Retail Strategic Planning

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PPT 5-1

5th Edition5th Edition



PPT 5-2

McGraw-Hill/Irwin Levy/Weitz: Retailing Management, 5/e Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved.

Retail MarketingRetail MarketingStrategyStrategy

Chapter 5Chapter 5



PPT 5-3

Retailing Strategy

Retail Market StrategyChapter 5

Financial StrategyChapter 6

Retail LocationsChapters 7,8

Human ResourceManagement

Chapter 9

Information andDistribution

SystemsChapter 10

Customer RelationshipManagementChapter 11



PPT 5-4

³Strategy´ Is Over Used

Retailers Talk About A Lot of Different³Strategies´

± Sales Strategy

± Advertising Strategy

± Merchandise Strategy

± Location Strategy

Strategy Is Not Just Another Term for A Management Decision



PPT 5-5

Strategic vs. Tactical Decisions

Strategic Tactical

Direction Implementation

Strategy statement Annual plan

Broad Specific, detailed

Unstructured Structured

Problem solving Problem solving

Creativity Analytical

External focus Internal focus

Irregular Regular

Long-term Short-term

Difficult to evaluate Easy to evaluate

Note: Success Comes for Having a Good Strategy and Executing It Well



PPT 5-6

Elements in Retail Strategy

Target Market

Customer Needs

Retail Format

Method for Satisfying Needs

Bases for Building Sustainable Competitive AdvantageDefending Position Against Competitors



PPT 5-7

Chico¶s Strategy

Target Market

Woman 35 to 55 Who Want Comfortable, Casual, ButStylish Apparel

Retail Format

Specialty Apparel Stores in Malls and Strip CentersSelling Private Label, Coordinated Outfits

Bases for Building Sustainable Competitive Advantage

Unique Merchandise Sized 0,1,2,3



PPT 5-8

Analyzing McDonalds¶ Retail Strategy

What Is McDonalds¶:

-Target market?

-Retail offering (format)?

-Bases for competitive advantage?

What Threats Might McDonald¶s Face in the Future?



PPT 5-9

Examples of Retail Strategies

Starbucks

Kohls

Restoration Hardware

Ukrop¶s

What is the target market, retail offering, and

source of competitive advantage for each

retailer?



PPT 5-10

Strategy for Looking for a Job

Determine Your TargetMarket

± Area of Country

± Type of Company

± Type of Position

Assess andEx

ploit Your Competitive Advantage

± Unique Skills,Experience, Knowledge



PPT 5-11

Why Does a Retailer Need toFocus on a

Specific Target Market?

Why Not Sell to Everyone?



PPT 5-12

Retail Market Opportunities for Women¶s Apparel



PPT 5-13

Methods for Segmenting Markets

Demographics

Geographic

Lifestyle, Psychographics

Buying Situations

Benefits Sought



PPT 5-14

Criteria For Selecting A Target Market

Attractiveness -- Large,

Growing, Little

Competition

MoreProfits

Consistent with Your

Competitive Advantages



PPT 5-15

Can A Retailer Develop a SustainableCompetitive Advantage by:

Dropping the Price of Your Merchandise?

Building a Store at the Best Location?

Deciding to Sell Some HotMerchandise?

Increasing Your Level of Advertising?

Attracting Better Sales Associates byPaying Higher Wages?

Providing Better Customer Service?



PPT 5-16

Internal and External Bases for Competitive Advantage

Retail Firm

Low Cost

Large Size

Efficient

Distribution,

Operations

Unique

Knowledge

Loyal Employees

Sources of

Capital

Vendors,

Suppliers Customers



PPT 5-17

Sources of Competitive Advantage

More Sustainable

Location

Customer Loyalty

Customer Service

Exclusive Merchandise

Low Cost Supply ChainManagement

Information Systems

Buying Power with Vendors

Committed Employees

Less Sustainable

Better Computers

More Employees

More Merchandise

Greater Assortments

Lower Prices

More Advertising

More Promotions

Cleaner Stores



PPT 5-18

What does loyalty mean?

