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Retailer Positioning: Strategy is in Detail

Positioning in retail is the basis of how one store competes with another retail store; it
starts by defining target consumers in terms of ‘distinctive’ needs, and ends when
‘unique’ set of executable action steps are identified to achieve an ‘identity’ in the minds
of customers, an identity that customers’ experience in the store and distinguish in their
minds. A retail identity could be like Wal-Mart’s “Every Day Low Price” (note not the
lowest price) or Whole Food Supermarket’s (the fastest growing grocer in USA)
“World’s Leading Natural and Organic Foods Supermarket.” I am a believer that
positioning is best based upon ‘value provided to customers’ and not on ‘price.’ Price is a
positioning option only and only if a retailer has an innovative approach to being the
lowest cost operator. Wal-Mart’s pricing is based upon the competitive landscape. Where
it has head-to-head competition in geographic proximity, it avoids price discounting
versus competition, a potentially mutually destructive strategy. But where it has low
competition, pricing often is above average. And where it has somewhat distant
competition, it discounts to attract consumers within the proximate geography. Note,
however, that it defines competition very carefully – K-Mart or Target. Wal-Mart is
always cheaper than the traditional supermarkets, an option it can exercise based upon its
low-cost structure.

Retailing looks very different when viewed from the perspective of a manufacturer or a
consumer. For manufacturers retailers are a link in the distribution chain that takes goods
to consumers; channel members who ‘need’ to stock ‘what manufacturers’ make,’ and
who are ‘managed’ using economic incentives like margins, incentives, and promotions.
Consumers’ usually don’t articulate what they want from retailers but vote with their feet
through store loyalty, making some stores more successful than others. Retailers,
‘sandwiched’ between consumers and manufacturers, continuously strive to ensure that
the goods they stock are liked by their customers, and successful retailers are more adept
at selecting ‘correct’ stocks. A retailer adds economic value by matching diversity of
consumer demand with appropriately priced and quality suppliers. Retailers are agents of
consumers’ whom they serve by first understanding their needs, and then searching for
products to stock. Not only are consumer needs are very diverse, but consumers’ exhibit
different purchase behaviors even for purchasing the same product; a consumer buys milk
from a hypermarket, a convenience store, and also a neighborhood grocery. It is this
diversity that gives an opportunity to retailers to create different retail environments to
serve different consumer needs; retail formats that range from hypermarkets to
specialized niche stores like exclusive shirt or tie or socks shops or even coffee cafes all
serving a single product, albeit in different manifestations.

Achieving retail differentiation

Creating a distinctive store has two goals – one, to attract customers to visit the store, and
second, to create an image and experience of the store visit in the minds of customers so
that the memory of the store (and the products) is aroused when the need for similar
products is aroused. Traditional retailing talks of product assortment and location as few
of the means of differentiation amongst stores. In an over-retailed environment the role of
distinctive product assortments and location as a differentiator has weakened; products
(and brands) can be rapidly copied (e.g. Zara), and are easily available on the net (e.g.
eBay, Amazon). Newer choices of achieving retail differentiation have emerged based
upon a deeper understanding of consumer behavior; how consumers shop, understand and
evaluate products on display, and make product / brand choices. Each step of consumer
evaluation and choice-making offers an opportunity to retailers to ‘influence’ purchase
behavior. Research suggests that product (and often brand) choice is ‘constructed’ in the
store, rather than retrieved from memory based upon prior experience and / or a priori
evaluation of alternatives. A critical first step in developing a differentiating plan is to
understand what happens when a customer interacts with the product assortment. Three
potential levels of influence exist - assortment width / diversity / quality / price,
assortment presentation (static - as visual merchandising, and dynamic - as staff-customer
interactions) impacting how consumers’ experience products in the store, and marketing
mix variables like price and promotions (see inset). This emphasizes the need of
assortment ‘management’ as different from assortment ‘planning.’ Assortment
management is based upon planning assortments recognizing that consumers usually
make product choice decisions on the shop floor, and the behavior and choice process
they manifest lends itself to influence.

Presented hereunder are a series of steps that guide the creation of a differentiation plan.
The steps are based upon a differentiation of products into two categories – functional
(products that fulfill a functional need e.g. kitchen tools, appliances, luggage) and
symbolic (products that consumers use to express themselves in their social circle e.g.
fashion clothing, Cartier watch, Tiffany jewelry, Prada handbag). To locate a position on
the quadrant reflect upon the consumer behavior of the targeted consumer - what do
customers want when they buy the product, how do they shop for it, and what do they
expect from the product (and store) in terms of added features, benefits, and services. A
consumer buying Giordano fashion is purchasing a basic functional product, and does not
use the brand to express a lifestyle statement, whereas a consumer purchasing a Gucci
handbag is willing to pay a premium.

Step 1:

In table 1 identify which quadrant you are in (for an existing retailer) or desire to be (for a
new retailer searching for market space). Examples of the different products that lie in the
different quadrants are identified. Key thoughts to be borne in mind – high margin
businesses are an exception and not the rule, customers concern for value doesn’t imply
that customers will not be willing to pay a higher price for quality, and opportunities exist
in creating value through services in both low-margin and high margin businesses.

Step 2:

If we have a idea about the quadrant we wish to be in, we can use table 2 to detail how
retail differentiation will be implemented in practice using – differentiation at the product
level, in-store (and post purchase) services, lifestyle and price strategies. The basis of this
analysis will be an understanding consumers based upon research (or intuitive insight)
and analysis of competition.

