
Cost of value-added activities
The cost of selling as a fraction of GDP
(Gross Domestic Product = De totale waarde van goederen en diensten geproduceerd binnen de
grenzen van een land gedurende een bepaalde periode). This indicates the portion of the national
economy allocated to sales costs (about .2 or .3 of GDP)
- Cost of wholesaling and retailing + Cost of communication and transportation.
Turnover vs. sales volume
- Turnover is prices times the number of products.
- Sales volume is adjusted with inflation (price changes).
,Some defining characteristics of retail (Huiswerk Leidt Tot Goede Resultaten)
- Highly regulated:
- When shops can open / when trucks can supply the stores
- Low productivity:
- Large amount of employees but this employees don’t
bring much profit
- Thin profit margins:
- Average profit margins: groceries 2,4%, apparel 4,1%,
consumer electronics 13,2%
- Globalizing:
- Chinese & spanish firms coming to The Netherlands
- Rapid influx of technology:
- New machines, drones etc. / Tech industries are also investing in retail.
Introduction to retail operations
What you see: Stores, parcel/grocery delivery, website or app
What you don’t see: Warehousing, order picking, technology, transport, distribution, analytics
Complexity only seen when things go wrong
The forward retail value supply chain
The reverse retail value supply chain
- Is concerned with retrieving, reusing, and recycling
end of life products
- Legislation may force retailers to engage in reverse
supply chain activities
- The WEEE EU Directive mandates online
retailers to collect old electrical appliances
when delivering a new one, providing
customers with options for immediate or
delayed collection or reimbursement of
shipping costs to a designated point.
Online retail
The online retail sector is experiencing a significant surge with promising growth prospects.
Currently, retail e-commerce accounts for 19% of total retail sales, and future projections anticipate it
to reach up to 23%.
,Offline retail
- Scattered inventory problem: Not knowing where the product is going to be purchased
- Online retail eliminates stores, cutting real estate costs and consolidating inventory in a
central warehouse (= inventory pooling).
- Fulfillment from regional warehouse.
Online marketplaces
- Example of an online platform (other are search engines, review platforms etc).
- Allow third parties to sell through its digital channels
- Common that the marketplace also has its own assortment (bol, Amazon etc).
- Retailers and brands are trending towards opening marketplaces for creating more engaging
product ranges for additional revenue streams.
- Regulation tightening: clear seller identification, dissatisfaction resolution, antitrust
compliance, no use of non-public data, unbiased product selection, two purchase options,
equal treatment, free choice of carriers(= transport bedrijven), and an open logistics market.
The effect of Covid-19 on online retail
- E-commerce has grown two to five times faster than before the pandemic.
- Some of this growth isn’t permanent.
- Online accelerated but it didn’t remove physical retail.
, Slides Lecture 2: The omnichannel (r)evolution
The omnichannel (r)evolution
- Single channel: Only one channel to reach the customers, e.g. only a physical store or
website.
- Multi channel: Multiple channels to reach customers, e.g. a store, a website, an app etc. The
channels are not linked.
- Cross channel: The same as multi channel however it also connects the channels, e.g. click
and collect or buy in store and get delivered home.
- Omnichannel: Takes cross channel to the extreme. The customer can use different channels in
their customer journey at any point in time. They may use two channels at the same time.
Common definition of omnichannel retail
Providing customers with seamless(= moeiteloos) journeys across
all available channels.
The omnichannel customer journey
Not all the channels that customers use are under your control
Touchpoints
- Narrow definition: All the moments in which the customer
comes into contact with your brand, directly or indirectly,
throughout his or her customer journey.
- Broad definition: All the interactions customers have
throughout their journey with information and fulfillment
channels.
The M-O interface in omnichannel retail
The set of decisions related to the coordination of multiple channels within or across the same
customer journey, aimed at carefully balancing superior customer journey experience and reliable and
efficient product flow during the customer journey.
