WHAT IS A RETAIL

STRATEGY?
Strategy
is frequently use in
retailing.
- is used to commonly it
appears that all retailing
decisions are strategic
decisions.
-

Retail strategy

is a statement identifying the

retailers target markets, the format
the retailer plans to use to satisfy the
target markets needs and the bases
upon which the retailer plans to build
a sustainable competitive advantage.

Target market
is the market segment toward
which the retailer plans to focus its
resources and retail mix.

Retail format
-suggests the type of retail
mix (nature of merchandise and
service offered, pricing policy,
advertising and promotion
Sustainable
program, approach to store design
competitive
and
visual merchandising, typical
advantage
location.
is an advantage over the
competition that is not
easily copied and thus
can be maintained over
a long period of time.

TARGET MARKET AND RETAIL

FORMAT
Retailing concept is a
management
orientation that
focuses a retailer on
determining the
needs of its target
market and satisfying
those needs more
effectively and
efficiently than its
competitors do.

Retail market is a group of

consumers with similar needs ( a

market segment ) that is serviced by
a group of rtailers using a similar
Retail market
retail
format to satisfy them.

Retail markets for women's

apparel
Fashion segments
conservative TraditionalFashion-forward

Retail Formats

Specialty
store

Charming
shop

The Gap
Wet seal
The Limited Urban Outfitter
Talbots
H&M
Saks 5th ave
JCPenney
MacysBloomingdales
Khols
Neiman Marcus

Department
store

Discount Family dollarKmart

Wal-Mart
store Dollar General
Off-price
store

Rose stores

Target

T.J max

Steinmart
Bluefly.com
Neiman Marcus

Catalog FingerhutJCPenney LandsEnd Bloomingdales

Anthropologie

BUILDING A SUSTAINABLE
COMPETITIVE ADVANTAGE

The final element in a

retail strategy is the
retailers approach to
building a sustainable
competitive advantage.
Any business activity
that a retailer engages
in can be the basis for a
competitive advantage,
but some advantages
are sustainable over a
long period of time.

Seven important opportunities

for retailers to develop
sustainable competitive
advantage

Customer Loyalty
Location
Human resource management
Distribution and information systems
Unique merchandise
Vendor relations
Customer Service

Customer Loyalty
Means

that customers are committed to

buying merchandise and services from a
particular retailer.
Other bases for sustainable competitive
advantage discussed in this section help
attract and maintain loyal customers.
For instance, having dedicated
employees, unique merchandise, and
superior customer service all help
solidify a loyal customer base.

o Customer Loyalty

Is more than
simply liking one
retailer over
another

Retail Branding
Stores

use
brands to build
loyalty in much
the same way
that
manufacturers
do

 Positioning
A

retailer builds customer loyalty by

developing a clear, distinctive image of
its retail offering and consistently
reinforcing that image through its
merchandise and service.
Involves the design and implementation
of a retail mix to create an image of the
retailer in the customers mind relative
to its competitors.

 Loyalty Program
Are

part of an overall customer relationship

management program (CRM).
Customer loyalty programs work hand-inhand with CRM. Members of loyalty
programs are identified when they buy
because they use some type of loyalty card.
Their purchase information then is stored n
a huge database known as data warehouse.

Loyalty Program
From

this data
warehouse,
analysts determine
what types of
merchandise and
services certain
groups of
customers are
buying.

 Location

what are the 3

important things in
retailing? Is Location,
location, location.
Location is the critical
factor in consumers
selection of a store.
A competitive
advantage based on
location is sustainable
because it is not easily
duplicated.

Human Resource
Management
Retailing

is a
labor-intensive
business, in which
employees play a
major role in
providing services
for customers and
building customer
loyalty.

Distribution and
information systems
o

All retailers strive to reduce operating

costs-the costs associated with
running the business-and make sure
the merchandise that customers want
is available.
Retailers achieve these efficiencies by
developing sophisticated distribution
and information systems and sharing
information with vendors.

Unique merchandise
It

is difficult for retailers to develop a

competitive advantage through
merchandise because most competitors can
purchase and sell the same popular
national brands.
Many retailers realize a sustainable
competitive advantage by developing
Private Label Brands (store brands), which
are products developed and marketed by a
retailer and available only from that
retailer.

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
are not available to
competitors who lack
such relationships, or
receive popular
merchandise in short
supply.

