Retail Market Strategy

Retailing Strategy

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

Elements in Retail Strategy Target Market Retail Format Sustainable Competitive Advantage © image100 Ltd

Target Market

What Criteria Can be Used to Selecting A Target Market? Rim Light / PhotoLink / Getty Images

Retail Format

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

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.

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

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

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

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

Example of Positioning

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?

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.

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.

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.

Strategy Options

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. Ryan McVay/Getty Images

Growth Opportunities

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?

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.

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.

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?

Deciding on a Strategy

Stages in the Strategic Retail Planning Process

Elements in a Situation Audit

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? Stockbyte/Punchstock Images