Ch 5 Retailstrategy

7/27/2019 Ch 5 Retailstrategy

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Chapter 5

Retail Marketing Strategy

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What is a retailing strategy?

A retail strateg y is a statement identifying

(1)The retailers target market

(2)The format (Retail Mix) the retailer plans touse to satisfy the target markets needs

(3)The bases on whi ch the retailer p lans to

build a sustainable competitive advantage

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5-4

Retailing Strategy

Ret ail Mar ket Str ategyChapt er 5

Financial Strategy

Chapt er 6

Retail L ocation sChapt ers 7,8

Human Resource

Manag ementChapt er 9

Information and

Distribut ionSyst ems

Chapt er 10

Custo merRelationship

Manag ement

Chapt er 11


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Questions

What is a retailing st rategy?

How can a retailer build a sustainablecompetitive advantage?

What steps do retailers go through to dev elop astrategy ?

What different strategic growth opportunit ies canretailers pursue?

What retailers are best positioned to become

global retailers?

5-6

More attention to long-term strategic

planning than ever before

Due to the emergence of

New competitors

New formats

New technologies Shifts in customer needs

5-7

Elements in Retail Strategy

i mage100 Ltd

Target Market the market segment(s) toward which the retailer plans

to focus its resources and retail mix

Retail Format the nature of t he retailers operationsits retail mix

Sustainable Compet itive Adv antage an advantage over the competition

5-8

Analyzing Otobis Retail Strategy

Target market?

Retail offering (format)?

Bases f or competitiv eadv antage?

What Threats Might Otobis Face in the Future?


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Why Does a Retailer Need to Focus ona Specific Target Market?

Why Not Sell to Everyone?

Target Market

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Target market and retail format:Retail Market Opportunities for Womens Apparel

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Criteria For Selecting A Target Market

Att ract iveness -- Large,

Growing, Little

CompetitionMore

Prof its

Consistent with Your

Competit ive AdvantagesRim Light/PhotoLi nk/Getty Images

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Opportunit ies fo r retailers t o d evelop sustainablecompet it ive advantages

Customer Loyalty

Location

Human Resource Management

Distribution & Information Systems

Unique Merchandise

Vendor Relations

Customer Service

PhotoLink/Getty Images


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Customer Loyalty

More than simply liking one retailer over another

Customers will be reluctant to patronizecompetitive retailers

Retailers build loyalty by: Developing a strong brand for the store or store

brands

Developing clear and precise positioning strategies

Creating an emotional attachment with customers

through loyalty programs

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Retail Branding

Retail brand

Can create an emotionaltie with customers thatbuild their trust and loyalt y

Facilitates store loyalt ybecause it stands for apredictable level of quality

Stores use brand (stores name and store brands private label brands) to build customer loyalty

Walmart

brands

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Loyalty Programs

Part of an overall Customer Relationship Management(CRM) program

Purchase behaviors of members of loyalty programs Are identifi ed when th ey buy bec ause they use s ome type of

loy alty card

Sav ed in Data Ware house

What they buy

When they buy

How much they buy

How often they buy

How much they spend

What channel they use

Develop personalized marketing effort to them

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Approaches for BuildingCustomer Loyalty

Unique Positioning

Location

Customer Serv ice Informat ion About Customers (Database)

Unique Merchandise


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Example of Positi oning

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Location

What are the three most important things inretailing? location, location, location

Locat ion is a competitive advantage A high density of Starbucks stores

Creates a top-of-mind awareness

makes it very difficult for a competitor to enter amarket and find a good locations

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Human Resources

Employees are key to build a sustainablecompetitive advantage

Strategies for Recruiting and Retaining TalentedEmployees

Employee Branding

Develop positive organizational cult ure

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Distribution and Info Systems

Flow of Information

Vendor

Distribution Center

Store -Better services-Increase in breadth and depth-Decrease in prices

By decreas ing costs here, theis more money av ailable to

inv est in:


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Unique Merchandise: Private Labels

Sears Kenmore -- appliances

Federateds Inc. fine apparel

Kmarts Martha Stewart -- home

JCPenneys Arizona -- jeans Jul es Frazier/GettyImages

Rob

Melnychuk/Getty

Images

Jac obs StockPhotography/Getty Images

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Vendor Relationships

Low Cost - Eff iciency Through Coordination Electronic Data Interchange (EDI)

Collaborative Planning and Forecasting toReduce Inventory and Distribution Costs

Exclusive Sale of Desirable Brands

Special Treatment Earl y Deliver y of New St yles

Shipment of Scare Merchandise

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High Quality Customer Service

