Retail Strategy Ric Anderson9.16.10

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RETAIL STRATEGY FIND THE BEST CUSTOMER FOR YOUR BUSINESS!AND MAKE IT WORK!

byRIC ANDERSON

RETAIL STRATEGY : FIND THE BEST CUSTOMER FOR YOUR BUSINESS!2

OBJECTIVES:OBJECTIVES:Understand the processes to create a Retail StrategyUnderstand the processes to create a Retail Strategywith a Customer Centric Focuswith a Customer Centric Focus

Learn to analyze your business and competition from Learn to analyze your business and competition from a multi-dimensional point of view.a multi-dimensional point of view.

Refine your “Customer Value Proposition”Refine your “Customer Value Proposition”

Use Innovation as a Competitive AdvantageUse Innovation as a Competitive Advantage

Understand the power of an “Engaged Culture”Understand the power of an “Engaged Culture”

MURPHY'S LAW OF MANAGEMENT STRATEGY MURPHY'S LAW OF MANAGEMENT STRATEGY Some people manage by the book,

even though they don't know who wrote the bookor even what book.

STRATEGYSTRATEGYTHE DEFINITION OF BUSINESS STRATEGY IS:

A LONG TERM PLAN OF ACTION DESIGNED TO ACHIEVE A PARTICULAR GOAL OR SET OF

OBJECTIVES

AGENDA:AGENDA:

Frame of ReferenceFrame of ReferenceGoals and Point of ViewGoals and Point of ViewVisit the “3 Stages” of Strategy Timeline & PathVisit the “3 Stages” of Strategy Timeline & PathBreakdown “Stages” into ProcessesBreakdown “Stages” into ProcessesFinalize and ExecuteFinalize and Execute

WHAT IS THE PURPOSE OF A WHAT IS THE PURPOSE OF A BUSINESS?BUSINESS?

EVERY BUSINESS HAS A “PURPOSE!EVERY BUSINESS HAS A “PURPOSE!THAT PURPOSE IS TO PROVIDE THAT PURPOSE IS TO PROVIDE A PRODUCT OR SERVICE A PRODUCT OR SERVICE WHERE THE CUSTOMER HAS WHERE THE CUSTOMER HAS

A PERCEIVED VALUE! A PERCEIVED VALUE!

KEY PIECE KEY PIECE OF THE OF THE

PUZZLEPUZZLE

WHAT IS YOUR PURPOSE?WHAT IS YOUR PURPOSE?

WHAT SANDBOX ARE YOU PLAYING IN?WHAT SANDBOX ARE YOU PLAYING IN?

CURRENT STATE:CURRENT STATE:Your system is perfectly designed to produceYour system is perfectly designed to producethe results that you are getting today. the results that you are getting today.

LESSON:LESSON: If you want fundamentally and If you want fundamentally and substantially different results, you have substantially different results, you have to change the strategy and methodology to change the strategy and methodology of how you are doing business!of how you are doing business!

Insanity: Doing the same thing over and over again And expecting different results.Albert Einstein

THE “STRATEGY” FOR A RETAIL STORE THE “STRATEGY” FOR A RETAIL STORE IS A LIVING ORGANISM!IS A LIVING ORGANISM!

INNOVATION KEEPS IT HEALTHY!INNOVATION KEEPS IT HEALTHY!

ANDERSON’s 10 PILLARS:ANDERSON’s 10 PILLARS: BUILDING A FOUNDATION

1.1. 10,000 FT POINT OF VIEW10,000 FT POINT OF VIEW

2.2. CUSTOMER CENTRIC FOCUSCUSTOMER CENTRIC FOCUS

3.3. INTEGRATED STRATEGYINTEGRATED STRATEGY4.4. MULTI-DIMENSIONAL SOLUTIONSMULTI-DIMENSIONAL SOLUTIONS

5.5. COMPETITIVE & INTERNAL INTELLIGENCECOMPETITIVE & INTERNAL INTELLIGENCE

6.6. SUPREMACY THROUGH COMPETITIVE ADVANTAGESSUPREMACY THROUGH COMPETITIVE ADVANTAGES

7.7. ABILITY TO SYNTHESIZE HIGHLY QUANTITATIVE AND ABILITY TO SYNTHESIZE HIGHLY QUANTITATIVE AND QUALITATIVE DATA INTO A LOGICAL CONCLUSION.QUALITATIVE DATA INTO A LOGICAL CONCLUSION.

