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VIJEESH MOHAN

Module-II
Strategic Planning in Retailing
Retail strategic planning is a detailed process organizations go through in order to have
the most successful operations possible.
Retail strategic planning is a marketing plan that details how a business intends
to offer its products or services to consumers and influence their purchases.
For example, a typical retail strategy might illustrate how best to place and display
a company's products

in retail

outlets and

how

to

attract optimal consumer

interest at

those locations with such things as price discounts, placement, retailer incentives and signs.
A retail strategy is the overall plan and or frame work of action that guide a retailer.
One year in duration
Outlines mission, goals, consumer market, overall and specific activities, and control
mechanisms

The process of strategic retail planning has several features:


It provides a thorough analysis of the requirements for doing business for different type
of retailers
It outlines retailer goals
The legal ,economic and competitive envt is studied
A firms total efforts are coordinated
Crises are anticipated and often avoided

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Strategic retail planning process


The strategic planning process is divided into following steps:
1.
2.
3.
4.

Deciding the stores philosophy, mission and objectives,


Situation analysis
Formulation of retail strategy
Strategy implementation and control.

1. Deciding the stores philosophy, mission and objectives:


The retail strategic planning process starts with the identification of stores mission for its
existence and hence the scope of the retail store. The mission of a store entails identifying the
goods and services that will be offered to customers. It also deals with the issue that how the
resources and capabilities of a store will be used to provide satisfaction to customers and how the
store can compete in the target market vis-a-vis its competitors.
The mission also involves the way of stores functioning. How a store will work and
accomplish its day to day operations? What is the emergency planning? All are answered in the
stores mission statement. For example, Vishal Mega Marts, they have philosophy of customer
satisfaction through manufacturing to retailing.
Once the organization mission has been determined, its objectives, desired future
positions that it wishes to reach, should be identified. Stores objectives are defined as ends
which the store seeks to achieve by its USP (Unique Selling Preposition) and operations.
The stores objectives may be classified into two parts:
(i) External store objectives
(ii) Internal Store Objectives
External store objectives are those that define the impact of store on its environment,
e.g., to develop high degree of customer confidence by providing quality goods at lowers prices.
Internal store objectives, on the other hand, are those that define how much is expected
to be achieved with the available resources, e.g. to raise the store turnover by 15% in the coming
year.

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2. Situational Analysis (SWOT Analysis):


The objective of doing stores situation analysis is to determine where the store is at present and
to forecast where it will be if formulated strategies are implemented. The difference between
current and future position (forecasted) is known as planning or strategic gap. Under
organisational analysis, normally stores study their external (environmental) and internal
environments.
i.External Analysis:
The purpose of examining the stores external environment is to study the opportunities
and threats in the retailing environment. The external analysis studies factors that affect the
macro-environment of retailing industry and the task environment.
Under external analysis, retailer studies these parameters:
(i) Economic environment of retailing,
(ii) Political environment of retailing,
(iii) Legal environment of retailing,
(iv) Socio-cultural environment of retailing,
(v) Technological environment of retailing, and
(vi) International environment of retailing.
The stores task environment can be influenced directly by retailers own policies and
includes competitors, suppliers and customers.
ii. Internal Analysis:
The objective of studying internal environment of its own store is to identify the stores
strengths and weaknesses. The store will try to increase its capabilities, and overcome the
weaknesses that deter the business profit. While doing the internal analysis, store examines the
quality and quantity of its available resources and critically analyzes how effective these
resources are used.

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These resources for the purpose of examining are normally grouped into human
resources, financial resources, physical resources (assets) and intangible resources
(goodwill, image etc).
3. Formulation of Retail Strategy:
In this stage, after analyzing the stores capabilities in terms of HR, finance, physical and
intangible resources, a store manager formulates retail strategy with regard to marketing, retail
positioning and retail mix.
Marketing is the way to achieve the set objectives. Therefore, marketing strategy should
be devised according to stores primary and secondary objectives. Generally, marketing strategy
is developed on the basis of product and/or market segmentation instead of the market as a
whole.
Retail Positioning is a plan of stores action for how the retailer will enter the target
market and will compete with its main competitors. Retail positioning from a retail stores point
of view, is a step by step plan to create and maintain a unique and everlasting image of the store
in the consumers mind.
This process reveals the fact that understanding what customer wants? is the
success key to retail positioning in the market. Under retail positioning, a retailer conveys the
message that its products are totally different and as per customers requirement. The reason here
is that customers are attracted towards items that are new for them with the perception that if it is
new, it will have some extra/added features.
Retail positioning is made possible under these circumstances:
(i) By differentiating the stores merchandise from its competitors,
(ii) By offering high level of after sales services at nominal/no cost, and
(iii) By adopting low pricing policies.

