Journal of Retailing 93 (1, 2017) 96–119

Future of Retailer Profitability: An Organizing Framework

V. Kumar a,b,c,d,∗ , Ankit Anand a , Hyunseok Song a
a Centre for Excellence in Brand and Customer Management, J. Mack Robinson College of Business, Georgia State University, Atlanta, GA, United States
b HUST, China
c Texas A&M University Institute for Advanced Study, College Station, TX, United States
d Indian School of Business, Hyderabad, India

Available online 7 December 2016

Abstract
Retailers are dynamic in nature, and their strategies keep evolving with changing scenarios and availability of new technologies. In the current
scenario, there is a need for a comprehensive and organizing framework for retailers to develop and implement a complex set of strategies. In this
article, we broadly categorize retailers’ implementation of strategies at four levels—market, firm, store and customer. The four-level categorization
has been done using a triangulation approach consisting of inferences from previous literature, interviews with practitioners, and reviewing popular
press. In the future, retailers will expand to even more countries, and there will be plenty of scope for using advanced technologies and big data.
This organizing framework accommodates for any such changes as well as guides retailers about ways of increasing profitability in the future. In
this article, we also provide generalized expectations of strategies under each level which not only can be used by researchers as a direction of
future research but also by practitioners to understand and implement their strategies in an effective and efficient way.
© 2016 New York University. Published by Elsevier Inc. All rights reserved.

Keywords: Retailer strategies; Retailer Profitability; Global expansion; Technological advancements; Developed economies; Emerging economies

Introduction forcing them to develop new strategies to address each of these

The retail industry is one of the largest and most diversified
operations in the world. The structure of the business indus-
try connects manufacturers to consumers by providing products
and services from the producer to the customer. New technol-
ogy, and the presence of an ever-changing competitive market
structure, requires the business industry to adapt their practices
accordingly. Between 2009 and 2014, big box and department
store retailers’ annual growth dropped by roughly four percent
while the annual growth of online retailers grew ten percent
(Globalmna 2015). The closing of 100 Macy’s stores in 2016 is
a direct result of this shift in consumer behavior. Sixty percent
of customers say they shop at their favorite retailer because of
price and 52% of consumers prefer shopping at a physical store,
despite an uptick in online research of certain products (partic-
ularly electronics and computers) (PWC 2016). Such dynamic
changes add to retailers’ existing multi-dimensional problems,
∗ Corresponding author.
E-mail addresses: vk@gsu.edu (V. Kumar), aanand2@gsu.edu (A. Anand),
hsong6@gsu.edu (H. Song).
challenges. Retailers are particularly concerned with strategies
such as pricing, product selection, location choice, and store
format. Though the retailers’ strategies can be profitable, the
difficulty lies in identifying the source of profitability in the
complex retail structure. This complexity arises due to vari-
ous possible combinations of independent strategies at different
functional levels of retailers. Following the literature on config-
urational approach of organizational theories (Meyer, Tsui, and
Hinings 1993), retailer strategies can be used for the market as
whole entity, as well as the smaller segments of the market.
In this article, we broadly categorize retailer strategies at four
levels—market, firm, store, and customer to develop comprehen-
sive framework. The main criteria of this division are the levels
at which practitioners and researchers observe decision strate-
gies, and how they implement those strategies. In this article,
we categorize the strategies based on strategy implementation
by retailers. This enables us to determine the source of prof-
itability and narrow down potential problems in the event of
a failure, as strategies which are configured at individual lev-
els are similar in their implementation approach. Each level is
comprised of multiple strategies which affect the profitability of

http://dx.doi.org/10.1016/j.jretai.2016.11.003
0022-4359/© 2016 New York University. Published by Elsevier Inc. All rights reserved.
 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
retailers in their own way. Further, we offer a set of generalized
expectations (GE) for each of these strategies to guide retailers
and researchers. We use a triangulation approach to develop the
proposed framework wherein we review the retailing literature
extensively, gather information from popular press, and survey
executives in the retail industry about the current and future
trends and issues.
The implementation of these strategies at the four levels is
contingent on the retailers’ (a) localized strategies in global
expansion and (b) adoption of advanced technology and big data
analytics. Slow growth in the domestic market, growing com-
petition from other multinational retailers, and the ability to use
knowledge learned in multiple markets, drives retailers to move
to diverse international markets. Retailers are concerned about
many of their existing strategies, such as whether to enter the
market as a joint venture or as wholly owned subsidiaries, and
whether to sell standardized products or customized products.
In addition, retailers are, and will be, confronted with abundant
advanced technologies and an abundance of data about cus-
tomers’ purchase behaviors. This technology, while helpful, is
expensive for retailers and requires change in current practices to
account for the digital fluency brought by new technology adop-
tion. Adoption of advanced technologies and big data has a larger
effect on store and customer-level strategies, which are more
dynamic when compared to market and firm-level strategies.
In this article, we draw upon previous literature and exist-
ing retail practices to organize the framework. Hollander (2002)
suggests that studying patterns from historical papers will help
pave the way for a better future in the retail industry. Our
classification of a retailer’s strategies is also consistent with
Mason, Mayer, and Wilkinson (1993), and Miles et al. (1978)
who suggest that structural classification of the retail industry
is useful for understanding and implementing retailing strate-
gies efficiently. The expansion to foreign markets and a high
influx of data and technology will bring about active changes
in the retail industry. Our organizing framework is also in line
with extant literature that discusses retailers’ choice of strategies
when moving to an international market, for example, whether
to opt for a ‘global integration’ or ‘local responsiveness’ strat-
egy (Swoboda, Elsner, and Morschett 2014). Following Zhu and
Kraemer (2005), we also argue that the adoption of innovative
technologies affect retailers’ organizational routines and impact
overall performances.
To understand further the practical relevance of dividing
strategies at the four levels, we conducted interviews with
managers in the retail industry from different countries and
different types of merchants. We conducted 80 personal inter-
views, including senior managers of small and large retail firms
as well as managers from chain and single store retailers. We
interviewed 22 chief marketing officers (CMO) and 22 directors
of marketing from developed nations (sixteen from the United
States and 28 from Europe), eighteen CMOs and eighteen direc-
tors of marketing from emerging markets (24 from Asia and the
Middle East and twelve from Latin America). The questions we
asked focused on sources of profitability, strategy implementa-
tion based on the type of retail setting, global orientation of the
company, and the adaptation of future technologies. We specif-
97
ically focused on how the individual organizations deal with
competition in a dynamic environment, how they strategize for
top and bottom line growth, how they increase store traffic, and
how they maximize customer value. We also emphasized upon
questions related to their strategies for long-run survival in the
dynamically changing environment. We analyzed the qualitative
responses of the managers and found that the division of levels
based on the literature regarding implementation of strategies
matched up with thoughts and practices of individuals in the
field.
We contribute to research in the retail area by offering a
comprehensive framework that will allow researchers better
understand retail strategies at different levels, and focus on
individual strategies that need further research. The existing
framework is also useful when retailers expand to multiple coun-
tries with varying cultures. The framework is also applicable to
the technological changes, which are essential for the growth of
retailers. Managers of the retail industry in developed nations
and those planning to expand to emerging markets will ben-
efit from this framework by learning to implement strategies,
both effectively and efficiently, while identifying the source and
degree of their profitability within each level. They can also use
generalized expectation of strategies under each level discussed
in this article for their future strategy implementation.
Organizing framework
In our proposed organizing framework, we discuss retail-
ers’ strategies at each level and multiple strategies within each
of those levels. Market-level strategies consist of strategies
relating to market structure, market share, market response
to advertising, market-level pricing, market power and expan-
sion strategies. Firm-level strategies include approaches relating
to a firm’s mergers and acquisitions, alliance, store brand-
ing, and multichannel strategies. Store-level strategies consist
of approaches focusing on store marketing mix, location, and
atmosphere related strategies. Finally, customer-level strategies
are comprised of strategies dealing with customer experience,
satisfaction, loyalty, profitability and engagement strategies of
retailers. Finally, we discuss the effects of retailers’ localized
strategies in global expansion, and the effect of the adoption of
advanced technology and big data analytics on the relationship
between each level of strategies and the retailers’ profitability.
Fig. 1 contains organizing framework of strategies at four levels
and appropriate actions for practitioners at each level affecting
retailers’ profitability.
Market level
Market-level strategies are strategies which are implemented
at the aggregate market level and are unique to that particu-
lar market. Retailers implement their differentiating strategies
to position themselves uniquely against their competitors in
the market. Our selection of strategies under the market level
is consistent with the relevant literature as well as with man-
agers’ responses who are concerned with increasing competition
across different market segments, expanding their business, and
 98
Table 1
Select studies related to profitability of retailers at Market levels.a
Category Study scope Authors Type of study Measures Data Characteristics Model Characteristics Key observations

IVs DVs
Structure Brand Erdem (1996) Empirical Price, Brand choice Scanner panel data for Logit model and The average consumer is
attributes margarine, peanut simulated MLE habit persistent in all the
butter, yogurt and product categories.
liquid detergent Consumers are
heterogeneous with
respect to the processes

