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A Strategic Tool for Performance Analysis of Retail Formats

Volume 19, Number 4 Article by Jaideep Malhotra December, 2007

Retail Matrix: A Strategic Tool for Performance Analysis of Retail Formats :

The Retail Matrix is a strategic tool that can help retailers in analysing the performance of their shop-in-shops (SIS), i e shops inside departmental stores. The traditional tools used by retailers to assess performance are financial parameters like Gross Margin Return on Investment (GMROI), Gross Margin Return on footage or per square foot (GMROF), and Gross Margin Return on Full Time Employee (GMROL). However, the performance of a retail business cannot be judged on these parameters alone. There are several other non-financial parameters which affect the performance of a retail store, including the location of the store, the profile of visitors visiting the store, the number of competitors located in the vicinity, the location of the SIS within the departmental store and the visibility of the SIS. Although retailers know that these factors play a role in the performance of any store, they are not quantifiable and no specific tool exists that takes these factors into account. In this award winning student essay, Jaideep Malhotra develops a model to address this need.

The Retail Matrix incorporates both financial and non-financial parameters to assess the performance of an SIS. It has Judge Parameters or financial parameters on one axis, and Jury Parameters or non-financial parameters on the other. The stores of a single retailer at multiple locations were given scores on the different parameters, which were assigned weights through multivariate analysis. The total scores were used to plot the stores in the Retail Matrix. On the basis of their positions in the four quadrants of the matrix, the stores were categorised as performers, potential performers, foot-draggers and those that were a cause of concern. Such a categorisation will help retailers to tailor appropriate strategies for individual outlets.

Reprint No 07402