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Retail Mix is the blend of various retail activities which in total present the whole
concept of retailing. The retail marketing and retail positioning strategies are put into effect by
this retail mix the set of controllable elements that a retailer can use to satisfy customers needs
and to influence their buying behavior and compete effectively in the target market. Utmost care
is required on the part of retail manager to select the various elements for a perfect retail mix.
The main elements a retail store manager has to face are:
Stores location
Merchandise assortment
Pricing policy
Customer service mechanism
Visual merchandising
Personal selling efforts
Advertising efforts and
Stores internal and external environments.
4. Strategy Implementation and Control:
It is concerned with the designing and management of retail systems to achieve the best
possible combination of human, financial, physical and intangible resources of a retail store to
achieve the formulated objectives, without timely and effective implementation also requires
scheduling and coordination of various retail activities.
For example, the coordination between the marketing and sales promotion department is
a must for sales promotion to make success.
Further, the spirit of team work is an essential part for the success of strategy
implementation. If the retail stores strategies are competitive, marketing efforts are as per
demand but the sales promotion employees are not taking it seriously or are ineffective, result
will not be up to the mark.

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The implementation of new retailing strategies sometimes require changes in the way of
functioning and duties that can lead to resistance from employees. Therefore, stores should take
positive steps to reduce this resistance to change and to convince the employees that it in a long
term will be beneficial for both the store and employees.
The positive steps include the following:
(i) Inspection,
(ii) Detection, and
(iii) Correction.
It means after implementing the retail strategies, retailer should assess how effectively
strategies are being implemented, how far the strategic objectives are being achieved and what
has been left to be achieved in the stores objectives list.
Therefore, retailers inspect the implemented strategies from time to time and detect the
fault (if any) in the implementation of various retail elements. If any deficiency is found during
inspection process, that has to be corrected with immediate effect without any further loss to
store.

Retail Environment And Customers


There has been a tremendous metamorphosis in the retailing environment in India over
the last ten years, and the beginning of this evolution can be traced to early years of the
liberalization process in the country. The retail environment definition is the overall experience
that the retailer provided to the customer. It is believed that the product is no longer the most
important aspect of the retail business. Instead, it is the experience that the customer has in your
store that will keep them coming back and making future purchases.
Retail marketing environment consists of the external actors and forces that affect the
retailers to develop and maintain successful transactions and relationships with its target
customers.

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There are two types of marketing environment.


1. Micro environment
2.Macro environment

1. Micro environment
The micro environment consists of the actors in the retailers immediate achievement that
affect its ability to serve its market- suppliers, intermediaries, customers, competitors and public.
1.Suppliers are business firms and individuals who provide resources needed by the retailer.
For example a retail store must obtain various products from different suppliers so that as and
when customers come and ask the product, he will be in a position to sell them on tome.
2. Intermediaries are firms that aid the retail shop in promoting selling and distribution goods
to final buyers.
3. Customers are the end users of the product or services and they are the last link in the
business process.
4. Competitors the retailers marketing system is surrounded and affected by a host of
competitors. These competitors have to be identified , monitored and outmaneuvered to captured
and maintain customer loyalty.

2.Macro environment
The macro environment consists of legal ,social, economic and technological forces.
1. Demographic

2.

Political and legal

3.

Social and cultural environment

4.

Economic environment

5.

Technology environment(Online purchase, Credit Cards, Electronic Data Inter


change (EDI), Response (QR) System-ERP, Radio Frequency Identification (IFID))

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Designing retailing Information system and Location


Retail Information System (RIS)
The Retail Information System (RIS) is a flexible tool that enables you to collect,
aggregate and analyze data from retailing activities.
The Retail Information System integrates data from the areas of Purchasing, Sales and
Distribution, and Inventory Management, and also enables you to evaluate data that is
particularly significant for Retail (data relating to retail price change documents or the POS
interface, for example).
The Retail Information System is a component of the logistics Information system. The
Logistics Information System is divided into the following information systems:
Sales Information System (SIS)
Purchasing Information System (PURCHIS)
Inventory Controlling (INVCO)
Quality Management Information System (QMIS)
Retail Information System (RIS)

The Logistics Information System (LIS) also includes the following information systems:

