The business dictionary defines retail management as the process of promoting greater sales and customer satisfaction.

If you break this down, you will get all the aspects of running a retail business. For example, to achieve more sales, you must know what the market needs. Once you know what is needed, then making sales becomes significantly less burdensome since needs have to be met.

In the course of meeting people’s needs, you will recognize the place of quality products, great customer service and employee satisfaction. For you to keep meeting needs, you have to stay competitive and make enough profit so as to expand accordingly and motivate your staff as well.

This article helps you understand how the retail management process works to give you maximum profits while satisfying both customers and employees.


Being a process, retail management consists of several steps to be followed so as to achieve its goals. These steps are what determine the way the business will be run and how profitable it will be.

In retail management, there are four basic steps which have to be followed so as to achieve the goals set. Let us look at these.


A plan is a proposed method of doing or achieving something. It details the steps to be followed so as to ensure resources are well utilized and misuse avoided or at least minimized.

In retail management, planning is what sets the ball rolling. It is the first stage of running the business. At this point, a lot of work is done to set the stage for the final and most visible part of the process—selling.

Planning in itself can be broken into several steps as discussed below.

1. Market Research

You have decided to venture into the retail industry. Your intentions are to gain a considerable market share and eventually be the biggest and most profitable business. But have you decided on what to sell? Where and how to sell it?

These are some of the questions that you need to answer at this stage. If you will for example sell general consumer products, like what supermarkets sell, then you need to research on that. If aiming to sell cars, then you also need to do some homework.

What are the products available on the market? Who are the suppliers? What is the growth of the industry? How fast does it grow? What are the returns? What are the usual expenses?

When doing market research, you are seeking to find out what to engage in so as to achieve your goals. You want to ensure that you have set everything right in order to avoid unnecessary obstacles.

This could also come down to the difference between needs and wants. There are businesses which specialize in providing wants, e.g. luxury living, whereas others provide needs i.e. food, shelter, clothing and healthcare.

If you are operating from a retailer’s level, you are interacting directly with consumers. It therefore becomes necessary to ensure there is a need for the product you want to trade in. Even if you want to provide wants, ensure there is ‘need’ for them. This is the essence of market research.

2. Logistics

This step includes detailed organization of how products will move from the supplier to your stores in the event that you are the one collecting them. This has to do with the transport options which you have available, considering the relevant costs.

Apart from transporting, time is also crucial in this stage. It is not enough to know where to get goods from. It is equally important to know what time it will usually take to get them to your store. Part of this is the time spent having your purchase order processed at your point of purchase.

Logistics is not just external but also internal. The staff handling logistics must know the size of your store rooms. All the goods that will be received will have to be either going to the shelves or a storage area. It would be a disaster having more products than can fit in your storage area.

3. Expenses

No business can make any profit without keeping tabs on its expenses. Your budget essentially determines how much purchases you make. More than that, it serves as a safety warning because ideally, you should never go beyond your budget.

In this planning stage, you will have to look beyond purchases. Consider the operating costs, salaries to be paid, bills to be settled etc. Calculate the expected costs in terms of rent, marketing, computer systems to be installed and whatever else you will spend money on.

Although you may not be able to cover everything, try to check on as much as possible. Since costs are usually higher than profits when starting out, find out how long it will possibly take you to break even. This is important as it helps you maintain a realistic focus on your pursuit of profits.

4. Profit margins

You are in business and that means you have to make profit. This is something you have to plan for. Having done your market research and engaged several suppliers on possible quantities and discounts, you should have decided on the appropriate profit margins.

It is very possible that when the time to buy comes, there may be a change in the prices. Whether this will be the case or not, once you have decided on the percentages you will make, then it’s easy to adjust your prices.

The issue of margins can be a tricky one to handle at times, especially if you are completely new in the industry. Since you may want to quickly attract customers, you may decide to significantly lower your prices compared to your competitors.

You may however find that there are products which retail at specific prices such that going lower than that may even draw suspicion.

At the same time, price wars can be very vicious. And if you start that war and your competitors realize you are eating into their market share, you may not be able to withstand a counter attack unless you have very deep pockets. Or you have managed to secure some strategic agreements with suppliers.

