Retail Mgmt - Retail Marketing Strategies

8/13/2019 Retail Mgmt - Retail Marketing Strategies

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Retail Management

Module 3Retail Marketing Strategies

Ashish J [email protected]


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Module 3 Agenda

Retail Marketing Strategies

What is a retail strategy?

Target market and retail format

Building a sustainable competitive advantage

International growth opportunities

The strategic retail planning process


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A retail strategy identifies:

The retailers target market

The format the retailer plans to use to satisfy the

target markets needs

The bases upon which the retailer plans to build a

sustainable competitive advantage

Target market: Market segment towards which the retailer plans

to focus its resources and retail mix


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Retailer format:

Suggests the type of retail mix used by the retailer

to satisfy the needs of the target market

Sustainable competitive advantage:

Advantage over the competition that is not easily

copied and thus can be maintained over a long

period of time


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Examples of retail strategy:

Case 1: Curvesi. Has more than 8400 franchises in all 50 US states and in 28

countries

ii. Worlds top fitness centre by number of clubs

iii. Targets the aging Baby Boomers instead of the prized 1834 class

iv. Centres dont have traditional equipment; instead have

hydraulic resistance equipmentv. Aim is to burn about 500 calories in 30 minutes with breaks

for jogging, walking

vi. Low fees - $ 29 / month


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Case 2: Magazine Luiza

i. Brazils third-largest food retailer

ii. Targets low-income consumers by selling on credit:instalment payments plans at affordable rates

iii. Brazil has some of the worlds highest interest rates andhalf the population do not have a checking account

iv. Customers must return to stores once a month to makepayments; customers tempted to buy new merchandise

on each visitv. Also provides personal loans and insurance policies

vi. Default rates are 50 % lower than other retailers though80 % sales are through instalment payments


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Case 3: Chicos

i. More than 300 specialty stores

ii. Sells merchandise suitable for 3355 years age group females

iii. High degree of vertical integration and customer service(flattering) provided to mature customers with active lifestyles

iv. 1.2 million members on its loyalty programme that accountfor 80 % of sales with average transaction per member at $130 compared to $ 90 for non-loyalty members

v. Sells only its own brands

vi. Salespersons trained to form personal bonds with customers


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Case 4: Save-A-Lot (SuperValu subsidiary)

i. Grown to more than 1000 stores

ii. US 13thlargest supermarket chain

iii. Only 1250 SKUs stocked compared to 2030 k

in rival chains

iv. Most SKUs are private label

v. Price is 40 % less than rivals

vi. Buying power enables customisation of private

label merchandise


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Target market and retail format

The retailing concept Management orientation that focuses a retailer on

determining the needs of its target market andsatisfying those needs more effectively and efficiently

than competitors do Retail market

Group of consumers with similar needs (segment) thatis serviced by a group of retailers using a similar retailformat to satisfy them

E.g. retail market for womens apparel seeExhibit 5-1


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Building a sustainable competitive

advantage

Final element in retail strategy

Involves building barriers around its market

position to protect from incursions

Over time, defences will weaken; stronger,

thicker, higher walls/barriers will however

stand; barriers needs to be reinforced and

rebuilt to protect turf


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advantage

Seven important opportunities for retailers todevelop sustainable competitive advantages:

1. Customer loyalty

2. Location3. HRM

4. Distribution and information systems

5. Unique merchandise6. Vendor relations

7. Customer service


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advantage

1. Customer loyalty

Ways of building loyalty:

Developing a strong brand for the store

Popularising store brands

Developing clear and precise position strategies

Getting customers emotionally attached through loyalty

programmes

Retail Branding

Private labels or the stores name itself e.g. aroat Metro,Reliance Select

Certain brands available exclusively at certain stores e.g.

Bajaj CFLs stocked at very few stores in Bangalore


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advantage Positioning

Involves the design and implementation of a retail mix to createan image of the retailer in the customers mind relative to itscompetitors

Emphasises that the image of the store in the customers mind iscritical

See Exhibit 5-3

Retailers close to an ideal point are evaluated morefavourably

Loyalty Programmes Loyalty cards e.g. Reliance One

Purchase information of loyalty customers stored in a datawarehouse

Customers segmented based on purchase pattern e.g. wine,gourmet, dairy buying preferences, F & V

Case: p 161


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advantage

2. Location

What are the three most important things in

retailing?

Location, location, location

Starbucks location strategy

Located in major areas of cities

One step at a time: moves to another major area andanother city once it has saturated a particular market


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advantage

3. Human Resource Management

Retailing is labour intensive

Employees need to be knowledgeable and

committed e.g. Home Depot, Southwest Airlines Competitive advantage sustained by:

Motivating

Incentives

Strong and positive organisational culture andenvironment

Managing diversity


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advantage

4. Distribution and Information Systems

Retailers succeed by maintaining lower operations costs,

ensuring stock availability and providing expected

customer service

The above are possible through use of sophisticated supply

chain systems

E.g. Wal-Mart, P & G: auto-ordering to vendors/DC


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advantage

5. Unique merchandise

Most retailers sell popular brands!

Developing private labels (store brands) is a

means to competitive advantage

E.g. Tesco wine, cheese, vegetarian sausages

Store brands: + $ 50 billion US sales, 1 in 5

branded goods sales Issues with store brands?