8.8. CONTINUOUS INNOVATIONCONTINUOUS INNOVATION9.9. ENGAGED CULTURE ENGAGED CULTURE 10.10.COMMUNICATIONCOMMUNICATION

GOALS: GOALS: HIGH LEVELEvaluate multiple “Solutions” to your Strategy. Evaluate multiple “Solutions” to your Strategy.

Build a Strategy that can create growth, is Build a Strategy that can create growth, is profitable,profitable,

sustainable, scalable, integrated, defendable andsustainable, scalable, integrated, defendable andhas competitive supremacy.has competitive supremacy.

Can easily be communicated.Can easily be communicated.

GOALS : GOALS : POINT OF VIEW Profitable “Market Niches” GrowthProfitable “Market Niches” Growth High ROIHigh ROI ““Best in Class” and “Top of Mind” Best in Class” and “Top of Mind” Innovative Customer TouchpointsInnovative Customer Touchpoints High Productivity Revenues ChannelsHigh Productivity Revenues Channels FlexibleFlexible Smooth Transition Smooth Transition Least RiskLeast Risk

CRITICAL PATHCRITICAL PATHPredetermined set of Processes and Predetermined set of Processes and

TimelinesTimelinesSEEK OUT, SURFACE AND RESOLVESEEK OUT, SURFACE AND RESOLVE

CRITICAL THOUGHT PROCESSCRITICAL THOUGHT PROCESS

THE “CRITICAL THOUGHT PROCESS” THE “CRITICAL THOUGHT PROCESS” IS THE PATHWAY TO A SOLUTION!IS THE PATHWAY TO A SOLUTION!

THREE STAGES OF BUILDING STRATEGY:THREE STAGES OF BUILDING STRATEGY:

1) Look, Listen and Learn

2) Evaluate, Collaborate and Test

3) Assemble and Execute

STAGE ISTAGE ILOOK, LISTEN AND LEARNLOOK, LISTEN AND LEARNCHAMPIONCHAMPIONA Senior Executive has to be given Authority:A Senior Executive has to be given Authority: Gather Data & Collect Information Gather Data & Collect Information Ask difficult & hard questionsAsk difficult & hard questions Request other’s time & assetsRequest other’s time & assets Conclusion and ExecutionConclusion and Execution

RequirementsRequirements ListenListen Open MindOpen Mind Qualitative and Quantitative Skill SetsQualitative and Quantitative Skill Sets

MARKETPLACE MARKETPLACE Which Marketplace?Which Marketplace?

What Products? What Products? Value?Value?

Channels of RevenueChannels of Revenue

WHERE AND WHAT IS YOUR SANDBOX?WHERE AND WHAT IS YOUR SANDBOX?

BRAND POSITION, BRAND POSITION, CUSTOMER VALUE PROPOSITION CUSTOMER VALUE PROPOSITION

and and BUSINESS MODELBUSINESS MODEL

BRAND POSITION BRAND POSITION

CUSTOMER VALUE CUSTOMER VALUE PROPOSITION PROPOSITION

(CVP)(CVP)

BUSINESS MODELBUSINESS MODEL

FINANCIAL GOALS and DATA FINANCIAL GOALS and DATA Plans vs. Current StatePlans vs. Current State

““Work Sessions” with Finance, Merchants Operations Work Sessions” with Finance, Merchants Operations

etc. etc.

Competitive Intelligence Competitive Intelligence

Where are the opportunities?Where are the opportunities?