 Customer Service
Retailers

also can build a sustainable

competitive advantage by offering
excellent customer service. Offering
good service consistently is difficult
because customer service is provided
by retail employees, and humans are
less consistent than machines.
The quality of service can vary from
person to person and from day to day.

Customer Service
Retailers

that offer
good customer
service instill its
importance in
their employees
over a long period
of time through
coaching and
training.

Multiple Sources of
Advantage
To

build a sustainable competitive

advantage, retailers typically dont
rely on a single approach, such as
low cost of excellent service.
Instead, they need multiple
approaches to build as high a wall
around their position as possible.

Growth Strategies
Four types of growth
opportunities that retailers
may pursue:
1.
2.
3.
4.

Market Penetration
Market Expansion
Retail Format Development
Diversification

1. Market Penetration
A

market penetration growth

opportunity involves realizing growth
by directing efforts toward existing
customers using the retailers present
retailing format.
Market penetration approaches
include opening more stores in the
target market keeping existing stores
open for longer hours.

Market Penetration

Other approaches
involve displaying
merchandise to increase
impulse purchases and
training sales people.
Cross-selling means
that sale associates in
one department attempt
to sell complementary
merchandise from other
departments to their
customers.

Market Penetration

2. Market Expansion
A

market
expansion
growth
opportunity
involves using
the existing
retail format in
new market
segments.

3. Retail Format
Development
A

retail format
development growth
opportunity is an
opportunity in which
a retailer develops a
new retail format-a
format with a
different retail mixfor the same target
market.

4. Diversification
A

diversification growth
opportunity is one in which a
retailer introduces a new retail
format directed toward a market
segment thats not currently
served by the retailer.
Diversification opportunities are
either related or unrelated

Related versus Unrelated

Diversification
In

a related diversification growth

opportunity, retailers present
target market or retail format
shares something in common with
the new opportunity.
Unrelated diversification lacks any
commonality between the present
business and the new business.

Vertical Integration
Is

diversification by retailers into

wholesaling or manufacturing.
In addition, retailers and
manufacturers have different
customers; the immediate customers
for a manufacturers merchandise
are retailers, whereas a retailers
customers are consumers.

Strategic Opportunities and

Competitive Advantage

Typically, retailers
have the greatest
competitive
advantage when
they engage in
opportunities that
are similar to
their present
retail strategy.

Global Growth Opportunities

International

expansion is a market
expansion growth opportunity that
many retailers find attractive. But
international expansion can be risky
because retailers must deal with
different government regulations,
cultural traditions, supply chain
considerations, and languages.

Key to success
4 characteristics of retailers that have

successfully exploited international

growth opportunities:
a.
b.
c.
d.

A global sustainable competitive

advantage
Adaptability
Global culture
Financial resources

a. A global sustainable
competitive advantage

Entry into non-domestic markets

is most successful when the
expansion opportunity is
consistent with the retailers
core bases of competitive
Core Advantage
Global
advantage.
Retailer Example
Low-cost, efficient operation
Carrefour
Strong private brands
Starbucks
Fashion reputation

Wal-Mart,
IKEA,
The Gap,

b. Adaptability
While

successful
global retailers
build on their core
competencies, they
also recognize
cultural differences
and adapt their
core strategy to the
needs of local
markets.

C. Global culture
To

be global,
retailers must
think globally. It
is not sufficient to
transplant a
home-country
culture and
infrastructure into
another country.

Financial Resources

Expansion into
international markets
requires a long term
commitment and
considerable upfront
planning. Retailers
find it very difficult to
generate short-term
profits when they
make the transition
to global retailing.

Entry Strategies

1.
2.
3.
4.

4 approaches that retailers can

take when entering
nondomestic markets are:
Direct investment
Joint Venture
Strategic alliance
Franchising

1. Direct investment

Involves a retail firm

investing in and owning
a division or subsidiary
that operates in a
foreign country. This
entry strategy requires
the highest level of
investment and exposes
the retailer to
significant risks, but is
also has the highest
potential returns.

2. Joint Venture
Is

formed when the

entering retailer
pools its resources
with a local
retailer to form a
new company in
which ownership,
control, and profits
are shared.

3. Strategic alliance
is

a
collaborate
relationship
between
independent
firms.

