BUSI 446 Week 8 Retail Management Project Final Report Example

Retail Management Project Final Report: A Retail Strategy for Harvest Lane Market

Introduction

This report brings together the retail strategy developed for Harvest Lane Market across the course. Parts 1 through 3 revise the three interim reports. Following the instructor's comments, Part 1 now states how the competitive advantage will be measured, Part 2 estimates what employee turnover costs the company each year, and Part 3 adds the sales volume the prepared-meals counter needs to cover its fixed costs. Part 4 answers the final prompts on store management, layout and customer service. The goal throughout is a single plan: deepen the trips Harvest Lane already wins by making fresh and prepared food its reason to be chosen.

Part 1: Customers, Strategy and Financial Position

Harvest Lane Market operates six compact supermarkets in the Lynchburg, Virginia, area, averaging 28,000 square feet, with annual sales of $62 million. Its shoppers are mainly families earning $60,000 to $120,000 who live within a 10-minute drive and value fresh food. Most of their grocery decisions are habitual (Levy et al., 2019), so winning a household's routine is worth far more than winning a single trip.

Households divide their grocery spending among formats, choosing the store that suits each kind of trip (Fox et al., 2004). Supercenters capture the big monthly stock-up; Harvest Lane captures the weekly trip for fresh food. The strategy is to grow within the trips it already holds rather than chase the stock-up shopper on price.

Using the three parts of a retail strategy described by Levy et al. (2019), the strategy is as follows. The target market is the family shopper described above. The format is a compact supermarket that is deep in fresh, local and prepared food and lighter in center-store variety. The sustainable competitive advantage is a 30-year network of about 40 regional farm suppliers that national chains cannot easily copy. A retailer's image rests on its assortment, service and store experience as much as its prices (Ailawadi & Keller, 2004), and being known locally as the place for fresh food is the most valuable thing Harvest Lane owns.

*Revision: measuring the advantage.* The interim report named the advantage but not how to track it. Harvest Lane will follow three measures each quarter: fresh departments' share of sales, now 41 percent, with a target of 45 percent; local products' share of fresh sales, now 22 percent; and the share of loyalty members who buy fresh produce on at least three of every four visits. If these measures fall while total sales hold, the advantage is weakening even though the stores look healthy.

Financially, Harvest Lane earns $1.24 million in net profit on $62 million in sales, a net profit margin of 2.0 percent. With $20.7 million in total assets, asset turnover is 3.0 times, and the strategic profit model gives a return on assets of 6.0 percent (Levy et al., 2019). As is common in grocery, turnover rather than margin does most of the work in producing that return. Any new investment must therefore either raise sales enough to keep turnover near 3.0 or earn a higher margin than the stores' average, which is the test the prepared-meals counter must pass.

The instructor also asked whether market expansion had been considered. It was, and rejected for now: opening a seventh store would require about $3.4 million in assets for fixtures, equipment and inventory, and the best candidate location is already served by a supercenter and two supermarkets. Selling more to the households Harvest Lane already serves is cheaper and builds on what those households already value.

Part 2: People, Supply and Customer Data

Harvest Lane employs about 420 people, roughly 280 of them part-time. Part-time turnover was 78 percent last year. Higher turnover goes with weaker store performance, although stores whose employees follow standard processes closely are hurt less (Ton & Huckman, 2008). For a grocer whose advantage depends on well-kept produce and knowledgeable answers about local products, every departing clerk takes some of that advantage out the door.

*Revision: the cost of turnover.* At 78 percent, about 218 part-time clerks leave each year. Counting recruiting, onboarding, training hours and lost productivity in the first weeks, the human resources manager puts each departure's cost near $2,500, or roughly $545,000 a year, close to half of annual net profit. Fixed weekly schedules posted three weeks ahead, the most common request in exit interviews, and a two-week pairing of each new hire with an experienced clerk aim to bring turnover down to 55 percent. That would mean about 64 fewer departures and savings near $160,000 a year, before counting any gain in service.