Some of these agreements can be about you being the only authorized retailer of certain fast-moving products. You could also be the only licensed provider of a specific in-store service. This can ensure more trust gets built with your customers as they seek licensed and authorized services.

These however don’t have to be the only means of achieving your goals. When it comes to strategy, there are always many ways to win.

You can negotiate discount percentages on the basis of huge quantities being purchased. As long as the products do not have a short shelf life, you can for example buy 3 months’ goods at once so that you get higher discounts.

Such a move would require you to also check your procurement policies so as to avoid overstocking your store. If you have someone or people handling your finances, you’ll need to consult them so that they can advise.

5. Staffing

Have you decided on the size of the store or whole company? This should be decided early. If possible, the hired staff should be part of the team arranging the goods on the shelves before the opening of business.

When staff are hired in the early stages of planning, they form relations which will help build the team spirit. You can start with a minimum number of employees then increase as you see the need.

In planning for your employees, you should have in mind the various positions you will need to drive your business. From the managers to the cleaners, you will be looking for different qualifications.

With the different qualifications also come different pay amounts. This is something to be discussed with the finance team. If you are looking to start a retail business and you are yet to have any employee or don’t have someone to consult on this, then you will have to work on this at the market research level.

Included in staffing matters is training and other forms of employee retention. This is of great importance to avoid the resignation of your top talent. This can be a big blow to your business especially if it comes after you have started making profits.

Your staff will typically be aware, or think they are aware, of your company’s profitability. When they think you are making much money but not investing in their good, then they can leave for the competitor or worse, defraud you.

This means that you need to provide great incentives to your employees. Although there may be different types of incentives for the different categories of employees, there should at least be a standard. Ensure all your employees are happy with what they get.

6. Inventory Management

The inventory is the backbone of any retail business because the stock is what is making the business stand. Minus the goods, there is no business. This means that the inventory is your company’s main asset. You will recognize this reality when you learn about the effects of pilferage.

For an idea how you can lose business through employee theft. Watch the below video and see how it happens in a restaurant setting.

Pilferage causes many companies to suffer great losses. If undetected or not tackled effectively, then you could as well end up shutting down. This is because the stock available for selling is less than what you bought. You will therefore make no profit from what you are selling.

When you consider inventory management, there are three main points to consider:

I. Restock levels – the products you are selling will run out and you will have to buy some more. The question is, at what point do you buy more stock?

Ideally, customers should never come to your store and find that you don’t have the stock that is available elsewhere. If you have worked hard and managed to get the customers into your store, then ensure they come back again for the supplies they need.

Because stocks run out, you have to replenish them soonest possible. At the beginning, you may have a hard time knowing the appropriate time to restock.

The best way of going about this is by doing a thorough market research. This should include finding out what products move fastest and which ones move slowest. You should always have enough quantities of the fast-moving products in your store.

If you know that the supplier takes two days to deliver and you sell 5 pieces of product A in three days, then make weekly orders of 12 pieces. From that point, closely monitor the progress and change accordingly.

II. Understocking – this is having less products than the quantities needed by customers. This eats into your profits because customers will not have much to buy. When you notice that your store is experiencing dropped sales, this can be one of the causes.

Understocking also does another harm. This harm is in the minds of customers but the effect is on your business. When your shelves look empty because you don’t have the right quantities of goods, they paint the picture that the business is not doing well.

You might be experiencing delays in delivery but your customers rarely get to understand that. If they experience this severally, they will just go to the store which offers them everything they need.

III. Overstocking – this is just the opposite of understocking. When you have excess stock, your cash flow will suffer. This is because your money will be held in stock which is not moving thus causing a lot of inefficiencies in your operations.

You will realize that you cannot operate in an efficient manner when the daily payments that need to be done can no longer be made. Another symptom of cash flow problems is the lack of petty cash.

When you overstock, not only do you lack petty cash, you also stand to experience problems with expiring goods. When you buy too much and cannot sell them fast enough, you end up with goods whose shelf life is pretty short.

For you to clear them, you will have to reduce their prices to encourage sales or give them away while it is still safe to use. This eats into your profit margins and could even lead to losses.