Case: P 164


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advantage

6. Vendor relations

By developing strong relations with vendors, retailers may

gain exclusive rights to:

Sell merchandise in a specific region

Obtain special terms of purchase that to available to competitors

Receive popular merchandise in short supply

E.g. Ahold (Dutch retailer) works closely with

Nestle to bring in foods tailored to local tastes


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advantage

7. Customer service

Coaching and training essential

Considerable time and effort required to build a credible

reputation in retail market8. Multiple sources of advantage

combination of value, service, quality e.g. McDonalds

Retailers may focus on multiple areas to sustain CA


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advantage

Growth Strategies (See Exhibit 5-4)

Market penetration Involves realising growth by directing efforts toward existing

customers using the retailers present retailing format

Involves attracting consumers in its segment that don't currentlybuy from it

get current customers to visit stores more often or buy more pervisit

Opening more stores in the area

Keeping stores open for longer Encouraging impulse buys by displaying merchandise near tills

Cross-selling: salesmen from one department attempt to sellcomplementary items from another department


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advantage

Market expansion

Involves using the existing retail format in new market

segments

E.g. weekender and weekender kids, Wal-Mart andAsDa (however, George not as big in the US)


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advantage

Retail format development

Retailer develops a new formatformat with a

different retail mixfor the same target market

E.g. Barnes & Noble (specialty book store) exploited anew market when it started selling on the net

E.g. Best Buy offer professional services in terms of 24-

hours computer support and service through a Geek

Squad; though directed at customers, it involves

running a service than merchandise-based retail

business


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advantage

Diversification

Retailer introduces a new retail format directed toward a market

segment thats not currently served by the retailer

Related versus Unrelated diversification

Related: some commonality shared with new venture e.g.same vendors, same information systems used

E.g. Foot Locker, retailer of athletic footwear had Burger King

and Afterthoughts accessory stores in the 90s

Unrelated diversifications considered risky; stick to your

knitting e.g. JC Penny sold the Eckerd drug store chain tofocus on its multichannel, department store-based market

and Target sold its department stores to focus on its discount

stores


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advantage

Strategic Opportunities and CompetitiveAdvantage

Retailers have greatest advantage when they engagein activities similar to their present ones

Retailers are most at risk when pursuingdiversification strategies

Successful retailers build on existing strengths whenexpanding into new markets

A retail-format based success in a new market hasalready built on its brand name / reputation andsuccess in home markets


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Out of 50 large global retailers, 37 operate in

more than one country

Risky as retailers deal with:

Government regulations

Cultural traditions

Supply chain considerations

Languages


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Who is successful and who isnt?

Successful retailers have offerings that have

universal appeal e.g.

Distinctive merchandise

Low cost

Most successful global retailers are, for example:

specialty store retailers with strong brand pull and/orunique merchandise e.g.

IKEA, McDonalds, The GAP, Starbucks, Home Depot, Toys R

Usoffer broad assortments and competitive prices


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Discount and food retailers with low prices such as Wal-

Mart, Carrefour, Royal Ahold, Metro AG

Category specialists and supercentre retailers that may

be particularly suited to succeed globally because:

1. They are leaders in their use of technology to manage

inventories, control global logistics, tailor merchandise to

local needs

2. Economies of scale buying

3. Unique systems and formats that facilitate control of large

number of stores

4. Self-service model adopted world over now, thus reducing

cost of customer service (ALDI, Carrefour)


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Some US retailers enjoy global support because of the

influence of American culture on these countries e.g.

China has KFC, McDonalds, Starbucks in its cities

Youngsters now prefer credit cards to cash, chicken nuggets to

rice and cola to juice/tea

EU and Japanese retailers hire locals and stock more

local products to increase appeal


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Keys to success:

Four characteristics of retailers that have

successfully exploited international growth

opportunities are: A globally sustainable competitive advantage

Adaptability

Global culture

Financial resources


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Globally sustainable competitive advantage:

Core Advantage Global Retailer

Low-cost efficient operations Wal-Mart, Carrefour

Strong private brands IKEA, Starbucks

Fashion reputation The Gap, Zara, H & M

Category dominance Office Depot, Toys R Us


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Adaptability

Successful retailers adapt to local cultural conditions

Colour preferences, cut of apparel and sizes differacross cultures e.g. China - white for mourning and red

for brides Selling seasons: US - August is back-to-school time and

busy period for Gap, however EU is on vacation in Aug!Back-to-school in Japan is in April

Store designs: USone level discount stores, EUmulti-storeyed

Social norms may restrict stocking of mens andwomens merchandise next to each other


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Cultural values and government regulations have

influence on store operations

e.g. Latin American culture emphasises greater family

orientation where US retailers may have to alter US-style work

schedules to suit local conditions Boots had to have its Japanese checkout staff standing at the

tills as it was offensive for customers to pay to a sitting clerk,

but provided seating in Germany

Adapting products: Starbucks has fairly even product

offering around the world. However, it has developedgreen tea Frappuccino for Taiwan and Japan,

strawberries-and-cream Frappuccino for the UK


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1. Define the business mission

2. Conduct a situation audit

Market factors

Competitive factors

Porters FFF

Economies of scale

Bargaining power of vendors

Competitive rivalry

Hypercompetitive markets

Slow market growth High fixed costs

Lack of perceived differences between competing retailers


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Environmental Factors

Macro and micro environments e.g. Reliance Retail in UP

Retailers must answer at least three questions to ascertain

environment impact on business:

What new developments or changes i.e. new tech., laws,social factors, economic conditions?

Likelihood that these environmental changes will occur?

How will these changes impact each retail market, firm

and competitors?


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Strengths and weakness analysis

Management capability

Financial resources

Operations

Merchandising capabilities

Store management capabilities

Locations

Customers


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3. Identify strategic opportunities

Market penetration, expansion, diversification,

format development

4. Evaluate strategic opportunities

5. Establish specific objectives and allocate

resources

6. Develop a retail mix to implement strategy

7. Evaluate performance and make adjustments

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Retail Mgmt - Retail Marketing Strategies

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