Chapter 13

1. Chapter 13 RETAIL MANAGEMENT: A STRATEGIC APPROACH Operations Management

2. Operations Management Operations management is the efficient and effective implementation of the policies and tasks that satisfy a retailer’s customers, employees, and management (and stockholders, if it is publicly owned)

3. Sunday Shopping in Nova Scotia • The issue: • Nova Scotia only province where Sunday shopping was prohibited • Nova Scotians polled about feelings and attitudes  rejected idea • But, certain retailers were permitted to open on Sunday • By restructuring their businesses to meet provincial criteria Sobeys and Superstore were able to open certain departments (redefined as businesses) of their stores on Sundays • The province tried to block such activity and amended their legislation • Sobeys challenged amendment in the courts and Superstore joined the cause • Supreme Court of NS ruled in favour of the grocers and province reversed its position • As of Sunday, Oct. 8, 2006 retailers in the province may open for business on Sundays

4. Sunday Shopping in Nova Scotia • Nova Scotian retailers have been and will continue to be affected by this issue • Uncontrollable factors • Government regulation, competitive pressure, changing sociocultural elements • Controllable factors • Their retail strategy mixes must reflect the current situation • Consider operations implications…

5. Operating A Retail Business • Operations Blueprint • Store Format, Size, and Space Allocation • Personnel Utilization • Store Maintenance, Energy Management, and Renovations • Inventory Management • Store Security • Insurance • Credit Management • Computerization • Outsourcing • Crisis Management Which operational issues will be impacted by NS retailers now deciding to open on Sunday?

6. Personnel Utilization • Personnel issues raised by Sunday shopping • Availability of labour • Recruitment and turnover • Job standardization and cross-training will become more important • Experienced v. inexperienced • Compensation implications? • Increase in computerization/self-service • Workload forecasts • Treatment of workers (Sept. 21, 2006 radio commentary) • Unionized v. non-unionized • Legislation not yet in place

7. Energy Management • Energy management will also be impacted by retailers opening on Sunday • Why should a retailer be concerned about energy management? • Social Responsibility v. Good Business Practice or Both? • Impact on bottom line • Energy = high costs in low margin businesses • Often large facilities that are very expensive to run (lighting, appliances, fridges and freezers, heating and air conditioning) • Consider Hbc social responsibility or just good business? • Saved company money • Promoted as a socially responsible activity (win-win?) • Energy Star • Mountain Equipment Co-op • http://www.fivewinds.com/uploadedfiles_shared/MECGreenBuilding040127.pdf

8. Conclusion Re: Sunday Shopping • Issue impacts: • many operational issues • overall strategy and positioning re: service quality • cost structure (energy, personnel, etc) but remains to be seen how it will impact bottom line either positively or negatively • Customers may want the convenience of Sunday shopping, but are they willing to pay? (Value Perception)

9. Credit Management • Payment method • Cheque, cash, debit, credit card, in-store credit • In-store credit v. outside credit  consider trade-offs • Costs and risks, expertise, control, impact on image • Counterfeit • # counterfeit bills increasing, but value decreasing b/c lower denominations (~$4 million 2002) • http://www.retailcouncil.org/news/media/press/2007/pr20070301.asp • http://www.bankofcanada.ca/en/banknotes/survey/rsom_2005.pdf • If retailer accepts bill, they lose the money • Retailers encouraged to help in pursuit of counterfeit criminals, but not at the expense of employee safety

10. Outsourcing • Are there any operating functions that should never be outsourced? • Depends upon retailer’s value proposition and how closely that activity is connected • Consider the loss of retailer control • Some examples: • Selling accounts receivable to a bank, it cannot extend terms to a loyal customer who just lost his/her job. • Outsourcing delivery means that a retailer cannot schedule an important customer’s appliance delivery at a set time, such as 9AM. • Outsourcing the installation of appliances may also result in the service operator’s charging additional costs to a loyal, important customer.

11. Store Security for Employee and Customer Safety • Think of examples of store security you have encountered: • Uniformed security guards • Undercover personnel • Brighter lighting • TV cameras and other devices • Curfews • Limited access to backroom facilities • Frequent bank deposits

12. Case 4: Using Software to Track Employee Theft 1. Why do you think many retailers that have installed computer scanning systems have not introduced sales-transaction software into their stores? • How would you do a cost-benefit analysis for sales-transaction software? State specific criteria to assess. • Identify five types of unusual activities that should trigger a computer scanning system and how a retailer should deal with them. • What are the pros and cons of informing employees of the existence of sales transaction software and in-store video cameras?

13. Why have retailers with computer scanners not introduced sales-transaction software into their stores? • Do not believe they have a problem with employee theft • Desire to concentrate on customer-based shoplifting • Expense  can cost $100,000+ just for the software • Actual shrinkage noted by Cdn retailers: • ~ $3billion/year ($8million/day) • Internal theft = 40% • External theft = 35%

14. How would you do a cost-benefit analysis for sales transaction software? Costs: • Initial software costs • Additional hardware requirements • Software upgrading costs • Additional investigative personnel • Additional legal personnel to defend against false accusations • Benefits: • Higher profits due to lower levels of employee theft • Easily quantified • The software could deter potential employees prone to theft from applying to positions with a retailer • More difficult to quantify • Can determine cost of recruiting/hiring/training each employee

15. Why inform employees of sales transaction software and in-store video cameras? Pros • Serve as a deterrent to theft • Privacy infringement not a concern • Potentially lowers number of dishonest employees hired Cons • Employees feel mistrusted  negative morale; increased turnover • Dishonest employees may seek to bypass controls

16. Canadian Retailers’ Methods to Combat Loss • Employee awareness • 95.4% Cdn retailers confirmed awareness programs • Mystery Shoppers • Strongly promote closed circuit television (48.3%) and electronic article surveillance (62.8%)

17. Crisis Management • When something unexpected occurs: • Should be contingency plans • Communication of information • Cooperation among parties involved • Responses should be as swift as feasible • The chain of command should be clear and decision makers given adequate authority

18. Takeaways • Operations Management encompasses a variety of activities • Retailers in Nova Scotia have hadto deal with a number of operational implications from Sunday shopping • Decisions w.r.t. any operational function need to be considered with the retailer’s image/positioning in mind and need to complement the overall retail strategy