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

by which past purchases
affect current purchases.
Store Leszczyc, Sinha, and Empirical HH size and Purchase timing and Scanner panel AC Dynamic hazard Competitive market
Timmermans (2000) income, store choice Nielsen data for 21 model structure based on pricing
shopping grocery stores from strategies and spatial
frequency, five chains. competition between
time spent per stores. Significant
trip. differences between the
inter-shopping times for
different stores for
switchers versus repeat
shoppers.
Share Buzzell, Gale, and Empirical Market share ROI 620 individual Data analysis As market share
Sultan (1975) businesses increases, a business is
likely to have a higher
profit margin, a declining
purchases-to-sales ratio, a
decline in marketing costs
as a percentage of sales,
higher quality, and higher
priced products.
Response to Brand Clarke (1976) Empirical Advertising Sales Survey method on Distributed lagged The cumulative effect of
Advertising expense past 70 articles model advertising on sales lasts
only for months rather
than years.
Tellis (1988) Empirical Ad exposure, Brand and quantity Scanner data of Tobit model The effect of advertising
price, choice twelve brands of toilet is generally nonlinear and
coupons, tissues and exposure its impact on volume
feature, to TV records purchased is mediated by
display. brand loyalty.
Pricing Van Heerde, Empirical Price, price Store visits and Consumer hand scan Multivariate Tobit II Losers were the rival
Gijsbrechts, and image, expenditure and perceptual data mid-level and high-end
Pauwels (2008) produce chains. Unlike the price
quality, war initiator, their price
distance, image did not improve,
feature, and they suffered from
display increased price image
sensitivity.
Power Channel Ailawadi, Borin, and Empirical Sales, ROA, ROS, ROI, Cross industry Regression Retailers are not better off
Farris (1995) operating costs EVA, MVA analysis than manufacturers on
total assets performance measures
such as Economic value
added (EVA) and Market
value added (MVA).

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

Kadiyali, Empirical Price, deal, Profit and Market Weekly aggregate data Analytical Manufacturer pricing
Chintagunta, and outside share for two categories. power, as measured by
Vilcassim (2000) category sales manufacturer markup, is
less than retailer pricing
power for each of the
national brands.
Expansion Timing Gielens and Dekimpe Empirical Home players, Speed and size of 75 European grocery Sequential Poisson Incumbents suffer
(2007) first entrant, entry retailers regression model significant sales losses as
foreign a result of a Walmart
players, entry, are significantly
format affected by their
players, reactions, and the
experience, relationship between
cultural and reactions and sales
economic outcomes varies across
knowledge retail formats.
International Gielens and Dekimpe Empirical Assortment, sales 160 foreign entries N/A When determining own
(2001) cultural entry timing and size,
distance managers pay closer
attention to the actions of
their home competitors,
react to prior entries of
same format competitors
differently from those of
different-format
competitors, and adjust
the observed industry
practice for the specificity
of their own resources.
a The articles are selected based on the relevance of the study as well as the number of citations.

99
100 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

Fig. 1. Organizing framework of strategies and actions for increasing Retailer Profitability.

increasing market shares to be more profitable. The structure of Market structure