Production Information System


Plant Maintenance Information System

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Retail research
Retail research means studying customers' psychology about products pertaining to their
daily necessities,asking for comments from them about a particular product and revert the same
back to the manufacturer for changes/improvement to regain market share. Since retailers have
direct contact with the ultimate customers, retail rearch is of utmost importance to
upgrade/improve the product to enhance selling possibility.
Marketing research is the function that links the consumer, customer and public to the
market through information- used to identify and define marketing opportunities and problems;
generate, refine, and evaluate marketing actions ; monitor marketing performance and improve
understanding of marketing as a process.
Marketing research specifies the information required to address these issues, designs the
methods for collecting information , manages and implements the data collection process,
analyses and communicates the findings and their implications.
Retail marketing research helps Managers to
Undertake market situation analysis
Work at developing strategy to build competitive advantage
Work out specific market development programs
Implement strategy with measureable objectives

I.Qualitative research methods


The qualitative research is used to find out what is in a consumers mind. Through the
qualitative research , the retailer will be able to get oriented to the range and complexity of
consumer activity and concerns. Such data usually helps the retailer to know more about things (
like feelings, thoughts, intensions, past behavior ) which cannot be directly observed and
measured.

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There are mainly three types of qualitative research.


1. Exploratory research method
Defining the problem in detail
Suggesting hypotheses to be tested in subsequent research
Generation new product or service concepts, problems, solutions product features
Obtaining preliminary reaction to new product concept
Presenting of structured questionnaires
2. Orientation method
Getting to know the consumers best view and vocabulary
Educating the researcher to an unfamiliar environment
3. Clinical
Gaining insights of issues which otherwise might be impossible to pursue with structured
research methods.
II. Quantitative research through survey
The survey, in its many forms is one of the most widely used and well known method for
acquiring marketing information by communicating with a group of respondents. Information
can be obtained by asking questions or observing the behavior of consumers.
Qualitative survey studies the target demographic groups by mapping the current market
trends according to the need based behavour of the consumers and thus determine the right
profile of the target market. The survey can be used to obtain information from consumers,
retailers, industrial users etc. survey can be done by using questionnaires or schedules.

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III. Observation method


Observation is another method were the relevant behavior of customers are observed. ,
but it is limited to providing information on current behavior only. The following are the various
observation methods

Direct observation
Contrive observation
Content analysis
Humanistic inquiry
Behaviour recording devices

IV. Retail audits


Retail audit helps to ascertain the sales personnels efficiency at the point of sale or to
find out the average time take on a normal day or during week end.
such retail process audits helps to examine a stores efficiency in terms
of its operating processes or reduce the cycle time. For instance, with the help of retail process
audit the retailer can work out ways to improve customer service deliveries and improve
performance.
ore audit auditors from well known research firms carry out retail store audits by
counting the inventory on hand and recording deliveries to the store since the last visit. The sales
for a particular period can be obtained by computing.
V. Purchase Intercept Technique
This technique uses the advantage of observation and the significant information gained
through self reporting. It consists of the following steps: Observing customer in-store shopping
behaviour. Recording pertinent shopping behaviour information. Interviewing customers
immediately about their purchase behaviour.

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VIJEESH MOHAN

VI. Experimentation Method


This technique uses cause-and-effect relationship between two or more factors.
Experiments are done normally under controlled conditions where the factors understudy are
manipulated keeping a set of factors constant.
For Example: Imagine a retailer who has increased his price by Rs10. To see the effect of this
he may conduct a survey to determine the effect it may have on sales, profits soon where factors
like display space, store layout, location, advertising displays are kept constant.

Location of retails
The choice of location is the most vital aspect for any business that relies on customers of
which retailing is the classic example. Deciding on location is the most complex of the decisions
to be taken by a retailer. Firstly the costs are very high and once a location has been selected
there is very little flexibility.
Choosing a wrong location can lead to losses and even closure of the store. This makes
the selection of the appropriate location the most critical aspect of retailing.
The importance of location decisions is high due to the following factors:
Location choice is a major cost factor.
1. It involves large capital investment (the high cost of land or building if it is being
purchased of recurring cost of rent if it is leased).
2. It affects the transportation cost structure (Distance from the manufacturer, distributor etc.
affects the total cost of transportation).
3. It has a significant bearing on human resources cost (if the retail store is located away from
central locations i.e. areas where public transport is weak the cost of employees will be
higher as employees will have to be provided with transportation or paid for transport).
4. It is dependable on the quantum of customer traffic (depending on the number of
consumers who frequent the area)
5. It affects the volume of business (if the number of customers visiting the store arelow then
thevolume of business done by the retail store is obviously affected)

