Retail Strategies

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 What is Retail Strategy ?
Definition of Retail strategy
A retail strategy is a statement identifying:-
The retailers target market

The format the retailer plans to use to satisfy

the target markets needs

The bases upon which the retailer plans to

build a SCA

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 What is a Retail Strategy
?
The retailers target market is the market
segments towards which the retailer plans to
focus its resources & retail mix
A retail format is the retailers mix
Nature of merchandise & services offered

Pricing policy

Advertising & Promotional program

Approach to store design and Visual

merchandising
Typical location

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 Retail Strategies
Each retail strategy involves :-
1. Selecting a target market segment and retail
format and
2. Developing a SCA that enables the retailer to
reduce the level of competition it faces

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1.Selecting a target market segment and retail
format

Starbucks
SCA : A Unique Service and atmosphere
A chain of gourmet coffee cafes

Annual sales : over $ 1 billion

Environment : Relaxing, helps in taking a break

from busy schedules

Baristas( Italian for bartenders) : Friendly

knowledgeable counter servers

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Selecting a target market segment and retail
format

Fingerhut
SCA : A catalog selling retailer
Sells wide ranging products from flowers to Home
entertainment centers
Each year it mails out 500 million catalogs to its
prime customers comprising of HHs with $15000
to $35000 annual income
Also provides credit facilities to lower income
customers..
Company also maintains database of 11 million
customers who failed to pay for the
merchandise !!!

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Selecting a target market segment and retail
format

Autozone
SCA :Target market : Low income customers who
repair their car themselves
A Memphis based auto parts retailer

Annual sales : exceeds $ 3billion

Largest auto supply retailer in the US

All employees called Autozoners

have prior automotive repair experience and
are encouraged to assist the customers in choosing
the right spare part needed by them
Even help customers fix simple things like
hoses and headlamps etc.

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 2.Building a SCA

Five important opportunities for retailers to

develop sustainable competitive advantage:-
Customer loyalty

Location

Vendor relations

Effective ,committed employees..

Low cost operations

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 Building a SCA

Customer loyalty
Some ways that retailers build loyalty are
1. Positioning
2. Customer service
3. Database retailing
4. Unique merchandise

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 Building a SCA

1.Positioning
Positioning is the design and implementation

of a retail mix to create an image of the

retailer in the customers mind relative to its
competitors
2.Service
Retailers also build loyalty by offering

outstanding customer service..

Good service can become a valuable strategic

asset

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 Building a SCA

3.Database retailing
Database retailing is the development and

implementation of retailing programs..

to build loyalty utilizing a computerized file of

customer profiles and purchase patterns

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 Building a SCA

Location
What are the three most important things in
retailing?
The classic response to this important question
on retailing is .
Location,

location,

location

Location is a critical factor in consumer

selection of a store
It can also become a SCA- which is not easily
duplicated

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 Building a SCA

Vendor relations
By developing strong relations with vendors,
retailers may get exclusive rights to
Sell merchandise in a region

To buy merchandise at lower prices, or with

better terms than competitors..

To receive popular merchandise which is in

short supply

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 Building a SCA
Effective committed employees
Retailing is labor intensive

Employees play a major role in providing

Services for customers and
Building customer loyalty
Knowledgeable and skilled employees can become
critical assets leading to success of retailers such
as
Southwest Airlines, Whole Foods, Mens
Warehouse
Eventually they provided a strong SCA to these
organizations

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 Building a SCA

Low cost operations

Cost of operations play a vital role in retailing

Even high priced brands like Tiffany- selling high priced

jewelry likes to operate on lower costs- all the time

Low costs can give more margins- which in turn can be

reinvested in enhancing the product offeringor

improve the levels of customer services
Efficient supply chain management can thus become an

important sustainable low cost advantage..

