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Keywords
Retailing, Productivity, Strategy
Abstract
Revisits the strategic resource management (SRM) model, a framework that was developed 20 years ago as a managerial tool for performance measurement and integrated decision making in retailing. Shows certain modifications to the SRM model, focusing on the gross and net margin return on retail space (i.e. GMROF and NMROF) as the key metrics. Authors contend the new focus gives the SRM framework a firmer grounding conceptually, and makes the SRM model more directional in practice. The paper also extends the SRM framework from its traditional gross margin metrics to net margin. Authors believe the greatest benefits of the SRM framework continue to be in benchmarking, planning, and executing alternative inventory, space, and people strategies in an integrative fashion.
Any medium to large-scale retail enterprise in today's global market environment - with thousands of locations spanning the world, each carrying several hundred thousand SKUs, and employing a similar number of workers, is a highly sophisticated machine. Added to this complexity is an intensely competitive market environment where major players are no longer isolated in their local markets, but are competing across national boundaries. Despite this growing complexity, however, the fundamentals of retail management - in managing the investments they make in merchandise, space, and people to generate sales - have remained essentially unchanged.
What is different in today's market environment is not so much these management fundamentals, but the emerging imperative to employ highly disciplined, and increasingly more sophisticated, analytical methods to a significant mass of data that are being (or need to be) collected at major retail enterprises today. The old adage, which says, "You can't manage what you can't measure", is certainly truer today than it has ever been in the past.
The centrality of merchandise, space, and people and their interactions in retail enterprises is well known to most students and managers of retailing. What the casual observer of this unique industry sometimes overlooks is the collective impact of these resource decisions on enterprise profitability. As we outline in Figure 1, the net result of the retailer's decisions with respect to inventory, space, and people - along with the choice of a target margin or markup - is virtually exhaustive of all of...