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Factors influencing Retail Locations


The following factors play a significant role in the location choice of a particular city:
Size of the City's Trading Area (area from which customers come to the city for
shopping)
The Population of the Trading Area( High growth in the population increase the retail
potential)
The Purchasing Power of the Customers
Distribution Networks
Number, Size and Quality of Competition.
Cost of Land, Rent and Other Retail Development Costs

Nature of retail locations


The types of retail locations can be classified as follows:
1. Isolated Stores
These store have typically no other retail store in the close vicinity. Their location
depends on their pulling power of customers. The advantages of isolated stores are that there is
no competition, the rentals are low as it is not a commercial area, further it will be able to
have better visibility than other stores, constantly upgrade its facilities as per the
requirement.
2. Unplanned Markets
Unplanned markets are basically the markets that come up with no systematic planning for
example the markets in the older part of the cities or where planned markets over the time have
become unplanned markets due to poor municipal lades and unplanned growth of the markets.
Here you also find that there are multiple stores selling the sameproducts. The advantages of
unplanned markets for the retailer are that the rentals are very low, good access to public
transport and availability of a variety of goods for the consumer.

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3. Planned Markets
The planned markets on the other hand are the shopping complexes, the Malls Etc The
advantages of planned markets are that there is a well-rounded assortment of stores making it a
one stop shopping experience for the entire family.
The malls have very large anchor stores which are either departmental stores or stores which
have the crowd pulling capacity. Further in these malls you have a variety of stores, restaurants
and services offered. There is high pedestrian traffic in these markets and all the retailers in the
market share the costs like lighting up of the market for festivals or running of joint promotions
to promote the market, which in malls is also supported by mall management.

Organizational Decisions
Whether to form a sole proprietorship, partnership or corporation- and whether to start a
new business, buy and existing business or become a franchisee.
A sole proprietorship is an unincorporated retail firm owned by one person
A partnership is an unincorporated retail firm owned by two or more persons, each with a
financial interest
A corporation is a retail firm that is formally incorporated under state law; it is a legal
entity apart from its officers(or stock holders) funds can be raised through the sale of
stock.
Starting a new business being entrepreneurial offers a retailer flexibility in location,
operating styles, product lines, customer markets and other factors; and a strategy is fully
tailored to the owners desires and strengths.
Buying a new business allows a retailer to acquire an established company name,
customer following, a good location, trained personnel and facilities; to operate
immediately; to generate ongoing sales and profits etc

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By being a franchisee, a retailer can combine independent ownership with franchisor


support: strategic planning assistance; a known company name and loyal customer
following; co-operative advertising and buying; and a regional, national or global image.
Rigid operating standards, limit the product line sold, and restrict supplier choice

Trading area analysis


A trade area analysis is an important part of business planning. Thetrade area
analysis shows where your customers live in relation to your existing or potential business
site(s). The trade area analysis compares the number of customers by distance from a business
site to the number of households in the study area.
Trade area analysis and mapping describe the characteristics of the area around a store or
network of stores. Without accurate trade area definitions, you cannot measure the key statistics
that impact a store's performance.
Trade area analysis is a methodology, process or technique that provides a basis for
understanding, visualizing and quantifying the extent and characteristics of known or
approximated trade areas.
Trade area analysis provides the foundation for:
Understanding the geographic extent and characteristics of store patronage.
Spatially assessing performance.
Performing competitive analysis.
Evaluating market penetration and market gap analysis.
Target marketing.
Merchandising.
Identifying/quantifying effects of cannibalization.
Developing and exploiting demographic profiles.
Site suitability and site selection studies.

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Trade area analysis also employs theoretical techniques that are used to approximate the
potential patronage area. These techniques are used in cases where customer level data is not
available.
Three types of theoretical approaches are commonly employed in trade area analysis,
including:
1. Radial (ring) studies
2. Gravity models
3. Drive time analyses
Radial Studies:
Radial or ring based analysis is performed by selecting and evaluating demographic
variables that fall within a pre-defined distance from a store location. This technique assumes
that the trade area is circular, with the store at its center. Ring analysis does not account for
barriers such as rivers or railroad tracks that may cross through a trade area and restrict access to
a retail site. Consequently, radial studies are a simplistic approach that can result in an incorrect
delineation of the trade area and errors of omission or commission.
Gravity Models:
Gravity models, or spatial interaction models, define a trade area based on its
attractiveness relative to other trade areas. These models provide an approximation of store trade
area by putting the distribution of all locations (including competitors) into a geographical
context and evaluating each location's relative attractiveness. Typically, a distance decay curve is
used to model the spatial interaction of individual locations. Often size of the store, or store sales
if available, is used to drive the attractiveness parameter.
Gravity models are more sophisticated than simple radial approximations, but they still
do not account for logistical barriers and they are limited by the availability and accuracy of
competitor data. Moreover, gravity models basically are sophisticated algorithms, which may not
be appropriate for non-technical analysts.