Difficult to Achieve People Are Not M achines -- Inconsistent

Retail Sales Associ ates At Bo tt om of Labor Pool

Goes Beyond Hiring Good People at HighWages and Training Them -- OrganizationalCulture

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Criti cal T radeoff In DevelopingStrategic Advantage

Focus Leads to Dev eloping

A Compet itive Adv antage

But

Focus Reduces Flexibility

Low Cost, Consistent Image, VendorRelationships Reduces Flexibility

Similar to Dating and Marriage Commitmentto a Relationship (Vendor) Reduces Flexibility


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Grow th Strategies

RyanMc Vay/ Getty Images

Market Penetration

Market Expansion

Retail Format Development

Diversif ication Related v s. Unrelated

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Growth Opportunities

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Market Penetration

Attract customers from target market Walgreens onever y corner

Get current customer to visit store more often or buy oneach visit

Cros s Selling s ales ass ociates in one department sellcomplimentar y merch andise from other departments

Example: Manicurist sells ser vices plus hand lotion or nai l polish

Example: Sales per son sells le af blower directs customer t o electrical

departm ent to purc hase a 100 foot extension c ord.

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Market Expansion

Market expansion growth opportunity inv olvesusing the existing retail format in new marketsegments

Dunkin Donuts new stores (and at gas stations)outside northeastern


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Retail Format Development

Develops a new retail f ormat with a diff erentretail mix f or the same target market

Multi-channel retailing

UK based TESCO: Tesco Express: small stores located close to where

customers live and work Tesco Metro: bring convenience to city center location

by specializing in ready-to-eat meals Tesco Superstores: traditional stores

Tesco Extra: one-stop destination with the widestrange of food and non-food products

Bharti Retail Ltd.

Easyday

Easyday market Easy day Hyper

ACI

Shwapno

Shwapno MINI

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Diversification

Int roduces a new retail format toward a marketsegment that is not currently serv ed by theretailer

Related div ersif icat ion

Unrelated div ersif icat ion

Vertical integration into wholesaling ormanuf acturing

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Global Grow th Opportunit ies

SteveCole/Getty Images

Specialty store retailers withstrong brand and uniquemerchandise?

McDonalds

Starbucks Zara

H & M

Discount and food retailerswith deep assortments and lowprices?

Wal-Mart

Carrefour

Metro AG

Who Is Successful and Who Isnt?


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IKEA

Operates 254 stores in 35countries

Unique, well-designed,functional furniture at lowprices for consumers whohave sophisticated tastes,but have no intention tospend a lot

You do our part. We doour part. Together, wesave money.

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Why Do Category Killers and SupercentersSucceed Globally ?

Developed operating expenses

Scale economies for buyingmerchandise globally

Unique systems and standardization

formats which facilitate control overmultiple stores

Understand that consumers are willingto forego service for lower prices

RyanMcVay/Getty Images

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Key to Success in Global Retailing

Globally s ustainable competit iveadv ant age

Low cost, efficient operations - W al-Mart, Carref our

Strong pr ivat e lab el bra nds:Starbucks, KF C

Fashion Reputation - T he Gap, Zara,H&M

Categ ory dominance B est Buy,IKEA, Toys R Us

Adaptabi lity

Global Culture

Financial Resources

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Evaluating Global Growth Opportunities

China Increasing operating costs

Lack of managerial talent Underdeveloped and

inefficient supply chain

India Prefers small family-owned

stores

Restricts foreign investment

Consider challenges and how to overcome them


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Evaluating Global Growth Opportunities

Rankings are based onweighted score usinggrowth (55%),

risk (25%), and

market size (20%)

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Growth, Risk, and Market Size of

Top 30 Countries

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International Market

Entry Strategies

Direct Investment

Joint Ventures

Strategic Alliances

Franchising

/

Profit and Ris k

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Bharti Walmart Priv ate Limit ed is a join t ventu re between

Bharti Enterpris es and Walmart


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Stages in the StrategicRetail Planning Process

1. Define the busine ss mis sion

2. Conduct a sit uatio n audit:Market attractiveness analysis

Competitor analysi s

Self-analysis

3. Identify strategic opportunities

5. Establish specific objectives and allocate resources

7. Evaluate performance and make a djustmen ts

6. Develop a retai l mix to impleme nt strategy

4. Evaluate strategic alternatives

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Amazon Mission

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Elements in a Situation Audit


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Market Factors

Market size large markets attractiv e to largeretail firms

Growth typically more attractive than mature ordeclining

Seasonality can be an issue as resources arenecessary during peak season only

Business cycles retail markets can be affectedby economic conditions military base towns