Wal-Marts expansion strategy across the US was based

on reducing distribution costs by locating multiple stores

around each warehouse

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 Growth Strategies

Retailers may pursue four types of growth

strategies :-
Market Penetration

Market expansion

Retail format development

Diversification

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 Growth Strategies

Market Penetration
Market penetration / opportunity involves

directing investments towards existing

customers using the present retailing format
This can be achieved by :-
Attracting new customers by

Opening new stores

Even opening existing stores for longer durations
Cross selling

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 Growth Strategies

Market Expansion
Market expansion opportunity employs the

existing retail format in new market segments

Examples
Gaps strategy to use a specialty store to sell

latest , private-brand sports wear to upscale

men and women in the age group of 20 and 45
Entering new geographic market segment with

same retail format

Opening of Toys R Us stores in Japan and Germany.

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 Growth Strategies
Retail format development
A retail format development opportunity involves

offering customers a new retail format involving

a different retail mix- to the same target market.
Examples
Barnes & Noble , a specialty book store sold

books to the same target market- thru internet

Another example could be various retailers using

Amazon.com to sell CDs, videos, pet supplies,

and gifts , in addition to books

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 Growth Strategies
Diversification
A retail format diversification opportunity involves a new

retail format directed towards a market segment thats not

presently served.
Diversification opportunities are either related or unrelated.

Related diversification
The present target market and retail format shares

something in common with the new opportunity

Examples of commonality are:-
Purchasing from same vendors

Using the same distribution system and/or same MIS or

using the same newspapers to similar target markets

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 Growth Strategies

Diversification
Unrelated diversification
Here, by contrast, an unrelated diversification

lacks any commonality between present

business and the new business
Vertical integration
Backward & forward integration

Retailers investing in manufacturing and/or

wholesaling merchandise

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Developing Growth
Strategies
Existing New

Retail format Diversificatio

Development n
NEW
RETAILFORMA

Market Market
EXISTING

Penetration expansion
T

Target Market Segment

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 International Growth Opportunities

Five characteristics of retailers that have

successfully exploited international growth
opportunities:-
Domestic leadership- capability to provide

necessary investment - from cash flow

generated thru secure and profitable domestic
operations

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 International Growth Opportunities

Strategic consistency
Entry in international markets is most successful when
expansion opportunity is consistent with the retailers
overall strategy and core competencies
Core competency Global retailer
Low cost, efficient distn Wal-Mart
Strong Pvt Brands Marks & Spencers,GAP,IKEA
Fashion reputation Gap, Zara, Hennes & Mauritz
Category dominance Toys RUs, Home Depot..
Image Disney, Warner Brothers

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 International Growth Opportunities

Adaptability- McDonalds
Global systems
Micro marketing

Adapting the merchandise assortment for each store

in a market-
is difficult to implement-unless you have well
developed logistical infrastructure

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 International Growth Opportunities

Long term commitment

Wal-Marts ROI is just 5.8% from international

business, far less than its US ROI

It takes time to develop relationships with new

customers, employees and vendors

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Deciding how to enter the
market
1. Joint venturing
(a) Franchising
Agreement with a licensee in a foreign market
For a fee or royalty
Licensee buys right to use companys
manufacturing process , trade mark, patent,
trade secret, or other item of value..
Company gains entry at little risk

Coca Cola markets by licensing bottlers
world wide

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Deciding how to enter the
market
2. Direct Investment
Advantages could be
Cheaper labor, & raw material
Foreign govt. investment incentives
Freight savings
Company can improve its image by providing
employment opportunities
Helps developing deeper relationships with
govt., customers, local suppliers, & distributors..
Allows it to adapt its products to the local
market better

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Deciding how to enter the
market
Disadvantages of the Direct investment option
could be
Higher risk of devalued currency,
falling markets..

government changes.

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 The strategic retail planning process

Steps in the strategic retail planning process

Define the mission

Conduct a situation audit

Market attractiveness analysis

Competitor analysis
Self-analysis
Identify strategic opportunities

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 The strategic retail planning process

Evaluate strategic opportunities

Establish specific objectives and allocate
resources
Develop a retail mix to implement strategy.
Evaluate performance and make adjustments
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