PRODUCT CATEGORY REVIEWPRODUCT CATEGORY REVIEW

MARKET SHARE MARKET SHARE

FINANCIAL ANALYSIS FINANCIAL ANALYSIS

ANALYSIS BY PRODUCT FILTERS ANALYSIS BY PRODUCT FILTERS

COMPETITIVE ADVANTAGES COMPETITIVE ADVANTAGES

PRODUCT CATEGORY REVIEWPRODUCT CATEGORY REVIEWMARKET SHARE MARKET SHARE

MARKET SHARE BY COMPETITOR JEANS

PRODUCTS Comp. 1Comp. 2 Comp. 3 Comp. 4 Comp. 5Women's 10.0% 8.0% 4.0% 7.0% 6.0%Men's 4.0% 6.0% 8.0% 5.0% 4.0%Kids 5.0% 8.0% 7.0% 5.0%Footwear 8.0% 6.0% 7.0%Accessories 8.0% 6.0% 5.0% 1.0% 3.0%Intimate 6.0% 5.0% 4.0% 2.0%Fine Jewelry 5.0%Home 4.0% 7.0% 6.0%

PRODUCT CATEGORY REVIEWPRODUCT CATEGORY REVIEW

ADDITIONAL ELEMENTS: ADDITIONAL ELEMENTS: INVENTORY – TURN – ROI INVENTORY – TURN – ROI SALES SQ. FT. GM$ SQ. FT., SALES SQ. FT. GM$ SQ. FT., MARKETING SPENDMARKETING SPEND % OF EACH ELEMENT PER MONTH & YEAR % OF EACH ELEMENT PER MONTH & YEAR

BREAKDOWN: Women’s, Men’s, Kids, Athletic, WorkBREAKDOWN: Women’s, Men’s, Kids, Athletic, Work

FINANCIAL ANALYSIS SHOES 1,000,000s

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTALSALES Reg 20$ 25$ 40$ 30$ 30$ 30$ 20$ 35$ 45$ 40$ 40$ 45$ 400$

Markdown 30$ 20$ 20$ 10$ 15$ 25$ 20$ 25$ 30$ 15$ 25$ 35$ 270$ TOTAL 50$ 45$ 60$ 40$ 45$ 55$ 40$ 60$ 75$ 55$ 65$ 80$ 670$

GM$ Regular 10$ 13$ 20$ 14$ 14$ 14$ 10$ 16$ 20$ 20$ 19$ 20$ 189$ Markdown 8$ 3$ 2$ 4$ 5$ 8$ 6$ 5$ 3$ 5$ 8$ 9$ 64$

TOTAL 17$ 16$ 22$ 18$ 19$ 21$ 16$ 21$ 23$ 25$ 27$ 29$ 253$

GM% Regular 48% 52% 50% 48% 45% 45% 48% 45% 45% 50% 48% 45% 47%Markdown 25% 15% 10% 35% 35% 30% 30% 20% 10% 35% 30% 25% 23%

TOTAL 34% 36% 37% 45% 42% 38% 39% 35% 31% 46% 41% 36% 38%

PRODUCT CATEGORIES FILTERSPRODUCT CATEGORIES FILTERSANALYSIS OF EACH CATEGORYANALYSIS OF EACH CATEGORY

Time PeriodTime Period

Product to Market Channel/Path Product to Market Channel/Path

Marketing: Product & ChannelMarketing: Product & Channel

““Purple Cow” Viewpoint Purple Cow” Viewpoint

PRODUCT CATEGORY FILTERS: PRODUCT CATEGORY FILTERS: MARKET BASKET

DEEP DIVE into multiple combinations of data

MARKET BASKETWOMEN MEN SHOESTOTAL Dresses Sport Denim JR TOTAL Suiting Sport Denim YM Work TOTAL Women Kids ATH Men's Work

