Retail Chain Management: Current State, Model, and Methods

Vũ Khôi

Author at Wotech Electronics Blog

How to manage a retail chain effectively has always been a thorny problem for retailers in today's market. The growing number of products and demand from far-flung locations push retailers to expand their sales footprint to cover more customers. However, expanding a retail chain while maintaining stable revenue and minimizing risk is what keeps managers up at night.

The current state of retail chains in Vietnam

Experts regard Vietnam's retail market as one of the most vibrant in the world. A large population of over 96 million people combined with a young demographic structure (58.5% of the population aged 15–54 according to the General Statistics Office) has strongly fueled retail commerce in Vietnam, with the most recent statistics showing a compound annual growth rate (CAGR) above 10% (according to Vietnam Report). For that reason, Vietnam's retail market is seeing ever more competition as more brands enter — while also opening up enormous opportunities for Vietnamese retail on the road ahead.

Another branch of retail — shopping malls — is also recording extremely positive growth of 11%. Within it, Vingroup still dominates with more Vincom shopping centers than any other mall operator.

In the near future, the retail industry will be somewhat affected by the still highly unpredictable Covid-19 pandemic. Reports indicate nearly 42% of retail businesses were severely impacted by Covid. Nevertheless, despite facing many difficulties, in the long term Vietnam's retail market is still rated highly by experts for its development prospects, especially in pushing the omnichannel selling trend.

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How to manage a retail chain

Look at large corporations like Big C, Metro, Parkson… They have all been very successful at entering different markets by building retail store chains. So how do these large businesses maintain stable revenue? There are always strategies they must follow, specifically including:

Financial management

Financial management is indispensable whether your business model is small-scale retail or a large enterprise. Simply managing the finances of each individual store is hard enough without a proper management approach — let alone an entire retail chain. In essence, finance covers everything from money, supplies, and materials to assets arising when capital is formed, plus the receipts and payments during operations. To manage all of these elements well, managers must be able to answer questions such as:

• Where does the capital come from? Should it be contributed or borrowed? When will the initial investment be recovered?

• What are the total revenues of the stores? Are they in balance with one another?

• What are the cash flows and the costs of selling, purchasing stock, and maintaining the product cycle?

• What are profit before tax and profit after tax? Compare these metrics across branches.

Good financial management helps retailers be more proactive in business decisions and thereby set sound strategies. Beyond that, businesses can assess their operating performance in time and control costs better.

Materials and quality management

One of the factors that make or break selling is product quality. Poor quality control of goods leads to unnecessary losses. When a business expands into a retail chain, goods management must become far tighter and more professional, because the volume, variety, and movement of goods between branches become more complex. In addition, one reason many retail chains fail is that they lack a supply of goods that is stable in both quality and price.

Materials management is also an extremely difficult task for businesses with retail chains. Improper management leads to losses in sales — for example, having far too little or far too much material on hand. Moreover, managing materials and goods is essential for receiving stock, issuing stock, and transporting products from one place to another.

Staff management

One of the biggest challenges in hiring for retail chain models is the high turnover rate: 28% of employers say candidates don't commit to working long-term, and about 49% of candidates waver when they receive an offer or invitation from competitors. Furthermore, the distance between stores makes it impossible for managers to keep a close eye on all staff across the system. As a result, many stores face dishonest-employee problems that cause significant losses.

Some proposed solutions for HR management are:

• Set clear criteria for personnel

• Adopt sensible and effective attendance, payroll, and shift-splitting models

• Organize training to raise professional skills as well as professional ethics

• Offer good salary, bonus, and benefits schemes to encourage employees to work more productively

• Apply advanced software to improve management capability

Customer management

In retail, one current reality for many stores is that they neglect customer data management and customer care and appreciation programs. This stems partly from retailers not knowing how to collect and manage customer data quickly and easily — especially when you must manage a chain with an enormous number of customers.

Take advantage of technology to optimize storing customer information across multiple platforms. From there, build long-term relationships with customers and encourage them to buy more from your stores. Connecting the stores within the chain is also a plus — it makes customers feel looked after, cared for, and entitled to certain benefits.

Regularly show customers you care by sending greetings and invitations on special occasions, or giving them special offers and promotions once they accumulate a certain purchase volume. Building a loyalty program that encourages customers to shop more is also a very sensible idea.

Technology management

As technology advances, stores are increasingly favoring software to support the management of their chains. However, the question they always wrestle with is which management software delivers the best results. When choosing software, stores look at features such as:

• Point of sale / cashier

• Inventory in-out management

• Online selling on e-commerce channels

• Cash and receipts/payments management

• Monitoring store performance and producing reports and statistics

• Managing shipping and receiving parties

• Order management and promotional programs

SimERP is one of the platforms that supports businesses extremely well in their digital transformation, providing a complete management system for the entire workflow. With SimERP software, businesses can optimize time and costs and store data on a big-data system, making sales management faster and more convenient than ever. From there, they can meet customer needs and raise the company's standing in the market.

The retail chain management model

From the individual factors above, brands should set a requirement to build a complete chain management model.

As you can see, within a chain of retail stores there is always a main store that serves as the central office — where the company's core departments are concentrated. This is where directors and management teams work directly and run the entire system of retail stores. If store management is carried out through technology, the system's server is placed at this central office. All data on sales, losses, and personnel records is collected by the retail stores and sent back to the server system for processing. With everything organized and arranged sensibly, supervision, tracking, and administration become far more convenient, and controlling the figures becomes easier and more effective.

Connected to the central office are retail stores of large, medium, or small scale. These stores include fewer departments but always maintain a certain number of sales staff: cashiers, managers, wholesale staff, and so on. Products are distributed to these stores with the aim of easily reaching more customers. From the overall model above, sales management also becomes far more convenient.

In short, with a chain of retail stores, allocating resources and building a connected network for each store's sales management is extremely important. Not only does it make sales management run smoothly, an effective sales network creates many development opportunities for the stores and many chances to reach customers — which in turn generates significant revenue.

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