On the supply side, local products were out of stock on 9 percent of shelf checks, against 4 percent for wholesaler products. Most out-of-stocks begin with store ordering and replenishment rather than with the supplier (Corsten & Gruen, 2003), and Harvest Lane's department managers still order from farms by hand. The eight largest farm suppliers, providing about 60 percent of local volume, will move to vendor-managed replenishment using daily point-of-sale data, within order limits each store approves (Levy et al., 2019). The target is a local out-of-stock rate of 5 percent within six months.

The instructor questioned whether small farms could handle data sharing. Two of the eight already use a delivery app that accepts electronic orders, and the other six have agreed to a three-month trial in which Harvest Lane's buyer reviews each automatic order before it goes out. If a farm cannot keep pace, it returns to manual ordering with a shared weekly sales report, so no supplier relationship is put at risk by the change. Reliable supply matters even more once the prepared-meals counter opens, because its menu depends on the same farms' meat and vegetables.

Loyalty cards are scanned on roughly seven of every ten dollars spent. Because customers who stay longest do not always bring the most profit (Reinartz & Kumar, 2000), each member will be scored on gross margin over the past 12 months instead of on visits. The highest-scoring 15 percent will get fresh and prepared-food offers in place of the blanket coupons everyone receives today.

Part 3: Pricing and Promotion of the Prepared-Meals Counter

The counter will sell family-size entrees for four with two sides at $19.99. Direct costs are $8.40 for ingredients and packaging and $3.10 for kitchen labor, leaving a contribution of $8.49 per meal, a 42.5 percent gross margin, well above the stores' 30 percent average. Comparable meals at two nearby competitors sell for $21.99 and $24.99.

*Revision: break-even volume.* The interim report set a price without asking how many meals must sell. The counter's yearly fixed costs are $150,000 in equipment depreciation ($1.5 million over 10 years) and $180,000 for counter supervisors' salaries, $330,000 in all.

Eighteen meals a day per store is modest for stores that serve several thousand shoppers a week, which supports going ahead, but a pilot in two stores should confirm demand before all six invest. In the two pilot stores, the equipment would cost about $500,000, so their share of fixed costs is roughly $110,000 a year, and each pilot store would need about the same 18 meals a day to break even. If the pilot stores average 25 or more meals a day after three months, the counter goes to the remaining four stores; if they average fewer than 15, the menu and location are reworked before any further investment.

The counter will hold its prices steady instead of following the center store's weekly specials. When a supermarket chain tested both directions, lower everyday prices added little volume and hurt profit, and higher ones lost little volume and helped profit (Hoch et al., 1994). Supermarkets tend to choose pricing formats that fit their local shoppers and their rivals (Ellickson & Misra, 2008). Weeknight convenience buyers are served better by a price they can count on, so the menu will change and the price will not.

Promotion will target the top loyalty tier, because promotions aimed at chosen customers cost less per valuable shopper reached than mass offers (Ailawadi et al., 2009). Top-tier members will receive a free sample-meal coupon in the counter's first month, signs will run at the entrance and the meat counter, and members who redeem the sample will receive a weekly menu email. Success means at least 35 percent of those who try a sample meal coming back to buy within a month.

Part 4: Managing the Store, Layout and Customer Service

Staffing the Store to Its Traffic

Levy et al. (2019) describe the store manager's work as recruiting, training, motivating and scheduling employees while controlling costs. The most common way to control store labor cost is to schedule to a budget, but the budget can hide a costly error. Mani et al. (2015) used traffic counts from a large retail chain and showed that stores were frequently understaffed during busy hours, and that the sales lost in those hours were larger than the labor saved. Cutting hours when the store is full saves wages and loses sales.