Worse still, there is the danger of your staff not recognizing a certain product as almost expiring or already expired. If a customer buys such a product, you have very little control over what his reaction would be. Anything from being maligned to being sued is possible.


This is the process of acquiring the products which you will sell. Although it may seem like an easy step, it is best to recognize its importance. Without careful consideration, you may not be able to maximize on some great opportunities.

There are two basic stages in the buying process.


For you to buy, you have to find some sellers. In the retail industry, unless there is only one supplier of a product, it is best to have several suppliers you can buy from. This helps you stay in control of your business in case one is not able to deliver.

In the sourcing stage, you will have to find out who is the best supplier. Note that the best is not necessarily the one who other retailers are buying from. The best is strictly according to your business needs.

Who sells at the lowest price? Who is willing to deliver to your store? Who gives the best after sales services? What are their return policies? What are their credit periods? What discounts do they give? These and many other questions will be asked and answered at this stage.

Take time to know the people behind those businesses. In some cases, the manager may not be able to give you a discount. But if you get to know the owner of the business and form a good relationship with him, you can get lower prices.

Remember that relationships are not just built with your customers but your suppliers as well. These are the people who facilitate your business. If you don’t have the goods then you will have nothing to sell.

Note that negotiations do not have to be solely based on the prices. Depending on what will benefit your business, you can get some advantage over your competitors if they collect their supplies while you get them delivered to your stores.

The advantage for you is the cutting down of operating costs. This eventually adds to your profit. Additionally, if you can get suppliers who are willing to give you longer credit periods, that can also work to your advantage.

This way, especially if you sell well, you may make more profit per financial period compared to the competition. This comes from the lower expenses you will have incurred due to less outgoing payments. This gives you the opportunity to put more money where it profits most.

This can be especially good when you are just starting your business.


The act of buying involves some processes. These processes can literally make or break your business especially when speed is required. At the same time, your processes must have appropriate checks and balances so as to ensure the safety of your business.

In this age of technology, you most likely have a computer system which is running a software fit for the buying process. There are notable retail systems which have functionality to help you achieve efficiency. In general, there are two types of systems you can employ, either alone or together:

I. Back-office system – this is the system you will use to make purchases and handle other work like record keeping. In purchasing, there is at least one document needed. This is the local purchase order (LPO). However, depending on the requirements of your system, which is really a reflection of the requirements of your business, you may need more documents.

Some businesses may require a purchase requisition from the shelf attendant to be attached to the LPO. Others may also require a quotation to show that the price in the LPO is what the supplier gave.

Most of these requirements are usually put in place for security purposes to prevent manipulation of the system. It is important to note however, that the more the requirements, the longer it takes to finalize the process of buying before making the actual order.

II. POS system – this is the system running at the check-out counter. The POS system is usually meant to communicate with the back-office system to give information of what has been purchased. This way, the whole system keeps the inventory in check.

In smaller businesses, the POS and back-office system can be combined. One system could have both capabilities such that the back office work is done when there is less POS work.

This should only be the case if you are the only person working in the business such that you do both the back-office and cashier work.

Procedures are key both when securing your system and the business in general as well as when looking to avoid unnecessary steps in the buying process. This is because it may take too long to go from one person to another in the case of a big business where there are several people who should give approvals.


This stage describes the processes involved in getting the bought goods ready and available for selling. Several steps are involved as discussed below.

1. Receive goods

Whether you have collected the goods from the supplier or they have been delivered at your store, this is the first step. Here, you have to confirm that the delivered goods are what you ordered. This is a safety measure.

Mistakes may happen either while receiving or they may have happened at the supplier’s side where the wrong goods were released. Check the exact goods in terms of weight/volume, quantity, type or flavor if applicable and any other relevant thing to be considered.

Something else to be confirmed is that the set procedures were followed when making the purchase. Depending on the requirements you have for your business, it is important that all the requirements be followed.

If for example there should be a requisition form, a quotation, LPO and maybe an electronic or manual approval, ensure these are all available.

Along the same line, the selling documents from the supplier should match the buying documents from your side. This is important so as to avoid problems during payments. Check whether the information on the invoice and delivery note match. These should also match the information on your LPO.

If your LPO used the prices quoted by the supplier, then those are the prices which should be on the invoice. If there is a difference, then it should be resolved before the goods are received into the store.

