1. RETAILING
MANAGEMENT
RETAILING
MANAGEMENT
5th Edition

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

3. Retailing Strategy Human Resource Management Chapter 9
Retail Locations Chapters 7,8
Retail Market Strategy Chapter 5
Financial Strategy Chapter 6
Information and Distribution Systems Chapter 10
Customer Relationship Management Chapter 11

4. “Strategy” Is Over Used
Retailers Talk About A Lot of Different “Strategies”
Sales Strategy
Advertising Strategy
Merchandise Strategy
Location Strategy
Strategy Is Not Just Another Term for A Management Decision

5. Strategic vs. Tactical Decisions
Strategic Tactical
Direction Implementation
Strategy statement Annual plan
Broad Specific, detailed
Unstructured Structured
Problem solving Problem solving
Creativity Analytical
External focus Internal focus
Irregular Regular
Long-term Short-term
Difficult to evaluate Easy to evaluate
Note: Success Comes for Having a Good Strategy and Executing It Well

6. Elements in Retail Strategy
Target Market
Customer Needs
Retail Format
Method for Satisfying Needs
Bases for Building Sustainable Competitive Advantage
Defending Position Against Competitors

7. Chico’s Strategy Target Market
Woman 35 to 55 Who Want Comfortable, Casual, But Stylish Apparel
Retail Format
Specialty Apparel Stores in Malls and Strip Centers Selling Private Label, Coordinated Outfits
Bases for Building Sustainable Competitive Advantage
Unique Merchandise Sized 0,1,2,3

8. Analyzing McDonalds’ Retail Strategy
What Is McDonalds’:
-Target market?
-Retail offering (format)?
-Bases for competitive advantage?
What Threats Might McDonald’s Face in the Future?

9. Examples of Retail Strategies
Starbucks
Kohls
Restoration Hardware
Ukrop’s
What is the target market, retail offering, and source of competitive advantage for each retailer?

10. Strategy for Looking for a Job
Determine Your Target Market
Area of Country
Type of Company
Type of Position
Assess and Exploit Your Competitive Advantage
Unique Skills, Experience, Knowledge

11. Why Does a Retailer Need to Focus on a Specific Target Market
Why Does a Retailer Need to Focus on a Specific Target Market? Why Not Sell to Everyone?

12. Retail Market Opportunities for
Women’s Apparel

13. Methods for Segmenting Markets
Buying Situations
Benefits Sought
Geographic
Lifestyle, Psychographics
Demographics

14. Criteria For Selecting A Target Market
Attractiveness -- Large, Growing, Little Competition More Profits
Consistent with Your Competitive Advantages

15. Can A Retailer Develop a Sustainable Competitive Advantage by:
Dropping the Price of Your Merchandise?
Building a Store at the Best Location?
Deciding to Sell Some Hot Merchandise?
Increasing Your Level of Advertising?
Attracting Better Sales Associates by Paying Higher Wages?
Providing Better Customer Service?

16. Internal and External Bases for Competitive Advantage
Retail Firm
Low Cost
Large Size
Efficient
Distribution,
Operations
Unique
Knowledge
Loyal Employees
Sources of
Capital
Vendors, Suppliers
Customers

17. Sources of Competitive Advantage
More Sustainable
Location
Customer Loyalty
Customer Service
Exclusive Merchandise
Low Cost Supply Chain Management
Information Systems
Buying Power with Vendors
Committed Employees
Less Sustainable
Better Computers
More Employees
More Merchandise
Greater Assortments
Lower Prices
More Advertising
More Promotions
Cleaner Stores

18. Loyalty What does loyalty mean? Is It the same as liking a store?
…Going to the store frequently?

19. Approaches for Building Customer Loyalty
Unique Positioning
Customer Service
Information About Customers (Database Retailing)
Unique Merchandise
Location

20. Example of Positioning

21. Basis of Loyalty, Commitment
Costs
Location
Frequent Shopper Programs
Unique Merchandise
Mental, Emotional Attachment

22. Creating Store Loyalty Mental and Emotional Attachments
Elements in a Strong Brand
Top of the Mind Awareness
Associations with Brand/Store Name
Methods Used to Develop a Strong Brand
Massive Exposure
Symbols to Reinforce Image
Consistent Positioning Creating Strong Associations
Limited Brand Extensions

23. Vendor Relationships Low Cost - Efficiency Through Coordination
Electronic Data Interchange (EDI)
Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs
Exclusive Sale of Desirable Brands
Special Treatment
Early Delivery of New Styles
Shipment of Scare Merchandise