the market, type of retailers competing for superiority, and new
market entry and barrier strategies highly influence retailers’
profitability at the market level. Retailers’ market pricing behav-
ior is driven by two important factors—a manufacturer’s actions
and competition in the market (Chintagunta 2002). In a bid to be
eminent in the marketplace, retailers try to increase their market
share relative to their rivals while maintaining power in relation
to their supplying manufacturers. Retailers also encounter prob-
lems at the market level when they expand to different domestic
and international markets. We provide a representative of the
literature regarding the implementation of retailers’ strategies at
market level in Table 1.
Market structure refers to the competition among a number of
firms in the market producing identical products in a category,
which are homogeneous or heterogeneous. Market structure
has two key components—competition between firms, and the
number of firms operating in the market. Market competition
strategies depend on the presence of various types of retailers,
and the types of products offered in the marketplace. The num-
ber of retailers operating in the market and their competitive
strategies create barriers for new players. Market structure is
characterized by market concentration (Herfindahl-Hirschman
index), which reflects the degree of competition. Higher market
concentration need not lower competition among existing retail-
 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
ers. In fact, both high concentration and high competition coexist
in the retail industry because of the presence of various types
of retailers and the different positioning of individual retailers.
There are several types of competitions among retailers include
intra-type and inter-type, based on the product line specialty, and
inter-category competitions (i.e., competition between special-
ists and mass merchandisers) (Miller, Reardon, and McCorkle
1999). Further, retailers compete with their rivals based on cus-
tomer store choice (Leszczyc, Sinha, and Timmermans 2000),
brand choice (Erdem 1996), and demographics. Findings from
the past suggest that market concentration has changed to show
dominance of a few retailers and among different types of retail-
ers. Discount stores have the highest concentration in the retail
industry. An increase in market concentration of this type is the
result of the higher growth of top retailers in the market.
Competition in today’s market is so fluid that an individual
selling t-shirts on eBay poses competition to GAP, though on a
very small scale. Such forms of competition have increased at
the aggregate level in the recent past. For example, despite fierce
competition in the e-commerce retail industry, Jet.com has man-
aged to position itself as a low-priced retailer through real-time
pricing strategies, economical shipping options, and the pres-
ence of local distribution centers. This led to its acquisition by
Walmart for $3 billion in an effort to compete with Amazon in
the online market segment. There is also masked competition
between different categories of products sold by different types
of retailers. For example, digital cameras and GPS units are com-
peting with mobile phones whose primary function is not to take
photographs, but come with a built-in, high-quality camera and
GPS. New retailers need to design innovative business models
to remain profitable in the competitive market (Sorescu et al.
2011). Their business models should transfer a part of the value
appropriated through operational efficiencies to their customers
to acquire and retain them in the long term as accomplished by
Jet.com. Retailers should also move away from using standard-
ized strategies at the market level to more localized strategies in
different submarkets.
GE1: Market structure in the retail industry is dynamic, and
there is an opportunity for new retailers to remain profitable in
the competitive market through innovative business models.
Market share
Market share refers to the percentage of total market sales
or units a firm controls for its products and services. A retailer
with high market share is thought to have a competitive advan-
tage over its rivals. They may receive better treatment from
suppliers and enjoy economies of a larger scale. Retailers can
increase their market share mainly through innovation, mergers
and acquisitions, and customer relationship strategies. However,
does higher market share of a retailer actually bring higher
profitability? The conventional view that market share is a
strong determinant of profitability (Buzzell, Gale, and Sultan
1975; Szymanski, Bharadwaj, and Varadarajan 1993) has faced
criticism in subsequent studies which indicate that competitor-
101
oriented objectives, such as market share, are less profitable
(Armstrong and Collopy 1996).
Higher market share through price reduction comes at a cost
to the retailer because it signals lower product quality to cus-
tomers. Such insights have brought changes in the strategies
of retailers to shift their focus from market-level profitability
to customer-level profitability. For example, Anderson, Fornell,
and Lehmann (1994) found that higher customer satisfaction
leads to higher profitability, whereas higher market share reduces
customer satisfaction. In the smartphone market, Apple had 92%
of industry profits in the first quarter of 2015, whereas Apple’s
market share in terms of unit sales was only 20% (WSJ 2015).
Apple earned such high profits mainly due to high customer sat-
isfaction and a loyal customer base. Specialty retailers should
not implement their strategies only to gain higher market share
as this could hinder profitability. Supermarkets serve as an exam-
ple of the opposite problem. They operate on small margins and
must be dependent on a larger market share for their profitabil-
ity. Retailers should target their market share based on the type
of retailer, target market, and various intermediate effects (such
as price sensitivity, customer satisfaction, and loyalty) that play
a key role in purchase behavior.
GE2: Retailers targeting niche markets (e.g., Specialty retailers)
should focus on fulfilling customers’ expectations while those
targeting mass markets (e.g., supermarkets) should concentrate
on a higher market share to ensure profitability.
Response to advertising
Market response to advertising refers to the understanding of
consumers’ behavior, individually or collectively, in response to
advertising strategies by retailers. Retail advertising has a dual
role to play: first, it needs to accomplish institutional advertising
(i.e., for the retail institution itself) and second, it needs to offer
promotional advertising for products and brands it carries. The
aim of institutional advertising is to create awareness about the
retail store as a brand. Promotional advertising serves to increase
store and/or web traffic. For different product types, repetitive
advertising exposure has a non-linear effect on purchase volume,
which is mediated by brand loyalty (Tellis 1988). Marketing
scholars have also identified the duration of carryover effects of
advertising on sales which range from weekly to monthly, but
not annual (Assmus, Farley, and Lehmann 1984; Clarke 1976).
Retailers get more benefit from advertising for new brands than
for already established brands because the effect of advertising
diminishes as the product lifecycle advances.
In the current marketing climate of social media, retailers
focus more on creative advertisements and engagement with
customers via social media marketing campaigns, like voting
for the best Super Bowl commercial, to enhance awareness of
their product. Despite heavy social media marketing, only two of
the top 25 followed accounts on Instagram are retailers: Nike and
Victoria Secret. The other 23 are celebrity accounts. There is still
space for retail brands in social media advertising in the future,
particularly strategies that fill the need for real-time and creative
content strategies. Because millennials will use social media and
102 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
video streaming services more than generations, retailers should
personalize their advertising campaigns on age and type of media
used for marketing. For example, in the case of website ads,
retailers should include creative content and make the marketing
content available through social media to overcome the negative
effects of advertisement blocker applications. This allows for
a higher response from customers regarding the advertisement
since they are often willing to engage with retailers’ campaigns.
With the boom of mobile access to the internet and social media,
retailers should also focus on promotional targeting strategies
based on the location of customers (Fang et al. 2015). More
importantly, these advertisements should be strategic to counter
competing promotions and activate when customers are located
near competitor stores. In the future, retailers should also exper-
iment with innovative techniques to offer products as soon as
customers view the advertisement, such as providing links for
buying options on YouTube and smart TVs.
GE3: Retailers need targeted advertising, real-time location
based promotional advertising and with creative advertising
campaigns on social media to achieve higher market response.
Market pricing
Market pricing refers to the cost of products on the market-
place and customers’ perceived value of the retailers’ pricing
at the level of whole market. Retailers’ pricing strategies are
based on multiple factors such as a competition, category, store,
and chain factors (Shankar and Bolton 2004). Pricing is a popu-
lar competitive strategy used to create a long-term price image
across markets (Gauri, Trivedi, and Grewal 2008). Competitive
pricing strategies may lead to price wars, which could result in
mid and high-end retailers losing market share (Van Heerde,
Gijsbrechts, and Pauwels 2008). Another common option is
the cost-based pricing strategy where powerful retailers, like
Walmart, negotiate with manufacturers to get products at a
lower cost and then increase their market share by targeting
price-sensitive markets. From the customer’s perspective, price
changes increase over time, while choice elasticity remains con-
stant (Bijmolt, Heerde, and Pieters 2005). Retailers should adapt
to the customer’s behavior when choosing market-level pric-
ing strategies. Retailers should administer their pricing strategy
based on the price sensitivity across markets of operations, par-
ticularly when expanding to international markets. In developed
nations, retailers need to deploy customer analytics and get data
insights for their core pricing strategy and create their price
image in various sub-markets accordingly. In general, retailers
should consider integrated product channel pricing strategies in
different sub-markets based on customer behavior in channel
usage, with regard to insights from data received. Overall, since
pricing will be relatively transparent across various channels in
the future, retailers can be profitable through implementation of
personalized pricing strategies using digital coupons.
GE4: Market-level prices will be transparent, and retailers need
to implement integrated product pricing strategies across differ-
ent markets and different channels based on customer profiles.
Power
A retailer’s power against their manufacturers is a well-
researched area in marketing. The prevailing view among
practitioners, based on anecdotal evidence and popular press,
is that power, in terms of price negotiations, profit margin, and
promotional pass-through, has shifted from manufacturers to
retailers. Research by marketing scholars has confirmed that
retailers have gained power compared to manufacturers due
to trade promotions and guaranteed profit margins (Buzzell,
Quelch, and Salmon 1990; Krishnan and Soni 1997). Also,
solely based on pricing, manufacturers are found to have lesser
power than retailers in terms of manufacturer markup (Kadiyali,
Chintagunta, and Vilcassim 2000). Experts attribute this shift in
power to a higher market concentration of retailers, high com-
petition among manufacturers, and competition from retailers
through an introduction of private labels. On the other hand, mar-
keting scholars have also largely found that there was no shift in
the channel power in terms of profitability from manufacturers
to retailers (Ailawadi, Borin, and Farris 1995; Messinger and
Narasimhan 1995).
The conflict of a shift in power from manufacturers to retailers
depends on the definition of power, which ranges from decision
control and dependence on channel member, to profit margins
and the underlying market conditions. In the future, retailers
should realize that exploiting their power to extract higher trade
promotional pass-through would result only in short-term prof-
its. Retailers create more awareness via brand launch events
in stores and co-advertisements with manufacturers. Manufac-
turers should also cooperate with their retailers in smoother
supply chain operations by offering real-time supplies using bet-
ter technologies (e.g., Internet of Things) and thereby fulfilling
the demands of end customers on time. In fact, for a long-term
benefit, manufacturers and retailers should build trust between
them rather than focusing on exploiting the powers of their inter-
dependence (Kumar 1996). The power and interdependence of
manufacturers and retailers should be directed towards a mutual
growth of both the channel members with cooperation for a bet-
ter coevolution.
GE5: Retailers and manufacturers should not exploit their
respective powers as channel members and should cooperate
for mutual growth.
Expansion
Market expansion refers to the process of offering a prod-
uct or service to a wider section of an existing market or into
an entirely new market. Market expansion of retailers occurs in
various forms such as attracting a wider customer base through
diversifying current product lines or services, introducing new
store formats and channels, and serving new geographical loca-
tions. Most of the existing research in retail market expansion
is largely restricted to retail expansion via new geographical
markets and does not focus on the product line and new store
format expansion. Retail expansion can be achieved through
organic growth, as well as through mergers and acquisitions,
 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
licensing, and franchising. The most important reason for mar-
ket expansion is fierce competition, which reduces growth and
margins in the existing market, resulting in retailers moving to
new geographical markets (domestic or international). The tim-
ing, order of entry and cultural and economic knowledge are
key determinants for the success of retailers in the international
markets (Gielens and Dekimpe 2001, 2007). We will discuss
a retailer’s extent of international expansion in detail in terms
of how it affects their overall strategies later. At the domes-
tic level, researchers have mainly focused on the effect of the
entrance of the most powerful retailer (Walmart), on its com-
petitors. Retailers have found that incumbents suffer significant
losses and transfer of customers due to the entry of Walmart in
the domestic market (Ailawadi et al., 2010; Singh, Hansen, and
Blattberg 2006).
Researchers should focus on the expansion strategies of
retailers other than Walmart, and their long-term effect on retail-
ers’ profitability and competition. In the future, researchers can
concentrate on the effects of new store formats (e.g., Walmart
Supercenters) and competition of similar format types. The rate
of new product introduction is on the rise in the retail industry.
Additionally, merchants re-categorize current products into new
groups such as health and wellness and local items. Researchers
should focus on the effect of market expansion through new
product lines and new category introduction (e.g., Free Trade
Agreement).
Retailers can also grow their current market base through
channel expansion. In the past, brick and mortar stores intro-
duced their online channels to compete with e-commerce
retailers, but now it’s happening in reverse. For example, Ama-
zon began opening physical bookstores at the end of 2015 with
more stores slated to open over the next two to three years. Other
e-commerce retailers should consider this option in order to take
advantage of profits via an expanding market base. Researchers
should also investigate what initiated this reverse phenomenon,
and whether online retailers would benefit from such successful
patterns.
GE6: Retailers should focus on the long-term impact of expan-
sion strategies such as the introduction of new store formats,
product lines, channels, and categories on profitability.
Firm level
Retailers’ firm-level strategies refer to strategies for busi-
ness operations, which are implemented at the level of the
whole entity, and changes from retailer to retailer. Retailers can
grow organically through their operations or by merging, acquir-
ing, and partnering with other retailers. Firm-level strategies
differentiate each retailer from their competitors. Companies
implement these strategies to achieve higher market power, more
market share, and growth in intangible assets, like brand and
customer equity. Interview with practitioners suggest their con-
cern about multichannel strategies and ways to build their store
brands in the long-run. A CMO of a grocery retailer wants his
store brand products with no marketing costs so that it could be
offered at even lower prices, while a senior manager of an elec-
103
tronic retailer highlighted the need for omni-channel marketing
as their future growth opportunities. Retailers implement core
strategies at the firm-level including mergers and acquisitions
(M&A), alliance, developing store brands, and multichannel
marketing to increase their profitability. Table 2 is representa-
tive of the literature about the implementation of strategies at
the firm levels and their effect on profitability in retail.
Mergers and acquisitions (M&A)
Mergers and acquisitions (M&A) are a firm’s strategy to
achieve horizontal growth through combining the ownership
of different target companies. Research in the M&A area has
focused on both pre-M&A requirements and post-M&A opera-
tions and effects on profitability. Drawing on the resource-based
theory, Capron and Hulland (1999) find that the redeployment
of marketing resources affects retail firm performance after an
M&A. Srivastava (2012) finds brand equity to be an important
factor for firms in M&A decision making. Kumar, Kerin, and
Pereira (1991) argue that a variety of finance-related, marketing-
related and corporate-related variables are antecedents of M&A
activities in retailing. Hogan, Olson, and Capella (2015) explain
M&A trends among retailers in the last three decades and
describe returns. Their analysis of M&A activities across dif-
ferent industries from 1980 to 2009 concludes that food stores
and other miscellaneous retailers (e.g., drug stores, liquor stores,
and fuel dealers) are major leaders in M&A activities.
While retailers may acquire a firm to expand their business
and gain new customers, the loyalty of existing customers may
shift with a change of ownership based on the reputation of the
target firm. Retailers should be wary of the firms they are going to
acquire, and at the same time should work to retain their existing
customers. Additionally, when retailers merge or acquire firms
internationally, they should overcome cultural barriers to con-
nect with new customers through the target firm and also change
their existing organizational culture. To increase customer base
and to generate synergistic effect between firms participating
in M&A, retailers need to foresee emerging trends. For exam-
ple, Disney envisioned 3D movie trend and merged with Pixar,
AT&T predicted market opportunity in Mexico and acquired
Nextel Mexico, and Kroger is foreseeing the healthy consump-
tion trend in grocery market and is planning to acquire an organic
grocery firm. Researchers need to focus on the effect of inno-
vation, positional and customer relational overlap between the
acquirer and target firms in the profitability (Saboo et al. 2016).
GE7: Retailers should engage in M&A with firms where inno-
vation, positional and customer relational overlap is lower and
also acquire targets based on emerging trends.
Alliance
Alliance is an agreement between two firms used to cre-
ate mutual benefit by sharing resources. As firms participate
in alliances, they learn new ideas and capabilities their part-
ners have accumulated operating their firm (Kale, Singh,
and Perlmutter 2000), reduce costs by sharing resources and
 104
Table 2
Select studies related to profitability of retailers at Firm level.a
Category Study scope Authors Type of study Measures Data Characteristics Model Key observations
Characteristics
IV DV
M&A Antecedents Kumar, Kerin, and Empirical Finance- M&A activity 15 years data of M&A ANOVA and M&A participants, who
Pereira (1991) related activities in retail MNL model are bidders and target
variables, industry retailers, are determined
marketing- by three variables: 1.
related finance-related variables
variables, such as undervalued
corporate- common stock, earnings
related cash flow and financial