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Drive Time Analyses:


Drive time analyses are generally considered to be valid for convenience store
scenarios, where patrons are expected to go to the closest or most logistically convenient
location. Since this analysis is governed by the presence of properly located and attributed
roadway systems, the accuracy of the drive time analysis can be limited by the availability of
accurate and up-to-date digitized road data.
Use trade area analysis to aid site selection and target marketing.
Trade area analysis and mapping tell you:
Where a store's customers are coming from
How many customers you have in a trade area
Where to look for for more customers
Benefits of Trade Area Analysis
Identify gaps or overlaps in the market coverage of your existing store network, and
make corrections by opening, closing or moving stores
Make better site selection decisions by using characteristics of existing trade areas to
predict trade areas around potential locations
Define a geographic area to analyze for market potential, market penetration, and
competitive threats
Become more efficient and effective at target marketing by reaching out only to those
customers and prospects in a store's trade area
Use as a key input into customer profiling
Factors that Impact Trade Areas
Analyzing trade areas should be performed regularly to provide key metrics for
improving sales and marketing performance.
Adding new stores to your network will cause the trade area of nearby stores to change.
In a saturated market, or if stores are placed too close to one another, cannibalization can
occur.
A change to product offerings will impact the trade area, as will shifts in population and
demographics, the existence of competitors, changes to highways and roads, and the
addition of other businesses that attract people to the area.

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A trade area analysis typically includes:


1. Mapping existing customers in relation to store locations
2. Calculating distance/drive times from customers to store locations
3. Determining all variables that define and impact your trade areas
4. Developing a model for predicting trade areas around new sites
5. Using the results as an input into analyzing market potential or customer profiling or to
help make decisions about site selection or targeted marketing
Three major factors in trading-area analysis
1. Population characteristics
2. Economic base characteristics
3. Competition and level of saturation

Site selection
Site selection indicates the practice of new facility location, both for business and
government. Site selection involves measuring the needs of a new project against the merits of
potential locations.
Process
The site selection process includes a detailed evaluation of project needs which are then
measured against the merits of potential locations. The process typically includes selecting and
evaluating communities, real estate site analysis and acquisition, and may include negotiating tax
incentives.
The process includes the following steps:

Define project criteria


Evaluate communities
Create short list of communities based upon project criteria
Identify real estate sites within each finalist community
Real estate analysis
Negotiate tax incentives
Site acquisition

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Factors influencing site location


Availability/cost of land (if applicable) and proximity to major highways
Available infrastructure: utilities, sewer/water, power, transportation networks, etc.
Site ready location
Cost of doing business
Access to raw materials and supply chain
Rail access and ability to
Tax and regulatory environment
Availability of labor and wage requirements
Location of zone designations that may affect the project
Availability of public incentives to offset startup cash and reduce long-term reoccurring
costs
Quality of life

Organisational Pattern In Retailing


The organizational structure of a retail store will vary by the size and type of the
business. Most tasks involved with operating a retail business will be the same.
However, small or independent retail stores may combine many sectors together under
one division, while larger stores create various divisions for each particular function along with
many layers of management.
For example, the small specialty shop may have all of its employees under one category
called Store Operations.
A large department store may have a complete staff consisting of a manager, assistant
manager and sales associates for its Sporting Goods department, Home and Garden, Bed and
Bath, and each additional department.
In order to define the store's organization, start by specifying all tasks that need to be
performed. Then divide those responsibilities among various individuals or channels. Group and
classify each task into a job with a title and description. The final step is to develop
an organizational chart
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Retailing Structure
The following is a brief outline of some of the divisions in a retail organization.
-

Owner/CEO or President

Store Operations: Management, Cashier, Sales, Receiving, Loss Prevention

Marketing: Visual Displays, Public Relations, Promotions

Merchandising: Planning, Buying, Inventory Control

Human Relations: Personnel, Training

Finance: Accounting, Credit

Technology: Information Technology

As the store grows and the retail business evolves, the dynamics of the organization's
structure will change too.
Therefore it is paramount to redesign the store's organizational chart to support the decisionmaking, collaboration and leadership capabilities that are essential during and after a growth
period.

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