24. High Quality Customer Service
Difficult to Achieve
People Are Not Machines -- Inconsistent
Retail Sales Associates At Bottom of Labor Pool
Goes Beyond Hiring Good People at High Wages and Training Them -- Organizational Culture

25. Critical Tradeoff In Developing Strategic Advantage
Focus Leads to Developing
A Competitive Advantage
But
Focus Reduces Flexibility
Low Cost, Consistent Image, Vendor Relationships Reduces Flexibility
Similar to Dating and Marriage – Commitment to a Relationship (Vendor) Reduces Flexibility

26. Growth Opportunities Market Penetration Market Expansion
Retail Format Development
Diversification
Related vs. Unrelated

27. Growth Opportunities

28. International Growth Opportunities
Europe
China
Mexico, Latin America
Japan

29. Key to Success in Global Retailing
Domestic market leadership – strong base
Exploiting core competencies – competitive advantage
Low cost - Wal-mart, Carrefour
Fashion Reputation - The Gap, Zara, H&M
Category dominance - Toys ‘R’ Us, Office Depot
Unique Image, Brand – Disney, IKEA, Starbucks
Adaptability
Global Culture
Long-term commitment

30. International Market Entry Strategies
Direct Investment
Joint Ventures
Strategic Alliances
Franchising

31. Steps in the Strategic Retail Planning Process
1. Define the business mission
2. Conduct a situation audit: Market attractiveness analysis Competitor analysis Self-analysis
3. Identify strategic opportunities
5. Establish specific objectives and allocate resources
7. Evaluate performance and make adjustments
6. Develop a retail mix to implement strategy
4. Evaluate strategic alternatives

32. Elements in a Market Analysis
MARKET FACTORS
COMPETITIVE FACTORS
ENVIRONMENTAL FACTORS
ANALYSIS OF STRENGTHS & WEAKNESSES
Barriers to entry Bargaining power of vendors Competitive rivalry Threat of superior new formats
Technology Economic Regulatory Social
Management capabilities Financial resources Locations Operations Merchandise Store Management Customer loyalty
Size Growth Seasonality Business cycles

33. Questions for Analyzing the Environment
New developments or changes -- technologies, regulations, social factors, economic conditions
Likelihood changes will occur
Key factors determining change
Impact of change on retail market firm, competitors

34. Bargaining Power of Vendors Threat of Substitution
Porter’s Five Forces
Barriers to Entry
Bargaining Power of Vendors
Competitive Rivalry
Large Customers
Threat of Substitution

35. Strengths and Weaknesses Analysis
Management Capability: Capabilities and experience of top management Depth of Management--capabilities of middle management Management’s commitment to firm
Financial Resources: Cash flow from existing business Ability to raise debt or equity financing
Operations: Overhead cost structure Quality of operating systems Distribution capabilities Management information systems Loss prevention systems Inventory control system
Store Management Capabilities Management capabilities Quality of sales associates Commitment of sales associates to firm
Locations
Merchandising Capabilities: Knowledge and skills of buyers Relationships with vendors Capabilities in developing private capabilities
Customers Loyalty of customers

36. Illustration of the Strategic Retail Planning Process
Kelly Bradford – Owner of Gifts To Go
Two Store Chain in Chicago
Target Market – Upper Income Men and Women Looking for Gifts between $50 and $500
Strong Customer Loyalty Based on Knowing What Customers Want, Providing Good Customer Service
Low Turnover Among Associates

37. Mission Statement for Gifts To Go
“The mission of Gifts to Go is to be the leading retailers of higher-priced gifts in the Chicago and provide a stable income of $100,000 per year for the owner.”
Define growth opportunities will and won’t consider
Indicates objective of company

38. Situation Analysis of Gifts to Go
Market Factors
Chicago is an attractive market. (+)
Relatively expensive gifts are not affected much by the economy. (+)
Gifts are highly seasonal. (-)
Competitive Factors
Many in area. Primary department stores, craft galleries, catalogs, and Internet retailers (-)
Lack of large suppliers, customer (+)
Opportunities for differentiation (+)
Limited competitive rivalry. (+)

39. Situation Analysis of Gifts to Go (continued)
Environmental Factors
Potential Threat - Development of electronic channel by traditional bricks and mortar retailers (-)
Strengths and Weaknesses
Management Capability – Limited
Financial Resources – Good
Operations – Poor
Merchandise Capabilities – Good
Store Management Capabilities – Excellent
Locations – Excellent
Customer Loyalty – Good
Customer Database - Good

40. Growth Opportunities for Gifts to Go
Market Penetration
Increase size of present stores
Open additional gifts stores in Chicago area
Market Expansion
Open gift stores outside Chicago area
Sell lower priced gifts in present stores