4. Franchising

Offers the lowest risk

and requires the least
investment. However,
the entrant has limited
control over the retail
operations in the
foreign country,
potential profit is
reduced, and the risk of
assisting in the creation
of a local domestic
competitor is increased.

The Strategic Retail Planning

Process
Entails

the set of steps a retailer goes

through to develop a strategic retail
plan. It describes how retailers select
target market segments, determine the
appropriate retail format, and build
sustainable competitive advantages.
The planning process can be used to
formulate strategic plans at different
levels within a retail corporation.

Stages in the strategic retail

planning process
1. Define the business mission
2. Conduct a situation audit:
Market attractiveness analysis
Competitor analysis
Self-analysis

Exhibit 5-5

3. Identify strategic opportunities

4. Evaluate strategic alternatives
5. Establish specific resources

6. Develop a retail mix to implement strategy

7. Evaluate performance and make adjustmen

1. Define the business

mission
The

first step in the strategic retail planning

process is to define the business mission.
The mission statement is a broad
description of a retailers objectives and the
scope of activities it plans to undertake.
The mission statement defines the general
nature of the target segments in retail
formats on which the firm will focus.

business mission

2. Conduct a situation audit

After

developing a mission statement

and setting objectives, the next step
in the strategic planning process is to
conduct a situation audit, an analysis
of the opportunities and threats in
retail environment and the strengths
and weaknesses of the retail business
relative to its competitors.

Market Factors

Some critical factors related to consumers and

their buying patterns and the target market size
and growth, sales cyclicity, and seasonality.
Market size, typically measured in retail sales
dollars, is important because it indicates a
retailers opportunity to generate revenues to
cover its investment.

Competitive Factors
The

nature of the competition in retail

market is affective by barriers to entry,
the bargaining power or vendors, and
competitive rivalry.
Barriers to entry institute condition in
a retail market that make it difficult for
other firms to enter the market, such as
scale economies, customer loyalty, and
the availability of great locations.

Competitive Factors
Scale economies are cost
advantages due to a
retailers size. Markets
dominated by large
competitors with scale
economies are typically
unattractive.
Bargaining power of
vendors markets are less
attractive when only a
few vendors control the
merchandise sold in it.

Environmental Factors
can

affect market attractiveness

span technological, economic,
regulatory, and social changes.
When a retail market is going
through significant changes in
technology, existing competitors are
vulnerable to new entrants that are
skilled at using the new technology.

Strengths and weaknesses

analysis

The most critical aspect of the situation audit is

for a retailer to determine its unique capabilities
in terms of each strengths and weaknesses relative
to the competition.
Indicates how will the business can seize
opportunities and avoid harm and threats in the
environment.

3. Identify Strategic
Opportunities
After

completing the situation

audit, the next step is to
identify opportunities for
increasing retail sales. Kelly
Bradford presently competes
in gift retailing using a
specialty store format.

Identify Strategic
Opportunities
Market
penetration

1.

Market
expansion

1.

Format
Developme
nt

1.

Diversificati

1.

2.

2.

2.

Increase size of present stores and

amount of merchandize in stores
Open additional gift stores in Chicago
area
Open gift stores outside the Chicago
area (new geographic segment).
Sell lower-priced gifts in present
stores
Sell apparel and other nongift
merchandise to same customers in
same or new stores.
Sell similar gift merchandise to same
market segment using the internet.
Manufacture craft gifts.

4. Evaluate Strategic
Opportunities
The

4th step in the strategic planning

progress is to evaluate opportunities
that have been identified in the
situation audit.
The evaluation determines the
retailers potential to establish a
sustainable competitive advantage and
reap long-term profits from the
opportunities being evaluated.

5. Establish specific objective

and allocate resources
After

evaluating the strategic investment

opportunities, the next step in the
strategic planning process is to establish
a specific objective for each opportunity.
The retailers overall objective is
included in the mission statement; the
specific objectives are goals against
which progress toward the over all
objective can be measured.

6. Develop a retail mix to

implement Strategy
The

6th step in the planning process

is to develop a retail mix for each
opportunity in which an investment
will be made and control and
evaluate performance.

7. Evaluate Performance and

Make Adjustments
The

final step in the planning process

is to evaluate the results of the
strategy and implementation program.
If the retailers is meeting or exceeding
its objectives, changes arent needed.
But if the retailer fails to meet its
objectives, reanalysis is required.

Thank you..