Page 17 - DMGT553_RETAIL_STORE_MANAGEMENT

Retail Store Management

Notes
department store divisions. In 1992, Federated emerged from bankruptcy as one of the
largest and best managed retail chains. The company has since acquired four department
store chains (Hawaii) and Fingerhut, an Internet and catalogue retailer, but it maintains its
focus on developing synergies among its department store divisions. Federated appears
to have a long-term strategy of operating two national retail chains (Bloomingdale on the
price/quality continuum. The Bullock Jordan Marsh nameplate in 1995 and 1996, and the
Liberty House stores were converted in 2001.
Source: Reflections: 2001 Fact Book (Cincinnati, OH: Federated Department Stores, 2000); and personal
communications with Carol Sanger, Vice President, Corporate Affairs, Federated Department Stores.

Organization Structures of Other Types of Retailers

Most retail chains have an organization structure very similar to Rich with people in charge of
the merchandising, store management, and administrative tasks reporting to the CEO and COO.
Only corporations that operate several different chains, such as Target, The Limited, and The
Gap, have the overarching corporate structure. Large supermarket chains such as Safeway and
Kroger are often organized geographically, like Federated Department Stores, with each region
operating as a semi-independent unit having its own merchandise and store management staff.

The primary difference between the organization structure of a department store and other
retail formats is the numbers of people and management levels in the merchandising and store
management areas. Many national retailers such as at corporate headquarters and have fewer
buyers and management levels in the merchandise group. On the other hand, these national
retailers have many more stores than a regional department store chain like Rich have more
managers and management levels in the stores division.

Example: One person is responsible for stores and operations at The Gap, in contrast to
the five regional chains and one national chain (Bloomingdale Stores organization). But The
Gap, with over 1,000 stores, needs more levels of store management (14 zone vice presidents,
18 regional managers, and 195 district managers) than Rich only has 76 stores.

1.2.3 Franchise Stores

Franchising is an agreement between a franchiser and a franchisee that allows the franchisee to
operate a retail outlet using a name and format developed and supported by the franchiser.
These stores can be restaurants, fast food outlets, apparel outlets, sports goods outlets,
hypermarkets etc.
In this kind of an arrangement generally franchiser charges franchisee a lump sum fees towards
usage of brand names, retailing expertise plus a royalty and franchisee has to bear all operation
cost along with above and as to earn profit. Though in recent times franchiser also underwrites
the losses if it occurs to avoid high attrition and motivate franchisee to invest as these kinds of
arrangement require high investment. Franchisers support franchisee with merchandise planning,
store management, training, manpower sourcing, IT support, interiors and advertising at national
and regional level.
This format fuels growth faster as franchiser does not need to block huge capital, employ more
people and hold huge stock. This model has helped people with adequate capital but without
any technical knowledge to enter into retail trade. In India, UCB, Reebok, Adidas, Lee are
examples for this kind of retailing.

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