1. Retail Market Strategy

2. Retailing Strategy

3. More attention to long-term strategic planning than ever before
Due to the emergence of
New competitors
New formats
New technologies
Shifts in customer needs

4. Elements in Retail Strategy
Target Market
Retail Format
Sustainable Competitive Advantage
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5. Target Market

6. What Criteria Can be Used to Selecting A Target Market?
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7. Retail Format

8. Retailer's Type of Retail Mix
Nature of merchandise and services offered
Pricing policy
Advertising and promotion programs
Approach to store design and visual merchandising
Typical location
Customer services

9. Competitive Strategic Advantage
Choose a retailer and describe how it has developed a competitive strategic advantage. Include customer loyalty, branding, positioning, location, human resource management, distribution, information technology, unique merchandise, customer service and vendor relationships.

10. Sources of Competitive Advantage
More Sustainable
Less Sustainable
Location
Customer loyalty
Customer service
Exclusive merchandise
Low-cost supply chain management
Information systems
Buying power with vendors
Committed employees
Better computers
More employees
More merchandise
Greater assortments
Lower prices
More advertising
More promotions
Cleaner stores

11. Customer Loyalty More than simply liking one retailer over another
Customers will be reluctant to patronize competitive retailers
Retailers build loyalty by:
Developing a strong brand for the store or store brands
Developing clear and precise positioning strategies
Creating an emotional attachment with customers through loyalty programs

12. Approaches for Building Customer Loyalty
Brand Image
Positioning
Unique Merchandise
Customer Service
Customer Relationship Management Programs

13. Retail Branding Retail brand
Stores use brand (store’s name and store brands – private label brands) to build customer loyalty
Retail brand
Can create an emotional tie with customers that build their trust and loyalty
Facilitates store loyalty because it stands for a predictable level of quality

14. Example of Positioning

15. Location What are the three most important things in retailing?
“location, location, location”
Location is a competitive advantage
A high density of Starbucks stores
Creates a top-of-mind awareness
makes it very difficult for a competitor to enter a market and find a good locations
Ask the class to identify the locations of the nearest McDonald’s, Wendy’s, and Burger King. Who was in the location first? Describe that specific locale in terms of traffic patterns, etc.
Why can location provide a sustainable advantage? Which local retailers have a good location? A poor location? Why?

16. Human Resources Management
“Employees are key to build a sustainable competitive advantage”
Strategies for Recruiting and Retaining Talented Employees
Employee Branding
Develop positive organizational culture
Discuss how employee commitment to the retailer appears to be varied at different stores frequented by students, as evident by employee turnover, interactions with employees, etc.
In tight labor markets, and since retailing offers relatively low-paying jobs, at least at the lower levels, what can management do to maintain effective, committed employees.

17. Distribution and Info Systems
Flow of Information
By decreasing costs here, the is more money available to invest in:
Vendor
Distribution Center
-Better services
-Increase in breadth and depth
-Decrease in prices
Store
Ask students to describe their experience at a store where they could not find the product/brand they wanted. If they contacted a store employee, how did this employee respond? Evaluate and discuss.

18. 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
Discuss the example of Kmart's strategy of having electronic links with its vendors and providing many of its vendors with point-of-sale data. By developing computer links with its vendors, Kmart increases its opportunity to have the right merchandise at the right store when the customer wants it. Discuss how this can be an important competitive advantage.

19. Strategy Options

20. Growth Strategies Market Penetration Market Expansion
Retail Format Development
Diversification
Related vs. Unrelated
McDonald's original market was families with young children and its format was selling hamburgers and french fries in stand alone stores at lunch and dinner time. How would you classify these opportunities McDonald's pursued: breakfasts; locations in office building; locations in schools; adding salads to the menu; adding pizza to the menu; opening up seafood restaurants to compete against Red Lobster.
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21. Growth Opportunities

22. Market Penetration
Attract customers from target market – Walgreens “on every corner”
Get current customer to visit store more often or buy on each visit
Cross Selling – sales associates in one department sell complimentary merchandise from other departments
Example: Manicurist sells services plus hand lotion or nail polish
Example: Salesperson sells leaf blower directs customer to electrical
department to purchase a 100 foot extension cord.
Consider The Gap, Land’s End, and Kmart. What would be examples of market penetration opportunities they could pursue?

23. Market Expansion
Market expansion growth opportunity involves using the existing retail format in new market segments
Dunkin’ Donuts – new stores (and at gas stations) outside northeastern
Abercrombie & Fitch (for college students) opens lower-priced chain Hollister Co. for high school students
Consider The Gap, Land’s End, and Kmart. What would be examples of market expansion opportunities they could pursue?
Examples of market expansion are Wal-Mart opening stores in large cities and the Gap starting Gap Kids.

24. Retail Format Development
Develops a new retail format with a different retail mix for the same target market
Multi-channel retailing
UK based TESCO:
Tesco Express: small stores located close to where customers live and work
Tesco Metro: bring convenience to city center location by specializing in ready-to-eat meals
Tesco Superstores: traditional stores
Tesco Extra: one-stop destination with the widest range of food and non-food products
Have the class discuss examples of a retailer adding additional merchandise categories or altering the breadth and depth of the assortment in its stores. Then discuss the pros and cons of this strategy. What type of financial investment would it take. What retailers would benefit from this. Describe their target markets. Consider The Gap, Land’s End, and Kmart. What would be examples of format development opportunities they could pursue? Examples of format development are Kmart starting a discount home improvement center -- Builders Square and Land’s End opening retail stores.

25. Diversification
Introduces a new retail format toward a market segment that is not currently served by the retailer
Related diversification
Unrelated diversification
Vertical integration into wholesaling or manufacturing
Consider The Gap, Land’s End, and Kmart. What would be examples of diversification opportunities they could pursue?
Discuss the example of JCPenney's two investments in electronic shopping (TeleAction and JCPenney Television Shopping Channel). TeleAction was an interactive electronic home shopping system selling a variety of merchandise, from food to ticket reservations. Since little of the merchandise was sold through the Penney stores or catalog, the system was an unrelated diversification because it didn't involve Penney's catalog ordering and distribution system. On the other hand, the Television Shopping Channel was a related diversification because it offers predominantly Penney merchandise shipped through its mail-order catalog distribution system. It's like an electronic catalog TV show.
For The Gap, Land’s End, and Kmart, what would be examples of related versus unrelated diversification opportunities? What about Sears buying a manufacturer of home appliances?

26. Deciding on a Strategy

27. Stages in the Strategic Retail Planning Process

28. Elements in a Situation Audit

29. Performing a Self-Analysis
At what is our company good?
In which of these areas is our company better than our competitors?
In which of these areas does our company’s unique capabilities provide a sustainable advantage or a basis for developing one?
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