Harvest Lane's stores already count customers at the doors. Store managers will build schedules from those counts, adding clerks to fresh departments and checkouts from 4 to 7 p.m. on weekdays, when traffic peaks and the prepared-meals counter is busiest, and trimming hours in the slowest morning periods to hold the budget. The fixed schedules promised in Part 2 remain possible because traffic patterns repeat from week to week.

Managers matter too. Netemeyer et al. (2010) studied a retail chain and found that store managers' performance and satisfaction carried through to their employees' performance and satisfaction, and from there to customer satisfaction and growth in customer spending. Harvest Lane will add a quarterly coaching review for each store manager, focused on staff retention and the fresh-department measures from Part 1.

Store managers also control loss. Levy et al. (2019) describe shrinkage from shoplifting, employee theft, vendor errors and paperwork mistakes, and in a fresh-food store spoilage is a large part of the loss. The prepared-meals counter adds a new source, meals cooked but not sold by closing time. Managers will track unsold meals daily, mark them down by 30 percent after 6 p.m., and donate what remains at closing to a local food pantry, which limits waste and serves neighbors in need. Kitchen staff will cook in smaller batches through the evening rather than all at once, guided by each day's sales pattern from the previous four weeks.

Store Layout and Visual Merchandising

Levy et al. (2019) describe the main layout types: the grid, typical of grocery stores; the racetrack, which leads shoppers along a main aisle; and the free-form layout. Harvest Lane uses a grid with produce on the right of the entrance, a common arrangement. The prepared-meals counter, however, would fit naturally in the back corner beside the deli, where many shoppers on a short trip never go.

Store layout affects spending. Hui et al. (2013) tracked shoppers' paths in a grocery store and found that the farther shoppers traveled within the store, the more unplanned purchases they made. Inman et al. (2009) found that displays and category characteristics shape how many purchase decisions shoppers make in the store rather than before arriving. Those findings point in two directions. A counter in the back corner would draw shoppers deeper into the store and raise unplanned purchases on the way. But a weeknight shopper who came only for dinner might not find it at all.

The plan does both. The counter will sit at the back next to the deli, and a small refrigerated case at the entrance will hold a rotating selection of that evening's meals, with a sign pointing to the full counter. Shoppers in a hurry can buy at the front; those with time will walk the store. Fixtures in the fresh departments will be lowered so that the counter is visible from the produce area, and the store's signs will feature named local farms, which reinforces the competitive advantage at the point of sale. The two pilot stores will compare basket size and counter sales between the entrance case and the back counter after eight weeks.

Customer Service Standards

Levy et al. (2019) distinguish a standardized service approach, built on rules and procedures, from a customized approach that adapts to each customer, and note that the gap between what customers expect and what they receive is where service fails. Service quality has measurable consequences: customers who judge service favorably are more likely to remain loyal, recommend the store and accept higher prices, while poor service leads them to switch and complain (Zeithaml et al., 1996).

Harvest Lane will combine both approaches. Standardized rules will cover the basics: every fresh-department employee greets shoppers within 10 feet, walks a shopper to any item asked about rather than pointing, and offers a taste of any prepared meal on request. Customized service will come from a no-questions-asked guarantee on fresh and prepared food, so that any employee can replace a meal or refund it without calling a manager. Service will be measured through a two-question survey printed on receipts each month, with a target of 85 percent of respondents rating their visit four or five out of five, and through the share of loyalty members who return within two weeks.

Conclusion

The four parts describe one strategy, and each revision made it more concrete: the advantage now has measures, turnover has a cost, and the counter has a volume it must reach. Harvest Lane competes on fresh, local and prepared food for families on weekly fill-in trips. Stable, well-scheduled staff, reliable local supply and better use of loyalty data protect that advantage; steady pricing and targeted promotion launch the prepared-meals counter; and a layout and service standards built around fresh food make the advantage visible in every store. The first actions for the coming year are the two-store counter pilot, fixed schedules for part-time clerks and vendor-managed replenishment with the eight largest farms, each measured quarterly against the targets set in this report.

References

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