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

variables leverage 2.
Marketing-related
variables such as sales
growth, and market
presence. 3.
corporate-related
variables such as the
extent of diversification
and the number of
previous acquisitions.
Trend Hogan, Olson, and Empirical Retail trade Target and acquirer 30 years of SDC Frequency and Within the retail trade
Capella (2015) M&A returns M&A database correlations industry, food retailer
followed drug retailers
dominated in M&A
activities.
Alliance Imbalance Bucklin and Sengupta Empirical Project Perceived Survey data Regression Power imbalance,
(1993) management, effectiveness, power managerial imbalance and
project payoff, imbalance conflict cause negative
partner match, effects and project payoff,
contractual partner match, age of
governance, alliance and rate of
transaction technological change
costs, cause positive effects.
interaction
Store Brand Promotion Ailawadi, Neslin, and Empirical Attributers of Customer Personal interviews Structural Price consciousness, low
Gedenk (2001) store brands characteristics Equation Model quality consciousness and
and national store loyalty are related
brand with store-brand usage
promotions rather than shopping
enjoyment,
innovativeness or
mavenism.
 Brand attitude Manzur et al. (2011) Empirical Price-related Brand attitude Survey data Structural Model Store loyalty rather than
variables and brand loyalty, and
non-price quality-oriented value
related rather than
variables money-oriented value
increase attitudes towards
store brands.
Brand choice Erdem and Chang Empirical consumers, Quality level of brand Scanner panel data Multivariate Cross-learning effects are
(2012) national/store Multinomial not significantly different
brands, and Probit Model between store brands and

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

time periods national umbrella brands,
but extended model with
cross-category effects
shows that store brands
give customers less
consistent experiences
and higher perceived risk
than national umbrella
brands.
Multichannel CLV Kumar (2010) Conceptual Customer CLV N/A Conceptual Based on the concept of
factors, firm framework CLV, a multichannel,
factors, multimedia
environmental communications
factors, framework is proposed.
technological
factors
Kumar and Empirical Customer Multichannel Customer purchase Ordered logistic Customer’s characteristics
Venkatesan (2005) characteristics, Shopping history data regression and and supplier factors are
supplier MANOVA associated with purchase
specific behavior across
factors, multi-channels, and
demographics multi-channel shoppers
bring more benefits in
B2B settings.
a The articles are selected based on the relevance of the study as well as the number of citations.

105
106 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

decrease market uncertainty (Chaharbaghi et al., 2005). Specif- premium product lines. For example, Whole Foods Market has
ically, in the retail sector, we can classify strategic alliances already launched an organic store brand 365 Everyday Value.
into two categories: (1) vertical alliance: an alliance between Experts predict that other retailers will launch their premium
a manufacturer and a retailer, and (2) horizontal alliance: product lines in the future to appease price-sensitive customers
an alliance among retailers. In vertical alliances, retailers that want an alternate (more affordable) option.
reduce expenses through co-advertising and achieve higher
GE9: Retailers should introduce store brands in premium prod-
profits through demanding higher promotional pass-through.
uct lines also.
Horizontal alliances increase customer experience and satisfac-
tion among participants (Mouri, Bindroo, and Ganesh 2015).
Multichannel marketing
Alliances between retailers through the sharing of retail space
drives higher sales for each of the retailers. In the case of the
A marketing channel is a set of interdependent organizations
alliance between Walmart and Subway, the partnership of the
involved in the process of making a product or service avail-
companies offers a better shopping environment for their cus-
able for use or consumption (Palmatier et al. 2014). Marketing
tomers. Walmart encourages customers to stay for an extended
channels are classified as direct or indirect channels. From the
period, while Subway provides a place for customers to con-
retailer’s perspective, the company can sell products or services
vene for a break during a long shopping trip. Retailers can form
to users directly or through other organizations such as deal-
alliances with other retailers, or other firms, and should launch
ers and resellers. With recent rise of internet usage, marketing
a joint loyalty program, where customers can use loyalty reward
channels can be classified as offline-channel and online-channel.
points at each store. In the future, retailers can focus on alliances
Venkatesan, Kumar and Ravishanker (2007) find that purchase
with firms where they can share intangible resources as well,
frequency and marketing communication are important factors
such as customers’ purchase behavior. In such cases, both par-
in second channel adoption duration. On the other hand, Li
ties can improve their business performance by understanding
and Kannan (2014) determine the attribution of each channel
each others’ customers better and offer appropriate offerings to
to the overall conversion at the website for retailer’s online
attract them at their respective businesses.
channels. Marketing scholars have found that factors such as cus-
GE8: Retailers need design joint loyalty programs, share behav- tomer tenure, customer activity and breadth of suppliers contacts
ioral information of their customer base with their allies. affect multichannel shopping behavior and also that multichan-
nel shoppers are profitable (Kumar 2010; Kumar and Venkatesan
2005; Kumar, Shah, and Venkatesan 2006).
Store brands
Customers are not just shopping from their personal comput-
ers. Many more customers are purchasing through smartphones
Store brands are brands launched by retailers to obtain a
or research about products on their phones while in the store.
single brand identity. Some may see introducing store brands
Retailers have begun to integrate their channels through an inte-
as direct competition between manufacturers and retailers, but
grated omni-channel approach. The idea is to sell the right
it is important to prioritize establishing these intangible assets
product through the right channel at the right price and at the right
as they can attract price sensitive customers easily. Ailawadi,
time. In the future, both researchers and practitioners should
Neslin, and Gedenk (2001) identify psychographic and demo-
focus on the role of mobile technology in omni-channel retail-
graphic traits and find that store brand use is related to price
ing conversion. In the past, customers used showrooming, where
consciousness, low quality and store loyalty. Manzur et al.
they experience products in the store, but buy it online. Now cus-
(2011) categorize antecedents of store brand promotion atti-
tomers are exercising webrooming, where they research about
tudes into two categories (1) price-related variables, such as
products online, but purchase products in a physical store. In
value consciousness and smart shopper self-perception, and (2)
webrooming, consumers do not need to wait for shipping, and
non-price-related variables, such as brand loyalty, store loyalty,
they have the opportunity to research a product before they
and impulsiveness. Steenkamp and Geyskens (2013) analyze
decide to buy. This behavior enables retailers to enhance cus-
store brand market shares based on global integration and local
tomer experience and save on shipping costs.
adaption strategies and suggest that retailers need to (1) use
copycatting of national brand package, (2) have better quality GE10: Retailers should use omni-channel strategies and utilize
than national brands for global integration strategies, and (3) mobile technology to bring showrooming and webrooming to an
heavy price-promotion activities for a local adaption strategy. equilibrium.
As store brands are low priced products when compared to
their respective national brands, a customer might perceive them Store level
as low-quality products. Smart consumers consider both the eco-
nomic value of a product and the product quality. For instance, Store-level strategies refer to practices unique to the store
most of the top 50 best-selling Amazon wines are not only afford- of a certain retailer, and which vary from store to store based
able, but also good quality. The average prices of the wines are on location and customer demographics. Store-level strategies
between $10 and $20 each. This shows that customers do not are particularly important for the retailers’ profitability when the
want to pay premium prices for a product, nor will they settle for location of their stores is their primary basis of competition with
a low-quality knock off. In the future, store brands could include rivals. Interviews suggest that managers are concerned about
Table 3
Select studies related to profitability of retailers at Store level.a
Category Study scope Authors Type of study Measures Data Model Key observations
Characteristics Characteristics
IV DV
Marketing Product Boatwright and Empirical Items, size, Sales Online Mixture model Consumers experienced divergent
Mix Nunes (2001) brand size, experiment in reactions to the reduction in
market share grocery sizes, but they uniformly
shopping welcomed the elimination of
clutter brought on by the
reduction in redundant items.
Category sales depend on the
availability of key product and

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

category attributes mainly brand
and flavor.
Sloot, Fok, and Empirical Sales change, Sales Household Experimental A major assortment reduction can
Verhoef (2006) test and data for two design lead to substantive short-term
control store, stores category sales losses but only a
promotion weak negative long-term
category sales effect
Pricing and Bell and Lattin Empirical Loyalty, price, Store choice Scanner panel Nested logit The large basket shopper is less
Promotion (1998) feature, data with model responsive than the small basket
consumption, twelve shopper to changes in category
store distance, categories. prices. Large basket shoppers
store prefer EDLP stores and small
advertising basket shoppers prefer HILO
stores.
Bezawada et al. Empirical Price, display, Sales Scanner panel Multiple spatial Aisle and display placements
(2009) feature data for 160 autoregressive have significant and sizable
stores. model asymmetric effects on
cross-category sales affinities
comparable to those influenced
by marketing-mix variables.
Distribution Fox, Montgomery, Empirical Price, Store format 96 households Type II Tobit Consumer expenditures respond
and Lodish (2004) promotion, choice and at six different model more to varying levels of
assortment, expenditure store chains assortment (in particular at
travel time representing grocery stores) and promotion
three retail than price.
formats Households that shop more at
mass merchandisers also shop
more in all other formats that is
visits to mass merchandisers do
not substitute for trips to the
grocery store.