Is It the same as liking a store?«Going to the store frequently?

Loyalty



PPT 5-19

Approaches for BuildingCustomer Loyalty

Unique Positioning

Customer ServiceInformation About Customers (Database Retailing)

Unique Merchandise

Location



PPT 5-20

Example of Positioning



PPT 5-21

Basis of Loyalty, Commitment

Costs

± Location

± Frequent Shopper Programs

± Unique Merchandise Mental, Emotional Attachment



PPT 5-22

Creating Store LoyaltyMental and Emotional Attachments

Elements in a Strong Brand

± Top of the Mind Awareness

± Associations withBrand/Store Name

Methods Used to Develop aStrong Brand

± Massive Exposure

± Symbols to ReinforceImage

± Consistent PositioningCreating StrongAssociations

± Limited Brand Extensions



PPT 5-23

Vendor Relationships

Low Cost - Efficiency Through Coordination

± Electronic Data Interchange (EDI)

± Collaborative Planning and Forecasting toReduce Inventory and Distribution Costs

Exclusive Sale of Desirable Brands

Special Treatment

± Early Delivery of New Styles

± Shipment of Scare Merchandise



PPT 5-24

High Quality Customer Service

Difficult to Achieve

± People Are Not Machines -- Inconsistent

± Retail Sales Associates At Bottom of Labor Pool

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

Culture



PPT 5-25

Critical Tradeoff In DevelopingStrategic Advantage

Focus Leads to Developing

A Competitive Advantage

But

Focus Reduces Flexibility

Low Cost, Consistent Image, Vendor Relationships Reduces Flexibility

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



PPT 5-26

Growth Opportunities

Market Penetration

Market Expansion

Retail Format Development

Diversification

- Related vs. Unrelated



PPT 5-27

Growth Opportunities



PPT 5-28

International Growth Opportunities

Europe

ChinaMexico, Latin America

Japan



PPT 5-29

Key to Success inGlobal Retailing

Domestic market leadership ± strong base

Exploiting core competencies ± competitiveadvantage

± Low cost - Wal-mart, Carrefour ± Fashion Reputation - The Gap, Zara, H&M

± Category dominance - Toys µR¶ Us, Office Depot

± Unique Image, Brand ± Disney, IKEA, Starbucks

Adaptability Global Culture

Long-term commitment



PPT 5-30

International MarketEntry Strategies

Direct Investment

Joint Ventures

Strategic Alliances

Franchising



PPT 5-31

Steps in the StrategicRetail Planning Process

1. Define the business mission

2. Conduct a situation audit:Market attractiveness analysisCompetitor analysis

Self-analysis

3. Identif y strategic opportunities

5. Establish specific objectives and allocate resources

7. Evaluate perf ormance and make adjustments

6. Develop a retail mix to implement strategy

4. Evaluate strategic alternatives



PPT 5-32

Elements in a Market Analysis

0

50

10 0

1 st Qt r 2 nd Qt r 3 r d Q t r 4 t h Qt r

MARKETMARKETFACTORSFACTORS

COMPETITIVECOMPETITIVEFACTORSFACTORS

ENVIRONMENTAL ENVIRONMENTAL FACTORSFACTORS

ANALYSIS OFANALYSIS OFSTRENGTHS &STRENGTHS &

WEAKNESSESWEAKNESSES

Barriers to entry

Bargaining power of

vendors

Competitive rivalryThreat of superior

new formats

Technology

Economic

Regulatory

Social

Size

Growth

Seasonality

Business cycles

Management

capabilities

Financial resources

LocationsOperations

Merchandise

Store Management

Customer loyalty



PPT 5-33

Questions for Analyzing 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 market