WOMENTOTAL 100% 30% 60% 40% 25% 40% 10% 30% 30% 15% 5% 60% 65% 40% 30% 30% 10%Dresses 30% 100% 40% 30% 15% 10% 8% 15% 20% 5% 1% 30% 50% 10% 7% 12% 3%Sport 60% 40% 100% 75% 40% 40% 5% 25% 30% 15% 2% 50% 60% 20% 10% 15% 4%Denim 40% 30% 75% 100% 25% 25% 5% 3% 30% 25% 10% 60% 60% 25% 15% 10% 5%JR 25% 15% 40% 25% 100% 20% 1% 15% 20% 20% 1% 40% 35% 30% 25% 5% 1%

MEN TOTAL 40% 10% 40% 25% 20% 100% 40% 80% 50% 35% 50% 40% 25% 40% 30% 40% 30%Suiting 10% 8% 5% 5% 1% 40% 100% 60% 40% 20% 20% 30% 20% 20% 20% 30% 25%Sport 30% 15% 25% 3% 15% 80% 60% 100% 50% 30% 25% 40% 25% 35% 25% 40% 30%Denim 30% 20% 30% 30% 20% 50% 40% 50% 100% 45% 35% 40% 15% 30% 30% 40% 35%YM 15% 5% 15% 25% 20% 35% 20% 30% 45% 100% 10% 25% 10% 10% 25% 25% 10%Work 5% 1% 2% 10% 1% 50% 20% 25% 35% 10% 100% 30% 8% 15% 20% 30% 80%

SHOES TOTAL 60% 30% 50% 60% 40% 40% 30% 40% 40% 25% 30% 100% 65% 40% 30% 35% 25%Women's 65% 50% 60% 60% 35% 25% 20% 25% 15% 10% 8% 65% 100% 60% 40% 30% 30%Kids 40% 10% 20% 25% 30% 40% 20% 35% 30% 10% 15% 40% 60% 100% 30% 45% 40%Athletic 30% 7% 10% 15% 25% 30% 20% 25% 30% 25% 20% 30% 40% 30% 100% 50% 40%Men's 30% 12% 15% 10% 5% 40% 30% 40% 40% 25% 30% 35% 30% 45% 50% 100% 80%Work 10% 3% 4% 5% 1% 30% 25% 30% 35% 10% 80% 25% 30% 40% 40% 80% 100%

CUSTOMER PROFILECUSTOMER PROFILEKNOW AND UNDERSTAND YOUR CUSTOMERKNOW AND UNDERSTAND YOUR CUSTOMER

Current Customer?Current Customer?Analytics?Analytics?Population of the Market? Population of the Market? Filters and Segments?Filters and Segments?Preferred Customer?Preferred Customer?Alternative Customer?Alternative Customer?

CUSTOMER PURCHASING DECISION CUSTOMER PURCHASING DECISION

LASER FOCUS ON THE CUSTOMERLASER FOCUS ON THE CUSTOMER

CUSTOMER TOUCHPOINTSCUSTOMER TOUCHPOINTS Visual, Physical or MentalVisual, Physical or Mental

COMPETITIVE SUPREMACY COMPETITIVE SUPREMACY BUSINESS WITH THE MOST INNOVATIVEBUSINESS WITH THE MOST INNOVATIVECOMPETITIVE ADVANTAGES WINS!COMPETITIVE ADVANTAGES WINS!

ProductProductPrice, Value, Quality etc.Price, Value, Quality etc.Business ModelBusiness ModelCustomer Value PropositionCustomer Value PropositionMost positive Customer TouchpointsMost positive Customer Touchpoints

COMPETITIVE INTELLIGENCECOMPETITIVE INTELLIGENCEWHO? UNDERLYING COMPETITORS?WHO? UNDERLYING COMPETITORS?