107
 108
Table 3 (Continued)
Category Study scope Authors Type of study Measures Data Model Key observations
Characteristics Characteristics
IV DV

Location González-Benito, Empirical Formats, size, Store choice 63 self-service Nested integrated The spatial accessibility of a store
Munoz-Gallego, distance food stores spatial model differently affects the demand for
and Kopalle belonging to its competitors according to the

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

(2005) sixteen retail store format in which it and its
chains. competitors operate.
Formats were There is more rivalry within store
supermarket, formats relative to the rivalry
hypermarket across store formats.
and discount
stores
Atmospherics Design, music Baker et al. (2002) Empirical Design, Store Experiment on Experimental Design cues have a stronger and
and perception employee, patronage students. design more pervasive influence on
music intentions customer perceptions of the
perceptions, various store choice criteria than
effort and do store employee and music
psychic cost cues.
Wang et al. (2007) Empirical Social Store Lab and field Structural Social cues induce perceptions of
perception, patronage experiments. equation modeling Web site socialness, leading to
pleasure, intentions increased pleasure and arousal,
arousal, both of which positively influence
interest, flow, hedonic and utilitarian
curiosity value, and patronage intentions.
social cue–induced arousal leads
to increased pleasure only for
consumers who are involved with
the product category.
a The articles are selected based on the relevance of the study as well as the number of citations.
 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119 109

overall customers’ in-store experience and ways to increase jointly across channels, while controlling for other marketing
their store loyalty. Responses from managers indicate that they decisions. With the introduction of the internet of things (IoT),
are particularly interested in same-store sales growth because retailers should also implement real-time product assortments
these are signs of long-term growth for the investor. In 2011, with the help of their suppliers. Finally, retailers should always
Walmart opened its Walmart Express stores, which closed after experiment with their product assortments to learn the cus-
four years due to losses. These stores were located in remote tomer’s changing purchase patterns.
places with small populations, and because Walmart stayed with
GE11: Retailers should optimize assortment across different
their low price policy, the profits at these stores suffered. This channels and should always experiment with their assortments
is a prime example that illustrates that the location continues to understand changing buying behavior.
to be and one of the most important factors for retailers (Bell
2014). Local demography helps retailers to distinguish them-
Pricing and promotion
selves from their competitors through tactics like local store
formats and store-level pricing strategies suitable to area demo-
Retailers’ market pricing strategies create a price image of
graphics. Store-level marketing mix strategies are fundamental
retailers as an entity in the market compared to their competi-
to retailers and play a crucial role in increasing store traffic and
tors, whereas store-pricing strategies are specific to individual
revenue. Also, store atmospherics, which is dependent on cus-
locations where managers decide the prices of products. Market-
tomer demographics and culture, is an essential element of store
ing scholars always presumed that at a particular store, managers
loyalty and patronage. Table 3 is representative of the literature
set prices for different brands to maximize total category profits
in retailing about the implementation of strategies at the store
(Raju, Sethuraman, and Dhar 1995; Vilcassim and Chintagunta
level and their effect on profitability.
1995). Store-level promotional pricing strategies are particularly
important for retailers as Hoch et al. (1995) confirmed that a cus-
Marketing mix
tomer’s demographic characteristics affect price elasticity more
than market factors like a competitor’s store distance or store
Product assortment
format. Though convenience and assortment affect a customer’s
store choice (Briesch, Chintagunta, and Fox 2009), pricing also
Product assortment refers to the collection of goods and/or
plays a major role in the decision (Bell and Lattin 1998) as does
services that a retail store provides to customers. Product assort-
brand choice (Kumar et al. 1998). Another stream of literature
ment planning is a high priority for retailers as they work with a
finds that reference price can increase profits on promotions via
limited budget, store size, and shelf space. Based on store char-
recurring pricing strategy (Greenleaf 1995; Kopalle, Rao, and
acteristics and customer preferences, retailers eliminate those
Assuncao 1996). Promotional pricing strategies may also have
product assortments which do not affect sales of the store.
a long-term effect on profitability, particularly when compared
Removal of low preference items by up to 54 percent while
to the general beliefs about short-term effects of promotional
maintaining constant category space by the retailers does not
pricing (Dekimpe and Hanssens 1995; Jedidi, Mela, and Gupta
significantly affect the consumer’s assortment perception and
1999).
store choice (Broniarczyk, Hoyer, and McAlister 1998). Market-
A recent summary of the innovation in retail pricing strate-
ing scholars have found that shelf reorganization and pragmatic
gies has been discussed from various viewpoints ranging from
reduction of small-share stock keeping units (SKUs) increase
RFID tags on products to eye tracking technology (Grewal et al.
category sales while keeping in mind about the product attributes
2011). Brick and mortar retailers should implement electronic
mainly brand and flavor (Boatwright and Nunes 2001; Dreze,
display pricing so they can deploy real-time pricing based on the
Hoch, and Purk 1995). Product assortment planning also plays a
availability of products. Since it is easy for customers to find the
key role in the consumer’s decision in store choice. The probabil-
lowest available prices for any product, retailers should provide
ity of store choice is increased by an increased number of brands,
customized pricing offers to customers via loyalty programs. In
but fewer SKUs per brand and a certain number of unique SKUs
the future, promotional pricing offers should be personalized in
belonging to the store (Briesch, Chintagunta, and Fox 2009).
such a way that retailers can identify and make profits from vari-
The growth of e-commerce retail sales increased in 2015 to
ety seeking and habit persistent behavior of customers. Retailers
eight percent of the total overall retail sales (ATKearney 2015).
should also identify key value categories and items across dif-
Unlike brick and mortar stores that have shelf space restrictions,
ferent channels and offer prices accordingly.
online retailers have the capacity to accommodate an infinite
number of products. In an online shopping context, online retail- GE12: Personalized price optimization from purchase behavior
ers categorize these assortments so that customers can find their and real-time pricing in stores will be the focus of future retail
products easily while accessing recommendations and reviews pricing strategies.
from other users. Based on the current trends of omnichannel
retailing, merchants can sell large, low-selling products through Distribution
their online channel. This strategy saves retail space in the store
for new and upcoming products and for new product lines. Distribution strategies refer to means in which goods move
Researchers should focus on the link between online and offline from manufacturer to the store where customers purchase them.
product assortments and find methods to optimize the assortment Marketing scholars have found that the relationship between
110 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