firm, competitors



PPT 5-34

Porter¶s Five Forces

CompetitiveRivalry

BargainingPower ofVendors

Barriers to

Entry

LargeCustomers

Threat ofSubstitution



PPT 5-35

Strengths and Weaknesses Analysis

Management Capability:Capabilities and ex perience of to p management

De pth of Management--capabilities of middle management

Management¶s commitment to fir m

Financial Resources:Cash flow from existing business

A bility to r aise de bt or equity financing

Operations:Overhead cost str ucture

Quality of o per ating systems

Distri bution capabilities

Management infor mation systems

Loss prevention systems

Inventory control system

Merchandising Capabilities:K nowledge and skills of buyers

Relationshi ps with vendors

Capabilities in develo ping private

capabilities

Store Management CapabilitiesManagement capabilities

Quality of sales associates

Commitment of sales associates to fir m

Locations

CustomersLoyalty of customers



PPT 5-36

Illustration of theStrategic Retail Planning Process

Kelly Bradford ± Owner of Gifts To Go

± Two Store Chain in Chicago

± Target Market ± Upper Income Men and WomenLooking for Gifts between $50 and $500

± Strong Customer Loyalty Based on KnowingWhat Customers Want, Providing GoodCustomer Service

± Low Turnover Among Associates



PPT 5-37

Mission Statement for Gifts To Go

³The mission of Gifts to Go is to be the leadingretailers of higher-priced gifts in the Chicagoand provide a stable income of $100,000 per year for the owner.´

Define growth opportunities will and won¶tconsider

Indicates objective of company



PPT 5-38

Situation Analysis of Gifts to Go

Market Factors

± Chicago is an attractive market. (+)

± Relatively expensive gifts are not affected muchby 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 rivalry. (+)



PPT 5-39

Situation Analysis of Gifts to Go (continued)

Environmental Factors

± Potential Threat - Development of electronic channel bytraditional bricks and mortar retailers (-)

Strengths and Weaknesses

± Management Capability ± Limited

± Financial Resources ± Good

± Operations ± Poor

± Merchandise Capabilities ± Good

± Store Management Capabilities ± Excellent

± Locations ± Excellent

± Customer Loyalty ± Good

± Customer Database - Good



PPT 5-40

Growth Opportunities for Gifts to Go

Market Penetration

± Increase size of present stores

± Open additional gifts stores in Chicago area

Market Expansion

± Open gift stores outside Chicago area ± Sell lower priced gifts in present stores



PPT 5-41

Growth Opportunities for Gifts to Go (continued)


± Sell non-gift merchandise to same customers in present or new stores

± Sell similar gifts to same customers through an electronicchannel

Diversification

± Manufacture craft gifts

± Open an apparel store targeting teenagers

± Open a category killer store selling a broader assortmentof gifts



PPT 5-42

Evaluating Growth Opportunities for Gifts to Go

Market Attractiveness

Market Penetration

± Increase size of present stores (low)

± Open additional gifts stores in Chicago area (medium)

Market Expansion

± Open gift stores outside Chicago area ± new geographic

segment (medium) ± Sell lower priced gifts in present stores ± new benefit

segment (medium)



PPT 5-43

Evaluating Growth Opportunities for Gifts to Go (continued)

Market Attractiveness


± Sell non-gift merchandise to same customers in present or new stores (High)

± Sell similar gifts to same customers through an electronicchannel (High)

Diversification

± Manufacture craft gifts (High)

± Open an apparel store targeting teenagers (High)

± Open a category killer store selling a broader assortmentof gifts (High)



PPT 5-44

Evaluating Growth Opportunities for Gifts to Go

Competitive Position

Market Penetration

± Increase size of present stores (High)

± Open additional gifts stores in Chicago area(Medium)

Market Expansion

± Open gift stores outside Chicago area (Low)

± Sell lower priced gifts in present stores (low)



PPT 5-45

Evaluating Growth Opportunities for Gifts to Go (continued)



± Sell non-gift merchandise to same customers in present or new stores (Low)

± Sell similar gifts to same customers through an electronicchannel (Medium)

Diversification

± Manufacture craft gifts (Low)

± Open an apparel store targeting teenagers (Low)

± Open a category killer store selling a broader assortmentof gifts (Low)