ANALYSIS ANALYSIS ““BEST IN CLASS”BEST IN CLASS”

COMPETITIVE ADVANTAGESCOMPETITIVE ADVANTAGES

COMPETITIVE ADVANTAGES COMPETITIVE ADVANTAGES

PRODUCTPRODUCT QUALITYQUALITY BRANDSBRANDS ASSORTMENTASSORTMENT PRICE/VALUEPRICE/VALUE EXCLUSIVEEXCLUSIVE LOCATIONLOCATION ETC.ETC.

COMPETITIVE SUPREMACY COMPETITIVE SUPREMACY BUILDING COMPETITIVE SUPREMACY

COMP. 1 COMP. 2 COMP. 3 COMP. 4 COMP. 5FINANCIAL

ROIMARGIN

PRODUCTASSORTMENT

QUALITYUNIQUE

BRAND POSITIONHIGH

MIDDLELOW

PRODUCT CHANNELSPEED TO MARKET

GEOGRAPHY

CUSTOMERSERVICE

VALUEENGAGEMENT

COMPANY HISTORYCOMPANY HISTORY

History: PAST vs. CURRENT History: PAST vs. CURRENT What is driving the Business? What is driving the Business? Revenue ChannelsRevenue ChannelsCompetition: old and newCompetition: old and newEconomic Status Economic Status Changes in Population Demographics Changes in Population Demographics Technology – Innovation?Technology – Innovation?Other Elements? Other Elements?

POWER OF CULTUREPOWER OF CULTUREASSETS: ASSETS: PEOPLE AND CULTURE PEOPLE AND CULTURE ENVIRONMENT ENVIRONMENT is one of trust, engagement, learning,is one of trust, engagement, learning,communication, listening and cooperation!communication, listening and cooperation!

LEADERSHIPLEADERSHIP is at all levels! is at all levels!

RESPONSIBILITYRESPONSIBILITY for own role! for own role!ALL SECTORS ALL SECTORS to be utilizedto be utilized

ENGAGEMENTENGAGEMENT has to be total! has to be total!

CONTINOUS INNOVATIONCONTINOUS INNOVATION is top of mind in all is top of mind in all sectors!sectors!

INTERNAL INTELLIGENCEINTERNAL INTELLIGENCEANSWERSANSWERS ARE WITHIN THE ORGANIZATION ARE WITHIN THE ORGANIZATION SOLUTIONSSOLUTIONS TO SURFACE IS THE ISSUE. TO SURFACE IS THE ISSUE. CROSS FUNCTIONAL SUPPORT GROUPSCROSS FUNCTIONAL SUPPORT GROUPSINTERVIEWS: INTERVIEWS: INDIVIDUAL AND GROUPINDIVIDUAL AND GROUP

RETAIL STRATEGY : FIND THE BEST CUSTOMER FOR YOUR BUSINESS!

REVENUE CHANNELS: REVENUE CHANNELS: WHICH ONES FIT YOUR STRATEGY?WHICH ONES FIT YOUR STRATEGY? STORESSTORES CATALOG CATALOG

INTERNETINTERNET

B2BB2B WHOLESALE TV WHOLESALE TV

MARKETINGMARKETINGCUSTOMER REACHED?CUSTOMER REACHED?

MARKETING CHANNELS?MARKETING CHANNELS?

CHANNELS BEST REFLECT CHANNELS BEST REFLECT THE BRAND?THE BRAND?

EFFECTIVENESS BY CHANNEL?EFFECTIVENESS BY CHANNEL?

REACH NEW CUSTOMERS?REACH NEW CUSTOMERS?