distribution and market share ranges from S-shaped (Lilien and store itself.
Rao 1976) to convex shaped (Reibstein and Farris 1995; Wilbur
GE14: Selection of a geographic location of the retail store is
and Farris 2014). Distributional strategies of the retailers are no longer a concerning factor. Strategies to bring customers to
complex, particularly in the presence of retailers that opt for
a store through mobile targeting and store promotional offers
e-commerce retailing. Distribution strategies in the emerging
will be profitable location strategies for retailers.
markets are unorganized when compared to developed markets.
In emerging economies, retailers must consider store format-
Atmospherics
specific distribution elasticities to enhance retail profitability
(Kumar, Sunder and Sharma 2014). In the future, we expect that
Retail atmospherics refer to a retail store’s ambience factors
customers will purchase certain product types (e.g., frequently
used to influence a customer’s buying mood. Store atmospherics
purchased and large sized items) mostly online. Manufacturers
broadly include physical characteristics such as design, music,
and start-ups have already explored this method. For example,
scents, lights, as well as social employees. Store atmospherics
Diapers.com and Dollar Shave Club send their customers prod-
play a vital role in enhancing store image, store patronage inten-
ucts at regular intervals through a subscription. For e-commerce
tions, and the overall shopping experience of customers. Baker
retailers, strategic presence of a distribution center in a loca-
et al. (2002) find that design cues have a stronger influence on a
tion will reduce shipping costs and delivery time. In the future,
customer’s perception of various store choice criterion than store
e-commerce retailers should move away from customized ship-
employees and music cues. Store atmospherics are not limited
ping costs and vary their prices based on the distance between
to physical stores. Stores can extend these external influences to
the distribution center and shipping address.
online channels through the interactivity of websites. The ease of
GE13: Retailers will not need space in physical stores for some use on e-commerce websites can increase pleasure, arousal, and
product categories, based on the frequency of usage and size; patronage intentions (Wang et al. 2007). Internal and external
retailers can ship these items directly to customers. retail store environment have also been found to impact store
performance (Kumar and Karande 2000). In-store marketing
factors outperform out-of-store factors in terms of attention and
Location
evaluation of brands influencing the point of purchase behavior
(Chandon et al. 2009).
In the past, the geographical location of retail stores were
Retailers should be aware of customers who like touch and
an important factor for customers and attracted the attention
feel shopping and should target them for enhanced brand expe-
from marketing researchers (Achabal, Gorr, and Mahajan 1982;
rience. This would work well in the case of new product and
Ghosh and Craig 1983). Recently, the distance to stores has
brand launches in the store. Retailers can also cooperate and
become less important due to faster delivery services from online
co-advertise with manufacturers of brands to arrange such expe-
retailers and better distribution of local retailers. Currently, retail
riences for customers in the store. Retailers should also make
location does not explain much of the variance in a customer’s
their websites and social media interactions engaging so that
store choice. This customer behavior is primarily based on store
customers have a better experience and can easily navigate their
price format, shopping costs, (Bell, Ho, and Tang 1998), and
web pages. Interactions with employees will always be an inte-
purpose of shopping (Leszczyc, Sinha and Sahgal 2004). Store
gral part of store atmospherics, Employees will be a feel-good
location and traveling distance are a fixed cost of shopping, while
factor for customers as online buying and self-checkout kiosks
promotions and price discounts at a particular store are variable
provide fewer opportunities for social interactions. Apart from
costs of shopping.
the current trends of color, scent, and music, retailers should also
Once the site of a retail store is fixed, retailers can use other
experiment with dine-in retailing so that customers have a rea-
tricks to bring customers to the particular store. Retailers may
son to come to the store, shop for a longer time, and stay a little
use mobile targeting strategies when a customer is located near
longer with an experience not usually associated with a store.
their store. Moreover, they can offer additional promotional
With the help of new technologies, tablets and smartphones can
strategies if they are near a rival retail store (Fong, Fang, and
act as personal shopping assistants in the retail store providing
Luo 2015). Additionally, retailers could offer incentives in the
customers access to promotional offers on the go.
form of better promotions to customers buying from their online
channel and then picking the items up from their store. This will GE15: Retailers should adopt innovative technologies for store
increase foot traffic to the store and may lead to impulse buying atmospherics and experiment with new ideas such as dine-in
behavior. Tesco’s South Korean unit, Home Plus, created virtual options and more employee interactions for better customer
stores near subway stations. The layout of these virtual stores experiences.
is be same as the real store. Customers scan a QR code, and
products are be delivered within hours. Other retailers should Customer level
consider experimenting with virtual stores. The location of such
stores should be populated areas where customers are likely to Customer-level strategies refer to strategies that retailers
congregate. In the future, the location of targeted customers and implement based on customer buying behavior and vary across
strategies to attract them to the store location will be an impor- customers. Retailers have changed their focus from product-
tant issue rather more so than the geographical location of the centric to customer-centric, and the research has shown an
Table 4
Select studies related to profitability of retailers at Customer level.a
Category Study scope Authors Type of study Measures Data Model Key observations
Characteristics Characteristics
IV DV

Experience Customer Grewal, Levy, and Conceptual Firm controlled factors, Retail N/A Conceptual Macro factors, promotion, price,
experience Kumar (2009) macro factors customer framework merchandise, supply chain and
experiences location and how they affect
customer experiences and behaviors.
Verhoef et al. Conceptual Social environment, Customer N/A Conceptual Social environment, service
(2009) self-service technologies, experience framework interface, retail atmosphere,
store brand assortment, price and promotions are
considered as determinants for
customer experience.
Online Novak, Hoffman, Empirical High levels of skill and Flow Survey data Structural Consumers achieving flow on the
experience and Yung (2000) control, high levels of equation modeling Web concentrate on the navigation
challenge and arousal, experiences for online shopping.

V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

focused attention,
interactivity and
telepresence
Satisfaction Sales Gomez, Empirical Attribute performance, customer Survey data Factor analysis, The links between satisfaction
performance McLaughlin, and customer satisfaction, satisfaction, Asymmetry and factors - customer service, quality
Wittink (2004) store sales sales nonlinearity tests and value- and sales store sales
performance performance are measured.
Loyalty Reward Kumar and Shah Conceptual N/A N/A N/A Conceptual To build and sustain profitable
program (2004) framework customer loyalty at individual
customer level, presenting two-tiered
rewards structure including not only
aggregate level metrics such as RFM,
PCV and SOW but also customer
level metrics such as CLV.
Customer Evanschitzky Empirical Affective commitment, attitudinal Survey data Structural Model For customers to motivate loyalty,
commitment et al. (2006) continuance commitment loyalty, emotional bonds are comparably
behavioral more important than economic
loyalty incentives.
Profitability Profitable Reinartz and Conceptual N/A N/A N/A Metrics Customers are segmented with two
loyalty Kumar (2002) axes: high/low profitability and
short/long-term customers, and each
segments needs different loyalty
strategies.
Engagement General Brodie et al. Conceptual N/A N/A N/A N/A A general definition is developed by
concept (2011) five fundamental propositions based
on literature review, and differences
from similar concepts such as
‘participation’ and involvement’ are
stated.
Online Rose et al. (2012) Empirical Cognitive experiential Online Survey data Structural The relationship between antecedents
customer state, affective repurchase equation modeling and results of online customer
experience experiential state, online intention experience is measured.
shopping satisfaction,
trust in online shopping

111
a The articles are selected based on the relevance of the study as well as the number of citations.
112 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119