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Competitive Factors

Barriers to entry

Scale e conomies of big box r etailers

Service and unique, high- end pro ducts of small r etailers

Bargaining power of vendors Markets are less attract ive when only a fe w vendors control the

merchand ise sold within it

Competitive rivalry

Defi nes the frequency and intensity of reactions t o actionsundertaken by c ompet itors

Conditions le ading to intense riva lry: a large num ber of same

size r etailers, slow growth, high fixed costs, a lack of perceived

differences between c ompeting r etailers

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Questions forAnalyzing the Environment

New developments or changes --technologies, regulations, social

factors, economic conditions

Likelihood changes will occur

Key factors determining change

Impact of change on retail marketfirm, competitors

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Performing a Self-Analysis

At what is our company good?

In which of these areas is our company betterthan our competitors?

In which of these areas does our companysunique capabilities provide a sustainableadv antage or a basis for developing one?

Stockbyte/Punchstock Images


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Strengths and Weaknesses Analysis

Management Capability:Capabilities and exp erience of top man agement

Depth of Management--capab ilities of midd le m anagement

Manag ements commitment to firm

Financial Resources:Cash flow from existing b usiness

Ab ility to ra ise debt or eq uity financing

Operations:

Overhead cost structure

Quality of operating systems

Distribu tion capabilities

Management information systems

Loss p revention systems

Inventory control system

MerchandisingCapabilities:Knowledge and skills of bu yersRelationsh ips with vendo rs

Capabilities in developing private

capab ilities

Store Management CapabilitiesManag ement c apabilities

Qu ality o f sales associates

Commitment of sa les assoc iates to firm

Locations

CustomersLoyalty of customers

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Illustration of the

Strategic Retail Planning Process

Kelly Bradford Owner of Gifts To Go Two Store Chain in Chicago Target Market Upper Income Men and Women

Looking for Gifts between $50 and $500 Strong Customer Loyalty Based on Knowing What

Customers Want, Providing Good Customer Service Low Turnover Among Associates

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Mission Statement for Gifts To Go

The mission of Gifts-to-Go is to be the leadingretailers of higher-priced gifts in the Chicago andprovide a stable income of $100,000 per year forthe owner.

Def ine growth opportunities will and wontconsider

Indicates objectiv e of company

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Situation Analysis of Gifts to Go

Market Factors Chicago is an attractive market. (+) Relatively expensi ve gifts are not affected much by

the economy. (+) Gifts are highly seasonal. (-)

Competitive Factors Many in area. Primary department stores, craft

galleries, catalogs, and Internet retailers (-)

Lack of large suppliers, customer (+) Opportunities for differentiation (+) Limited competitive r ivalry. (+)


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Situation Analysis of Gifts to Go

Environmental Factors Potential Threat - Dev elopment of electronic channel by

tradit ional bricks and mort ar retailers (-)

Strengths and Weaknesses Mana gement Capability Lim ited

Financial Resources G ood

Oper ations Poor

Merchandis e Capabilit ies Good

Store M anageme nt Capabilities E xcellent

Loc ations Excellent

Cust omer Loyalty Good Cust omer Database - Good

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Growth Opportunities for Gifts to Go

Market Penetration Increase size of present sto res

Open addit ional gif ts stores inChicago area

Market Expansion Open gift stores outside Chicago

area

Sell lower priced gifts in presentstores

RyanMc Vay/ Getty Images

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Growth Opportunities for Gifts to Go

Retail Format Development Sell non-gift merchandise to same customers in

present or new stores

Sell similar gifts to same customers through anelectronic channel

Div ersif ication Manufacture craft gifts

Open an apparel store targeting teenagers

Open a category killer store selling a broaderassortment of gi fts

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Evaluating Growth Opportunities for

Gifts to Go

Market Att ract iveness

Market Penetration Increase s ize of pr esent stores (low)

Open addit ional gifts stores in Chi cago area (medium)

Market Expansion Open gift stores outside Chicago ar ea new geographic

segment (medium)

Sell low er pr iced gifts in present stores new benefit s egm ent(medium)


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Steps in Using Market Attractiveness -Competitive Position Matrix

Def ine strategic opportunit ies

Identify market attractiv eness and competitiv eposition factors

Assign weight based on importance of factors

Rate opportunities on market attractivenessand competitive position

Calculate scores and ev aluate opportunities

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Attractiveness Ratings forInternational Growth Opportunities

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Competitive Position in InternationalGrowth Opportunities

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Ch 5 Retailstrategy

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