After all has been confirmed, then the receiving staff signs on the supplier’s documents and the goods are accepted into the store.

2. Storage

Received goods will normally head to the allocated storage space first. If the products have run out at the shelf, then immediate replenishing should be done.

Under storage, the goods are to be arranged in an orderly manner to enable quick and easy access when replenishing the shelves. It is also a good idea to have someone in charge of the storage area who can keep records of the products as they come in and leave for the shelf.

This acts as an extra layer of security and comes in handy when tracking down missing goods.

3. Shelf and product arrangement

Goods have to be arranged on the shelves where customers will pick them from. These arrangements should be done in ways which make it easy to be seen and picked.

Product arrangement should also be done in a relevant manner to draw customers in. For example, related items like toothpaste and toothbrushes should be close to each other. This will prompt some customers to replace their toothbrushes as they buy a new toothpaste.

Watch the below video for some tips on how to do visual merchandising.

4. Pricing

The products on your shelves must have the correct prices. Whether you use price tags or you have labels on the shelves themselves, the price must be correct. This is to avoid situations where a customer picks an item according to his budget only to realize when at the counter that the item is more expensive than the price indicated on the shelf.

The customer then has to make the decision at the counter on whether to pay extra or leave the product. Such a situation can also raise questions of insincerity and once customers can’t trust you, then you lose them. Possibly forever.

It is important for the shelf attendants to confirm prices upon receiving new stock. This is crucial because if goods come in at a higher price, you may have to increase their selling price to maintain your margins.

If there is a possibility of price variations from what is currently in the system, it may be advisable for the purchasing staff to quickly work on the changes. In case it may take long, then it is better for the products to stay off the shelf with customers being advised appropriately.


Selling could easily be said to be the main thing going on in a retail store. In any case, isn’t it all about buying goods to re-sell?

All the same, there are several things that make up the whole selling process. Since it is an ongoing business of selling, then you have to ensure that this is always happening. How do you do this?

1. In-store assistance

For maximum sales, you have to ensure that customers get assistance when in your store. You can consider empowering your shelf attendants for this task. Generally speaking, customers are likely to buy more and come again if they get assistance during shopping.

In-store assistance can be anything from welcoming customers into your store to helping them locate the products they want to buy. You can direct them to the right aisle, show them the manager’s office, help them find out whether another branch of your store has the product they want etc.

2. Customer service

At the heart of customer service is the need to develop relationships. Every human being wants and needs to feel valued. So when customers come to your store, no matter how big it is, they will appreciate more if they have someone to ask questions and get advice from.

The biggest mistake your staff could do at this point is rushing to sell. The customer will realize that you aren’t interested in meeting his needs but in getting his money. This will only work against you.

It is important that you first of all understand the needs of your customer then proceed to offer a suitable solution. If this happens well, then you could be the authoritative voice which gives advice instead of the internet.

The rule in customer service is that you should always seek to solve the customer’s problem. Once you do this, the customer will have no problem buying from you. Just remember to be honest and don’t push them to make a particular decision.

Another aspect of customer service with the intention of selling is doing suggestive selling. This is simply recommending to them to buy something that works alongside what they have bought.

For example, if someone buys toothpaste, you can suggest that he buys a toothbrush. To strengthen your suggestion, tell them that it’s advisable to change toothbrushes every three months. The more relevant information you give, the more likely you are to sell.

A common mistake to avoid during customer care is giving certain customers preferential treatment over others. Understand that as much as the returning customer is important, so is the new one. If you treat the new customer well, he will come again. And he may come back with a friend.

3. Handling complaints

Despite all your good efforts, you will always have complaints from customers. Be it products which did not work as expected or complaints about the customer service you thought was awesome. You should be ready for these.

If you have a returns policy, then you need to follow it in case products are being returned. However, there will most likely be unique situations which need a different approach.

When it comes to handling complaints, remember that the focus should be on the customer. Seek to understand the customer and make them feel valued. Let them know that their complaint has been received as feedback then proceed to solve the problem.


Every industry has some best practices which help guarantee smooth operations. Although some of these are applicable across all or many industries, there are those which are quite unique to the retail industry.