inclination for customer-focused marketing. In the interviews, of customers online and in-store to for their mutual benefit.
CMOs were generally concerned about reporting customer
GE16: Retailers should enhance online customer experience and
acquisitions statistics, learning about customer experience ease based on age. In store, they should integrate reviews and
through their decision journey, and engaging customers for
recommendations from social media with the products.
long-term retention and profitability. Retailers’ customer-level
strategies, (experience, satisfaction, loyalty, customer profitabil-
Satisfaction
ity, and engagement) sequentially and logically connect to each
other and follow a cyclical nature. When a customer purchases
Customer satisfaction refers to a degree of fulfillment of
a product in the store (or online), they feel comfortable with
customers’ expectations when they use retailers’ products or ser-
the entire experience and it leads to their satisfaction. Loyal
vices. Many academic research papers in customer experience
customers become profitable to retailers through their purchase
study customer satisfaction. (Arnould and Price 1993; Bitner,
activity. During the entire purchase process, retailers try to
Booms, and Tetreault 1990; Fornell 1992). Based on existing
engage their customers so they want to return to their store.
research, we conclude that positive and memorable expe-
Table 4 is representative of the literature in retailing about the
riences increase customer satisfaction. Gomez, McLaughlin,
implementation of strategies at the customer level and their effect
and Wittink (2004) measure the relationship between multi-
on profitability.
ple stores’ attribute perceptions and customer satisfaction that
ultimately affect sales performance. The effect of customer
Experience
satisfaction can also lead to positive word-of-mouth by loyal
customers. Satisfying the needs of customers is important in
Customer experience refers to the instance(s) of a customer’s
order to encourage them to return to the store and maintain a
encounter(s) with the company’s product offerings. Literature
profitable relationship with the retailer. Reinartz, Thomas, and
has focused on factors affecting customer experience. Verhoef
Kumar (2005) have found that it is profitable for firms to allo-
et al. (2009) argue that customer experience is holistic in nature
cate higher resources for customer retention than acquisition.
and involves the customer’s cognitive, affective, emotional,
Such claims make retailers work harder towards satisfying their
social and physical responses to the retailer. They also claim that
current customers so that they can retain those customers for a
past customer experiences, store environments, service inter-
longer period.
faces, and store brands also affect the customer experience.
In the future, customer satisfaction can be increased when
Moreover, Puccinelli et al. (2009) focus on the following seven
retailers offer customized product pricing promotions to cus-
domains: (1) goals, schemas, and information processing; (2)
tomers across different channels. This can be accomplished
memory; (3) involvement; (4) attitudes; (5) affect; (6) atmo-
by developing data-driven strategies. Additionally, retailers can
spherics; and (7) consumer attributions and choices. Grewal,
increase satisfaction by resolving customers’ issues through
Levy, and Kumar (2009) highlight the role of macro factors, pro-
their social media platforms, as this gives individuals a positive
motion price, merchandise, supply chain and location, and their
impression of superior services for both current and potential
effect on customer experiences and behaviors. Novak, Hoffman,
customers. To understand customer satisfaction in the era of the
and Yung (2000) focus on the customer experience in the online
omni-channel, retailers need to change the way they measure
environment and highlight that firms have to provide a conve-
customer satisfaction. They need to measure customer satisfac-
nient and pleasant internet environment for a better customer
tion at different touchpoints in a customer’s journey, all the way
experience.
from website access to the delivery of the product. They should
Different demographics of the population need different
not limit their measurement to overall customer satisfaction.
experience-driven treatment. The nature of experience and assis-
This new measuring method will help retailers better understand
tance for an elderly customer is entirely different from what a
areas they need to improve and properly address customers’
millennial wants. So, retailers need to be precise and deliberate
expectations at individual touchpoints in better way. Researchers
to customize their experience offerings for different customers
also need to adjust their means of measuring satisfaction to bet-
based on individual requirements. Retailers should also strategi-
ter understand customers’ behavior and offer deeper insights of
cally offer channel-specific experiences to customers by learning
different touchpoints in omni-channel retailing.
whether customers prefer an in-store or online experience. Both
researchers and practitioners should focus on how social media GE17: Retailers can increase customer satisfaction by provid-
affects a customer’s experience. Retailers should use informa- ing better services at each touchpoint throughout a customer’s
tion from social media sites (including popular online products journey and measure satisfaction at each touchpoint.
and products discussed online) as a resource for items in the
store. For example, Nordstrom has already placed a section in Loyalty
some stores where customers can purchase the top “pinned”
items from Pinterest, a social network that allows users to share Customer loyalty refers to a customer’s favorable attitude
images or videos. Consumers can save time searching public that leads them to buy retailers’ products or services repeatedly.
opinions, and retailers can analyze the consumer’s demands and Kumar, Ghosh and Tellis (1992) recognize loyalty as a means to
offer the proper products. Both social media websites and retail- analyze customer repurchase behavior, and Evanschitzky et al.
ers can engage in cooperative behavior to increase the experience (2006) recognize loyalty as customers’ continuing commitment.
 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
Reichheld and Sasser (1990) claim that if retailers increase
customer retention rate by five percent then they can increase
profits by about 100 percent. However, such claims have been
questioned (Dowling and Uncles 1997) and has been confirmed
through empirical tests that not all loyal customers are profitable
(Reinartz and Kumar 2000).
It is not easy to maintain customer loyalty in the presence
of intense competition. Nearly every retailer offers similar loy-
alty programs which customers can use for products or services,
this may cause ‘loyalty fatigue’ in customers. Kumar and Shah
(2004) suggest a two-tiered reward program. Tier 1 rewards con-
sist of standardized rewards while tier 2 rewards are a customized
rewards system decided by customers’ attitude, behavior, pro-
file information, and customer lifetime value (CLV). Even today
only a few firms offer customized rewards like Kumar and Shah
(2004)’s two-tiered rewards program. In the future, to improve
loyalty programs, retailers should embrace digital loyalty pro-
grams by using mobile technology. One benefit of this move
would be to lessen the burden on customers. Instead of carrying
a ton of loyalty cards, the programs can integrate with mobile
wallet services, (e.g., Apple Pay) whose usage is on the rise.
For example, Starbucks already uses a mobile app for its loyalty
program and connects it with mobile payments. Other options
like digital coupons and loyalty points that customers can easily
save on their mobile device and integrate with mobile wallets
may be easier to use.
GE18: Retailers can integrate loyalty programs with mobile
wallets for timeliness and ease of use.
Customer profitability
Customer profitability strategies refer to ability to earn
profits from a customer after accounting for retailers’ invest-
ments. Researchers have argued that not all loyal customers are
profitable, and recommend that customers should be catego-
rized based on loyalty and profitability. Reinartz and Kumar
(2002) differentiate customers with high/low profitability and
short/long-term customers indicating that loyal customers need
not be profitable and suggest appropriate marketing strategies
for each group. Kumar and Shah (2004) focus on building and
sustaining profitable customer loyalty and suggest using a two-
tiered loyalty reward program that focuses on customer lifetime
value.
In the current scenario, retailers have access to a syndicated
data of customers’ purchase behavior, and these trends will rise
further in the future. Many retailers have access to this type of
data, but a few of them use data mining techniques to extract
insights regarding the profitability of a customer. Retailers need
to implement insights from this information and use it in their
core targeting strategies and to identify profitable customers.
Retailers also need to target profitable customers for referral
programs because there is a high probability that a valuable
customer will network with profitable prospects. As prices of
products have become transparent to all, retailers can use person-
alized deals and offers according to the profitability of individual
customers. Retailers need to share information about customer
113
profitability and cooperate with other retailers to determine how
much to invest in customers.
GE19: Retailers will need data-driven strategies as their core
tactic to target profitable customers.
Engagement
According to Brodie et al. (2011), customer engagement is
defined as “a psychological state that occurs by virtue of interac-
tive, co-creative customer experiences with a focal agent/object
in focal service relationships.” Retailers have moved beyond just
purchase related relationships to customers’ behavioral manifes-
tations which include range of drivers such as positive WOM,
writing reviews, referrals blogging and helping other customers
(Brodie et al. 2011; Kumar and Pansari 2016; Kumar et al. 2010;
Vargo and Lusch 2004; Verhoef, Reinartz, and Krafft 2010).
Kumar et al. (2010) suggest four components of measuring
customer engagement value through customers’ purchase, refer-
rals, influencing and feedback behavior. Customer engagement
allows retailers to efficiently allocate their resources and enable
long-term profitability from their customers.
With the increasing use of the online channel and self-service
checkouts, there will be lesser interaction between employees
and customers. Retailers should make sure to engage with cus-
tomers to some degree, as it is far more effective when compared
to interacting through automated messages. For example, man-
ufacturers can host events to launch a new brand and apparel
retailers can organize events wherein fashion designers can inter-
act and engage with customers. Online shopping can be more
creative and interactive so that customers spend more time on the
website, and are motivated to visit the site regularly. Retailers
can also engage with customers through social media interac-
tions. Desperation to engage customers in any possible way may
sometimes backfire. Retailers should be very particular about
customers’ privacy and use permission marketing techniques
to engage with customers. For customers, who do not want to
interact through mailings or social media, retailers can study
their behavior and find innovative ways to engage them while
they are in the store or online. Customers in the modern era are
more responsible in regards to societal and environmental issues
and want to build relationships with firms who also hold similar
interests. So, retailers should invest in corporate social responsi-
bility (CSR) activities, and should make their customers aware
and engaged as they participate in these events.
GE20: Retailers should launch more online and in-store cam-
paigns to create social interactions, and they should engage
themselves in CSR activities.
Moderating effects of localized strategies in global
expansion and the adoption of advanced technologies and
big data analytics
Localized strategies in global expansion
Out of the top 250 retailers, 66% of them are operating
in at least one foreign nation. On average, 23.4% of revenue
114 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
comes from overseas operations, and the average number of
countries in which they operate is 10.4 (Deloitte 2016). These
facts not only indicate the need to enter foreign markets but
also the intensity of competition to move early to new markets.
Global expansion does not only enhance the growth of a firm,
but also becomes a necessity as competition from other multi-
national retailers intensifies in the domestic market (Douglas
and Craig 1992). Entry mode, timing, and cultural and economic
distance are important drivers for success in the emerging mar-
kets (Johnson and Tellis 2008). Another big challenge faced by
retailers who enter foreign markets is the fierce competition from
existing domestic players who have a better understanding of the
local market. Every country is different regarding price sensitiv-
ity, product choice, purchase behavior, brand loyalty and store
patronage based on the culture of the country. Retail managers
face various problems related to competition, organizational
restructuring, product offerings, branding and customers’ prefer-
ences when they expand their business to international markets.
They are also interested in tradeoff between strategic localization
and standardization of retailing activities.
Effect at all the levels
Expanding into international markets helps increase existing
market power and share of retailers. Given the associated risk
involved in international expansion, particularly strict govern-
ment laws, lobbying and the economy of the target country, most
retailers first consider entering countries with stable economies.
Retailers expand their business to different global markets
mainly through acquisitions or joint ventures with target firms
that have resided in a particular market for several decades
(Palmer and Quinn 2003). Cultural distance between firms who
are engaging in M&A will affect the success of the M&A