41. Growth Opportunities for Gifts to Go (continued)
Retail Format Development
Sell non-gift merchandise to same customers in present or new stores
Sell similar gifts to same customers through an electronic channel
Diversification
Manufacture craft gifts
Open an apparel store targeting teenagers
Open a category killer store selling a broader assortment of gifts

42. Evaluating Growth Opportunities for Gifts to Go
Market Attractiveness
Market Penetration
Increase size of present stores (low)
Open additional gifts stores in Chicago area (medium)
Market Expansion
Open gift stores outside Chicago area – new geographic segment (medium)
Sell lower priced gifts in present stores – new benefit segment (medium)

43. Evaluating Growth Opportunities for Gifts to Go (continued)
Market Attractiveness
Retail Format Development
Sell non-gift merchandise to same customers in present or new stores (High)
Sell similar gifts to same customers through an electronic channel (High)
Diversification
Manufacture craft gifts (High)
Open an apparel store targeting teenagers (High)
Open a category killer store selling a broader assortment of gifts (High)

44. Evaluating Growth Opportunities for Gifts to Go
Competitive Position
Market Penetration
Increase size of present stores (High)
Open additional gifts stores in Chicago area (Medium)
Market Expansion
Open gift stores outside Chicago area (Low)
Sell lower priced gifts in present stores (low)

45. Evaluating Growth Opportunities for Gifts to Go (continued)
Competitive Position
Retail Format Development
Sell non-gift merchandise to same customers in present or new stores (Low)
Sell similar gifts to same customers through an electronic channel (Medium)
Diversification
Manufacture craft gifts (Low)
Open an apparel store targeting teenagers (Low)
Open a category killer store selling a broader assortment of gifts (Low)

46. Market Attractiveness Aggressive investment
Market Attractiveness/Competitive Position Matrix
Market Attractiveness
Competitive Position
High
Low
Medium
Maximum investment
Consolidate position
Invest to challenge leader
Opportunities investment
Build strength or exit
Selective investment
Build on strengths
Cautious investment
Harvest or divest
Protect position
Manage for cash generation
Harvest or divest
Harvest or divest
Aggressive investment
Minimal investment

47. Steps in Using Market Attractiveness - Competitive Position Matrix
Define strategic opportunities
Identify market attractiveness and competitive position factors
Assign weight based on importance of factors
Rate opportunities on market attractiveness and competitive position
Calculate scores and evaluate opportunities

48. Characteristics of International Markets
U.S Germany Japan
Population (Millions)
Business Climate
Logistical Infrastructure Exc Good Avg.

49. Attractiveness Ratings for International Growth Opportunities

50. Competitive Position in International Growth Opportunities

51. Evaluation of International Growth Opportunities

52. Market Size (GDP Billions)
Risk and Rewards in Latin America: Country Risk Assessment
Short-Term Risk
Long-Term Risk
Brazil
Mexico
Argentina
Market Size (GDP Billions)
Colombia
Venezuela
Chile
Peru
Low
Medium
High
RISK
Source: Coopers & Lybrand Analysis, “Global Retailing: Assignment Latin America,” Chain Store Age Executive, April 1996, seciton 2, p. 4.

53. Evaluation of Retail Market Opportunities in European Community
High
Low
UNITED KINGDOM
NETHERLANDS
Open
Restricted
MARKETS
SPAIN
ITALY
FRANCE
GERMANY
BELGIUM
PORTUGAL
LUXEMBOURG
IRELAND
GREECE
DENMARK
GROWTH

54. Market Attractiveness Ratings for Growth Opportunities in Merchandise Categories
Weight
Market size
Growth
Vendor power
Competitive intensity
Social trends
Score
Junior’s (2)
Men’s (3)
Children’s (4)
Furniture (5)
Cons. Elec. (6)
Soft Home (7)
Women’s(1)
Factors 20 15 25 10 9 4 5
540 7 3
445 6
720 2
505
485 8 1
435
805

55. Competitive Position Ratings in Merchandise Categories
Weight
Location
Vendor relationship
Costs
Skills of buyers
Image with customer
Score
Junior’s (2)
Men’s (3)
Children’s (4)
Furniture (5)
Cons. Elec. (6)
Soft Home (7)
Women’s(1)
Factors 20 25 10
100 9 8 6
800 7
785 5
560
655 4 3
415 2 1
225
675

56. Market Attractiveness
Evaluation of Merchandise Category Opportunities
Market Attractiveness
High
Low
Medium
Soft home
Men’s clothing
Women’s clothing
Children’s clothing
Consumer electronics
1,000
667
333
Junior’s clothing
Furniture
1,000