Below we look at some best practices which you can implement for better business results. This list is a mix of general tips that can be applied to any business and those specific to the retail industry.

1. Communication

This is really necessary everywhere regardless of the industry you are in. When you have good communication, you can be sure that the job will be done well. This is because information shared is being understood.

At the heart of communication is the mutual respect between the people exchanging information. Each party should first seek to understand the other person then be understood. Without understanding the other person, you might not communicate with him well.

For your retail business, communication comes in three ways:

  • Business to business communication is when you are exchanging information between yourself and any of your business partners. These could be your suppliers, banks, auditors and any other external entity which is facilitating your business. You have to keep in mind that just as you are in business, so are your business partners. Both you and them are seeking to make money. As such, clear communication that is understandable should always be sought.
  • Business to employee communication is where you are communicating with your employees. As the people who are mainly working for you, you have to treat them well. Failing to treat your employees well could raise issues with labor officers or even lead your employees to defraud you. It is therefore important to develop a good relationship with your employees just as is the case with your customers. Keep in mind that it is your employees who interact with customers.
  • Business to customer communication is what happens through advertising, marketing etc. This communication is mostly one-directional whereby it is you giving the communication while your customer is consuming the information. Customer care can also be viewed as business to customer communication. In this case however, the communication is slightly different in that it it two-way. The customer gives feedback, while you respond to them.

2. Limit sales / promotions

In your desire to make more sales, you might be tempted to offer more promotions to attract more customers. This however should be done in moderation. Over-doing it can bring serious challenges which may not be very easy to handle.

To understand this, just think of your profit margins. As much as more sales could bring bigger profits, the way to go about it is not always the promotion way.

When you offer too many promotions, you create a mindset in the customers’ minds that you are all about promotions. With this attitude towards your business, whenever you are not having a promotion, they will not buy. They will be waiting for the upcoming promotion so as to buy when things are cheaper.

Watch the below video to see what other options your retail business could use to move stocks faster.

3. Employee training

Getting the right employees for your retail business is a must. You will obviously do well to hire qualified and hopefully, experienced employees. That hiring should however not be the end of having a great team.

Employees know how competitive the job market is. As such, the smart ones usually enroll themselves in classes to further their knowledge and remain relevant. As good as this is, it gets better when their employers recognize the need to offer them training that is relevant to the business.

The truth is that not all your employees are excited about working for you. Some may be with you just for the rime being as they search for their dream jobs. Others may not have desired the retail industry but having gotten the job, lack the enthusiasm to develop themselves along those lines.

But won’t your business need more knowledgeable staff?

You need to make it your responsibility to offer employee training. This maximizes on their suitability to serve your customers in the best way possible, or as the industry requires. Still, the industry requirements can be exceeded.

When you offer your employees relevant training, you make them more productive for your business. As you increase their capacity, you also reap the benefits.

4. Salaries, benefits and incentives

Whenever effort is dispensed, there has to be some form of compensation. This is true for all work.

Your employees work for you and they expect to have compensation for the efforts they put in. Although not all of your employees may know exactly how much your business makes, they are smart enough to know that they are important to the business.

As you build a team to work with, consider the market rates of the salaries of the various employees you will have. Unless yours is a really small business and cannot manage to offer competitive salaries, ensure you explain it to the candidate during the interview.

Make it known that there are benefits and incentives. These will show that you have other ways of rewarding your employees and will help in retaining them.

Benefits are usually available for all employees e.g. a pension scheme, health insurance etc. Incentives on the other hand are more performance-based. They tell the employee that the more they deliver, the more of something great they can get.

As an employer, you will have to make these very attractive and as your business grows, ensure that you make them even better.

5. Recognize and value your employees

As much as incentives can recognize the efforts an employee puts in, there is more to recognizing your staff than through these. To better understand the importance of valuing your staff, consider that there is a relationship between you and your employees.

It is therefore all about building that relationship.

Just as it works in other kinds of relationships, you have to respect your employees. Respecting them means that as much as you are giving them instructions, also consider listening to them. Some of them may know something about your competitor that you may not know from any other source.

If you are implementing some new ways of working, don’t just direct them to do things in a certain way. Create an environment that is suitable for holding conversations. Engage them and explain how the company is changing its approach thus the new way of operating.