M k t Att ti /C titi



PPT 5-46

Market Attractiveness/CompetitivePosition Matrix

M a r

k e t A t t r a c t i v

e n e s s


High LowMediumMaximum

investment

Consolidate

position

Invest to

challenge leader

Opportunities

investment

Build strength or

exit

Selective

investment

Build on strengths

Cautious

investment

Harvest

or

divest

Protect

position

Manage f or cash

generation

Harvest or

divest

Harvest

or

divest

Aggressive

investment

Cautious

investment

Minimal

investment



PPT 5-47

Steps in Using Market Attractiveness -Competitive Position Matrix

Define strategic opportunities

Identify market attractiveness and competitive

position factors Assign weight based on importance of factors

Rate opportunities on market attractiveness

and competitive position Calculate scores and evaluate opportunities

Ch t i ti f



PPT 5-48

Characteristics of International Markets

U.S. Germany Japan

Population (Millions) 266 82 126

Business Climate 3 10 24

Logistical Infrastructure Exc. Good Avg.

Att ti R ti f



PPT 5-49

Attractiveness Ratings for International Growth Opportunities

C



PPT 5-50

Competitive Position in InternationalGrowth Opportunities



PPT 5-51

Evaluation of InternationalGrowth Opportunities

Ri k d R d i L ti A i



PPT 5-52

Risk and Rewards in Latin America:Country Risk Assessment

Source: Coo pers & Ly br and Analysis, ³G lo bal Retailing: Assignment Latin America,´ Chain Store Age Executive,A pril 1996, seciton 2, p. 4.

RISK

M a r k e t S i z e ( G D P

B i l l i o n s ) 400

350

300

250

200

150

100

50

0

Low Medium High

Short-Term Risk

Long-Term Risk

Chile

Colombia

Peru

Venezuela

Argentina

Mexico

Brazil

E al ation of Retail Market



PPT 5-53

Evaluation of Retail MarketOpportunities in European Community

High Low

UNITED KINGDOM

NETHER LANDS

O

p e n

R e s t r i c t e d

M A R K E T S

SPAIN

ITALY

FRANCE

GERMANY

BELGIUM

PORTUGAL

LUXEMBOURG

IRELAND

GREECE

DENMARK

GROWTH

M k t Att ti R ti f



PPT 5-54

Market Attractiveness Ratings for Growth Opportunities in Merchandise Categories

Weight

Market size

Growth

Vendor power

Competitive

intensity

Social trends

Score

Junior¶s

(2)

Men¶s

(3)

Children¶s

(4)

Furniture

(5)

Cons. Elec.

(6)

Soft Home

(7)

Women¶s(

1)

Factors

20

20

15

20

25

10

9

4

5

4

5

540

7

3

4

3

5

445

5

6

10

10

6

720

4

5

9

2

6

505

5

4

2

5

6

485

6

8

1

2

4

435

7

6

8

10

9

805

Competitive Position Ratings



PPT 5-55

Competitive Position Ratingsin Merchandise Categories

Weight

Location

Vendorrelationship

Costs

Skills of

buyers

Image withcustomer

Score

Junior¶s

(2)

Men¶s

(3)

Children¶s

(4)

Furniture

(5)

Cons. Elec.

(6)

Soft Home

(7)

Women¶s

(1)

Factors

20

25

20

10

25

100

9

8

8

6

8

800

9

7

8

7

8

785

8

5

5

5

5

560

6

7

6

9

6

655

4

4

3

5

5

415

2

3

1

4

2

225

4

7

7

8

8

675

Evaluation of Merchandise



PPT 5 56

Evaluation of MerchandiseCategory Opportunities

1 , 0 0

0

M a r k e t A t t r a c t i v e n e s s

High LowMedium

Soft home

Men¶s clothing

Women¶s

clothing

Children¶s

clothing

Consumer

electronics

1,000 667 333

L o w

H i g h

M e d i u m

3 3 3

6 6

7

Junior¶s

clothing

Furniture

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Retail Strategic Planning

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