(Lodorfos and Boateng 2006). If their M&A strategies at the
domestic level are successful, then they can use the knowledge
to perform better operations with diverse target firms across the
world. Market pricing is also an important market-level strat-
egy in extent of global expansion. For instance, Walmart, which
is a low-priced retailer in the United States, was not success-
ful in Germany when it positioned itself as low-priced, since
the market was already loaded with similar domestic retailers.
Retailers have to focus on localized pricing strategy for each
foreign market even if it goes against their usual price image.
A retailer’s localization of strategies affects store-level strate-
gies because every nation and culture has preferences for store
formats and varies in price sensitivity. For example, Germany
is the largest European market by population, but Germany
is price sensitive while the UK is not price sensitive in com-
parison (Euromonitor 2016). There are different views among
researchers about the introduction of retail store formats in for-
eign nations. Gielens and Dekimpe (2001) find that retailers
entering international markets that are similar to their home
country realize profits over time because they already have
experience with familiar formats. This allows them to operate
efficiently in target countries. On the other hand, Corstjens and
Lal (2012) believe that retailers should enter with new store
formats because customers in the target country should expe-
rience something new. Research also suggests that shopping
pattern differs across different cultures, and that different cul-
tures react differently to price and promotional strategies of
retailers (Ackerman and Tellis 2001). Store design across cul-
ture is a crucial factor for global retailers as different colors have
different meaning across cultures as well (Schmitt 1996).
Customers’ diverse preferences and shopping trends are
observable across the globe and therefore, localization of
strategies are also important for customer-level strategies. For
example, Northern Europeans consume a lot dairy products
like as eggs and milk, while Asians consume more rice-related
products. On the other hand, there are global consumers who
have similar consumption patterns. For example, car color pop-
ularity shows similar consumption patterns in North America,
South America, Europe, and Asia-Pacific with white being the
most popular color (Industries 2016). In addition, there are cer-
tain common factors which are preferred by customers across
the globe such as low prices, high quality, and faster delivery
services. How can customer-level strategies increase retailers’
profitability through achieving both distinct difference and com-
mon preference? As a success example, McDonald’s restaurants
are famous for their standardized service. At the same time,
they serve localized menus for each country. This ‘glocalization
strategy’ of McDonald’s has made a successful extension in the
global market. On the opposite end of the spectrum, Walmart
experienced failure in four countries: India, Russia, Germany
and South Korea. In these countries, Walmart overlooked dif-
ferent cultural gaps and the customer’s demand, even though
Walmart’s service was well-standardized (Landler and Barbaro
2006).
GE21: Retailers’ international expansion strategies will
enhance the effect of strategies at all the levels on profitability
if they localize their core strategies based on the target country.
Adoption of advanced technologies and big data analytics
The rate of advanced technology relevant to retail industry
is on the rise and these technologies are available at a low cost
which allows the retail industry to apply them on a larger scale.
In retail, the adoption of advanced technology is implemented
at the front-end where store and customer-level strategies play a
major role. Retailers can access real-time data of each customer’s
action in the form of big data via new technology. Companies
can use this data for more personalized offerings to customers.
Interviews with managers indicate their concern about integra-
tion of upcoming technologies both at the front and back end.
They also raised concerns about embracement of new technolo-
gies by employees and incorporating the new tools throughout
the organization.
Effect at market and firm level
Data of customer purchase behavior is available in devel-
oped countries on a large scale but are only available in a
limited quantity from emerging markets. Firms have plenty of
big data available to them, but the real question is how many
 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
firms integrate these technologies and use data at the backend
to implement their core strategies? We believe firms need a
four-step sequential method: data collection, data mining, data
insights, and implementation of data-driven strategies. Synergy
between the front end team who deal with and help customers
in usage advanced technologies and the back-end support team
who get insights through analytics, will achieve higher prof-
itability. Retailers should implement lead-lag strategies for the
diffusion of advanced technologies into new markets, including
lead and lag markets affecting each other where simultaneous
interaction is feasible (Kumar and Krishnan 2002). In the devel-
oped nations, the researchers can segment the whole market into
different sub-markets based on the insights from big data analyt-
ics and not just geographical locations or other demographics.
For example, a sub-market can be price sensitive and it can
have higher customer engagement. Retailers need to create their
image and offerings accordingly in that submarket. Availability
of big data from retailers will add to better understanding of
market structure against their competitors, therefore the use of
market power and expansion strategies can achieve higher prof-
itability. Data privacy will be a concern for retailers in the future
and retailers who ally with technology firms for data insights
and joint loyalty programs need to be careful.
GE22: Adoption of advanced technologies and big data analyt-
ics will enhance the effect of market and firm-level strategies on
profitability.
Effect at the store and customer level
Brick and mortar stores have the opportunity to adopt bea-
cons, a device that communicates with smartphone apps based
on the proximity of customers via in-store Bluetooth devices.
This low-cost technology can help with targeted in-store mar-
keting and the promotion of products, which in turn will also
provide significant purchase- behavior data to the retailers. Ama-
zon has already started using IoT with dash buttons in frequently
purchased product categories like laundry detergent, diapers and
energy drinks. Brick and mortar stores can use IoT to notify sup-
pliers to restock product assortments and manage inventory in
real-time thereby fulfilling customer demand and saving retail
space for new products. Retailers can also use this technology
in smart thermostats and lighting attached to customer traffic,
allowing for more personalized store atmospherics and better
energy efficiency. The convenience of online shopping allows
consumers to view and purchase nearly any product from their
computers without making a trip to the store. But, some cus-
tomers prefer the physical experience of shopping in an actual
store. In the future, virtual reality will reduce this gap with virtual
stores accessible to customers on their mobile devices. They can
have the same experience of visiting the store from right where
they are.
Through the application of new technologies and personal-
ized offerings based on the analysis of customers’ data, retailers
are able to enhance a customer’s experience, satisfaction, loyalty
and engagement. Recently, Drones, unmanned aerial vehicles,
have gained popularity among retailers for shipping products.
115
Drone delivery will eliminate the cost of human labor, and
decrease waiting time. Amazon claims that by using drones
within a ten mile radius, they can deliver 5-pound packages
in 30 min, and for 88 cents (Insider 2015). Such technologies
enhance profitability through better customer experience, over-
all satisfaction and operational efficiencies. Retailers will have to
consider alternative customer engagement through social media
or in the store in the future, since one–on-one interaction with
these technologies is not possible. In the future, retailers plan to
use robots for stocking products and for delivery services (e.g.,
Dominos for pizza delivery). Though retailers expect customer
experience and satisfaction with this service to be high, there
will be fewer social interactions affecting customer engagement.
Retailers either need to improve these technologies so that they
can engage with customers or use alternate technologies such
as IoT. For example, Apple’s products such as the iPhone, iPad,
and iWatch can communicate with each other. This connection
extends to other devices such as a speaker, a car, a door lock,
and home electrical system. The IoT will be able to enhance cus-
tomers’ experience and engagement with retailers in real time
effectively boosting long-term profitability for retailers.
GE23: Adoption of advanced technologies and big data
analytics will substantially increase the effect of store and
customer-level strategies for retailers on profitability.
Contributions
We contribute to research in the retail area by providing a
comprehensive framework that will help researchers to under-
stand retailers’ strategies and better focus on those strategies at
the each of the four levels, particularly in areas that need further
research. The existing framework is also useful when retailers
expand to multiple countries with similar or different cultures.
The framework is also applicable to the technological changes
of the future, which is imminent in the growth of retailers. Man-
agers of the retail industry in developed nations, and those who
are planning to expand to emerging markets, will benefit from
this organizing framework by learning to implement their strate-
gies while identifying the source and degree of their profitability
from each level. Managers can also use generalized expectation
of strategies under each level discussed in this article for their
future strategy implementation.
Implications for researchers
The proposed framework in this article identifies future
direction of research in terms of the changing retail environ-
ment, global expansion of retailers, and disruptive technological
advancements related to retailing practices. This article uses
a triangulation approach to develop the organizing framework
where we also include how existing theories are contingent upon
dynamically changing environment. Likewise, in the future,
researchers should focus on integrating new findings from the
availability of big data analytics in the retail industry with
existing marketing theories. Researchers should also focus on
developing theories and building models for the generalized
116 V. Kumar et al. / Journal of Retailing 93 (1, 2017) 96–119
expectations provided in this article which are developed mainly
from managerial interviews as they will have practical relevance
in the current market conditions. For example, as mentioned ear-
lier in the discussion on customer-level strategies that customer
preferences in the retail industry is changing and researchers
need to focus on measuring customer satisfaction at different
touch points in the customer purchase journey.
Implication for practitioners
Implications for retailers in the developed markets
Practitioners can understand complex retail structures
through this comprehensive and organizing framework and it
also allows them to configure their strategies when implement-
ing in the real world. Since the development of framework and
GEs also consist of managerial interviews, practitioners can
benefit from this framework in enhancing their profitability in
the competitive environment. Fig. 1 contains actionable frame-
work for practitioners for the future of retail profitability. Such
actions range from adoption of new channels through instacart
and curbside for market expansion strategies to integration of
customer loyalty programs with mobile wallets. For instance,
CVS has already added curbside as a new channel that allows
customers to order online and pick-up outside the store sav-
ing customers’ time of entering the store. Market and firm-level
strategies are essential for all retailers, and affect retailers’ prof-
itability over time. However, these strategies evolve slowly over
time. On the other hand, store and customer-level strategies are
dynamic in nature, and retailers experiment with these strategies
to generate higher cash flow. In developed markets, managers
can adopt and use technological advancements and big data
analytics to enhance their profitability at each of the four lev-
els. Appropriate use of advanced technologies will significantly
affect the relationship of store and customer-level strategies
and profitability. Managers should also use insights from big
data analytics of customer purchase behavior (e.g., personal-
ized offerings in omnichannel strategies based on showrooming
and webrooming behavior) and make their focal strategies data-
driven.
Implications for retailers that are planning to expand to
emerging markets
Although our organizing framework is developed for retailers
in the developed countries, retailers expanding to multiple coun-
tries with different cultures can modify our proposed organizing
framework. There is not one global success formula for retailers;
retailers should modify core strategies as needed and accord-
ing to local needs of the target countries. Retailers can benefit
from expanding to multiple emerging markets by using their
knowledge of operations in developed markets as well research
from first entering emerging markets with similar culture. When
retailers expand their global operations to emerging markets,
they should focus on localizing their strategies at each level of
the operation.
Acknowledgments
We thank Dhruv Grewal, Anne Roggeveen, Jens Nordfält
for their guidance during the revision process. We also thank
Bharath Rajan and Ericka Faye Robinson for their valuable feed-
back on the earlier version of the manuscript. We thank Renu
for copyediting the manuscript.
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