Whenever an employee does something good, be sure to acknowledge his effort verbally. Encourage them by mentioning it during office meetings. Do not hold back those positive comments as they really build up your staff and encourage them to do more. This shows them that their efforts are noticed and valued.

6. Hiring and firing

As a business, you need to make decisions on a daily basis. Some may be easy whereas others may make you uncomfortable though they are necessary.

Two major decisions are about hiring and dismissing an employee. You may think that this is not a difficult decision until you get a friend or family member who approaches you for a job though he is not qualified. Or an employee performs fairly well but is disrespectful to others.

In such cases, you will need to make the decision that is best for your business. For example, if a family member needs a job but is not qualified, you should put the needs of your business first. Remember that you have to protect the needs of your business.

Although your decision may seem harsh, just consider the effects of having a non-performing staff who may not be very open to correction. Always consider the pros and cons of working with family members.

7. Know your competitors

Apart from knowing the strengths and weaknesses of your staff, you should also know two more kind of people: your customers and competitors.

Knowing your customers helps you serve them better. Many businesses put a lot of effort in this—and that is good. What should be included on top of that, is the knowledge of your competitors.

These are the people who may potentially push you out of business. They are the ones who work on ensuring that your customers become theirs. When you know your competitors, you will have a balanced and informed approach to your own business.

You should know the individuals behind the big brands. You should know about their relationship with suppliers, customers and employees. Such information helps you understand the strengths and strategies used by them in their quest to gain a bigger market share.

With this information, you are then well placed to come up with a strategy that will effectively counter them and establish you as the best option in the industry.

8. Respond to your customers

If you value someone, you will be naturally interested in knowing what is troubling him. This means that you will be willing to listen to them express themselves about the issue at hand. It is through listening that you understand the situation then respond accordingly.

This is what customer care is really about. When customers make inquiries or give feedback, their communication should be considered and responded to. No matter how small the issue raised by a customer is, the right response is important.

If you have given an email address on on your website or business card, ensure that you check those emails regularly. In fact on a daily basis or several times in a day. When a customer recommends a certain way of operating, listen and promise to share his thoughts with the appropriate people.

When your customers feel that they can give feedback and it will be considered, they feel like they are a part of you. This increases their loyalty to you.

9. KPIs

These are the basic methods of gauging an employee’s performance at work. Key Performance Indicators (KPIs) help you set some standards for your employees either for individual performance or group performance.

KPIs are helpful as they make it easy for an employee to know exactly what he is expected to achieve. When expectations are clearly defined, it becomes easy to work towards them and monitor progress.

The achievement of KPIs also helps in recognizing the efforts of employees. In this case, you cannot use one person’s KPIs to “wrongfully” reward someone else. You will therefore have no complaints about one employee working but the recognition going to another.

10. Prioritizing tasks

Time is a very valuable but scarce resource. It is also impossible to recover it once misused or lost. So how do you avoid such situations?

There is a lot of talk about setting priorities and following through with them. The problem usually starts with the challenge of distinguishing between what must be done from what may not even be necessary.

When it comes to your retail business, you may face a lot of challenges with the many tasks that need to be done. This is especially a problem when you are starting and don’t have the money to hire enough employees.

As such, you may be the one doing everything though nothing is really getting finished. This can lead to frustrations. There is an easy way to avoid the frustration.

Number the tasks you have in an ascending order. Then proceed to allocate time frames for each tasks. From here, start working on the tasks from the most important to the least.

For example, you may have received some products to sell. Those products may have been more expensive and so you need to work out new retail prices. On this same day, you may not have checked your emails. This means that you have not responded to your customers.

You will therefore need to start working on the most important task. In this case, it is the new prices of the received goods. Once this is done, you can safely sell the goods. Since selling is the primary work to be done, mails can be checked afterwards.


  • The retail industry has been experiencing changes as more people shop online. Buying from the physical store is however not stopping any time soon. People still want to touch products, interact with live humans and enjoy a real shopping experience.
  • If you are thinking of starting a retail business, just follow the advice given in this article. You will then be on your way to carving a market share for yourself.

Retail Management: Definition, Processes, Best Practices

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