INNOVATIVE TESTSINNOVATIVE TESTS

SOCIAL MEDIASOCIAL MEDIA

VENDOR COMMUNITYVENDOR COMMUNITYMOST UNDERUTILIZED ASSETMOST UNDERUTILIZED ASSET

Vendor Conference Vendor Conference Products Marketing Logistics Customer Experience Competition Innovative Solutions Invite Cross-Functional Support members

STAGE II: STAGE II: EVALUATE, COLLABORATE AND TESTEVALUATE, COLLABORATE AND TEST

USE OF MULTIPLE SOURCES USE OF MULTIPLE SOURCES

UNDERSTAND OPTIONS UNDERSTAND OPTIONS

ALTERNATIVE SOLUTIONSALTERNATIVE SOLUTIONS

QUANTIFIABLE TESTS QUANTIFIABLE TESTS

INTEGRATED STRATEGYINTEGRATED STRATEGY

COLLABORATECOLLABORATETEAM PROJECTTEAM PROJECT

MERCHANDISINGMERCHANDISING

STORES STORES

MARKETING CHANNELSMARKETING CHANNELS

CROSS FUNCTIONALCROSS FUNCTIONAL

SENIOR TEAM MEMBERSSENIOR TEAM MEMBERS

TRUSTED VENDORSTRUSTED VENDORS

STAGE III: STAGE III: ASSEMBLE AND EXECUTEASSEMBLE AND EXECUTEREQUIRES THE SKILL OF SYNTHESISREQUIRES THE SKILL OF SYNTHESIS

CREATE STRATEGYCREATE STRATEGYGATHER DATAGATHER DATAALIGN SOLUTIONSALIGN SOLUTIONSINTEGRATE ALL ELEMENTSINTEGRATE ALL ELEMENTS

CROSS FUNCTIONAL SENIOR TEAM CROSS FUNCTIONAL SENIOR TEAM SUMMARIZESUMMARIZEDISCUSSION DISCUSSION HOT BUTTONSHOT BUTTONSCOLLABORATIONCOLLABORATION

LITMUS TEST LITMUS TEST BRAND, CVP, BUSINESS MODEL IN SYNC BRAND, CVP, BUSINESS MODEL IN SYNC PURPLE COW PURPLE COW INNOVATIVE COMPETITIVE ADVANTAGESINNOVATIVE COMPETITIVE ADVANTAGESPROFITABLEPROFITABLESUSTAINABLESUSTAINABLEDEFENDABLEDEFENDABLESCALABLESCALABLEINTERNAL ALIGNMENTINTERNAL ALIGNMENTSUPPORT FROM INDUSTRYSUPPORT FROM INDUSTRY

PHASE III: Assemble and ExecutePHASE III: Assemble and Execute FINAL STRATEGY: FINAL STRATEGY: TASK: INCORPORATE AS MANY OF THE GOALSFROM THE REVIEW AS POSSIBLE INTO A SEAMLESSCOMPREHENSIVE AND A COLLABORATIVE STRATEGY.

THE CORE SENIOR TEAM MAKES THE FINAL DECISION.

CONGRATULATIONS! YOU HAVE COMPLETED 90% OF THE GOAL.

COMMUNICATIONCOMMUNICATIONSUCCESS TIED DIRECTLY TO SUCCESS TIED DIRECTLY TO

COMMUNICATIONCOMMUNICATIONDISSEMINATEDISSEMINATE

ACKNOWLEDGEMENTACKNOWLEDGEMENT

ANTICIPATE ISSUESANTICIPATE ISSUES

CHANGE MANAGEMENTCHANGE MANAGEMENT

SUMMARYSUMMARY

A STRATEGIC PROCESS THAT CAN BE USED BY THE A STRATEGIC PROCESS THAT CAN BE USED BY THE ENTIRE ORGANIZATION. EVERYONE HAS CONTRIBUTED, ENTIRE ORGANIZATION. EVERYONE HAS CONTRIBUTED, TAKES OWNERSHIP, UNDERSTANDS AND CAN EASILY TAKES OWNERSHIP, UNDERSTANDS AND CAN EASILY ARTICULATE TO OTHERS.ARTICULATE TO OTHERS.

Do not repeat the tactics which have Do not repeat the tactics which have gained you one victory, but let your gained you one victory, but let your methods be regulated by the infinite methods be regulated by the infinite variety of circumstances.variety of circumstances.Sun Tzu c. 490 BC, Chinese military strategist