Step 3:

If the quadrant and positioning options does not conform to being the best (cost-effective)
option, alternatives need to be developed by changing position or fine-tuning
implementation options. Table 3 identifies examples of retailers and their location in the

Step 4:

Retail is detail, and stage 4 requires detailing the implementation of the positioning
strategy by developing an assortment plan and an assortment management strategy.
Table 1 – Retail Positioning Map 1
High Margin Functional Products High Margin Symbolic Products
Specialty stores e.g. sophisticated stereo, Fine Jewelry
Samsonite stand alone store Expensive Watches
Convenience stores Crystal
DIY Silver
Designer Clothing


Functional MERCHANDISE TYPE Symbolic


Low Margin Functional Products

Health & beauty sold in a supermarket Low Margin Symbolic Products
Cameras and unbranded white goods Super-market clothing as a brand
Hardware Low Discounted brands
Samsonite luggage in a supermarket
Table 2 – Detailing of Retail Mix for Positioning 1
Retail Mix Options for implementation
• Unique products (exclusive location in a retail
• Hard to find products (getting 110 Volt
appliances in Dubai)
• Selectively distributed brands – (exclusive
distribution of brands or certain SKUs)
Product differentiation • Tailored or edited assortments – (assortments
exclusive to an outlet / chain) – small bookshop
• Wide range – breadth and depth – category
killer – Borders
• Merchandise combinations – (an electronic
store that carries different brands – one-stop-
store for electronics) – Jacky’s
• Location convenience
• Store ecology (convenience associated with
parking, complementary stores, children’s play
area, banks, etc.)
• In-store ambience and experience (ease and
speed of transaction, ease of product
evaluation, presentation convenience,
comfortable fitting rooms, alteration, etc.)
Service offerings • Time convenience (opening hours and
• Sales person (product knowledge,
accessibility, and interaction)
• Ordering and delivery
• Product advice (staff, website, and in-store
signage & material)
• Returns process and refunds
• After sales service
• Based upon perceptive insight into what
customers would like to experience
• Customers co-create the experience in the
• Positioning based upon ‘lifestyle.’ (like Crate
Lifestyle differentiation
& Barrel, Williams Sonoma, Home Depot as a
lifestyle DIY in the USA or Ikea)
• Achieved through complex interplay of all
elements of retail-mix to enable customer
experience the lifestyle in the store
• Price range of products to suit target customer
Price differentiation • Low feature low price ranges
• High feature top-of-line
Table 3 – Retail Positioning Strategies - Examples 1

Product differentiation
Achieved through unique merchandise
Product differentiation by unique designers,
Achieved through unique merchandise ever changing distinctive
Based upon product innovation merchandise tied to lifestyle –
Narrow & specialized products – Rivoli, Tavola Vila Moda, Carte & Barrel,
Widest product lines – Brantano shoes Williams Sonoma.
Edited assortments, and
G merchandise coordination
R – TableArt, Liz Claiborne, Nayomi

Functional MERCHANDISE TYPE Symbolic

Most overcrowded sector M

Offer surprise merchandise based upon A
manf. relationships - (AED 5 and 10 R Most overcrowded sector
stores) G Offer unique products to supplement
Offer predictable merchandise I Everyday line – organic foods in
- Wal-Mart / Carrefour N Supermarkets
Provide fast and convenient shopping Wide assortment is narrow categories –
- EPPCO convenience stores Vitamin shops
Provide knowledgeable shopping
- Circuit City / Best Buy
Price leadership, minimal service, and limited
product range – warehouse clubs COSTCO
Price leadership, high knowledge, and wide
range – category killer Home Depot


The basis of developing a unique retail positioning requires two inputs; one, a perceptive
understanding of consumer behavior, and two, a change of retailer mindset - shift from
behaving as a distributor of manufacturers and thinking like ‘agents’ of retail consumers.
The knowledge of consumer behavior needs to encompass an understanding of ‘how
consumers buy’ at the store. Positioning is detailed using four dimensions – products and
their attributes, services to be provided, lifestyle experience and price. The ability to
translate a positioning plan into winning strategy requires consumers to experience the
positioning, and relate to it. Successful positioning implementation requires great
attention to detail, and continuing attention to consumer experience, as different from
merchandise. Positioning is not a static phenomenon. Retail is a very dynamic business,
open to copying, commoditization and threat of changing consumer tastes, and needs
continuous re-invention.
Assortment Planning versus Assortment Management
Role of options as consumers make choice: Consumers usually focus upon the set of product choice options
they observe on the shelf that may be a sub-set of all options available. They rarely think of all the options
in the category, and the sub-set is more important than category. Williams-Sonoma, the US retailer of home
products, offered one bread maker of a particular design at a price X. Then added a new larger unit at
nearly 50% higher price nearly with no other difference. The sales volume of the first bread maker more
than doubled. In another experiment two branded home appliances, Panasonic and Emerson were available
at the same percentage of discount over the tag price. A new lower feature and priced Panasonic was added.
The sales of the more expensive Panasonic picked up.

The first example suggests that customers may have difficulty in assessing value of a brand / product in
isolation. We may expect that customers decide based upon past experience by retrieving from memory the
attractiveness of a product. Research suggests that prior knowledge is less salient. Comparisons are usually
more current. The second example suggests total product assortment, as different from the specific
comparison options, influences choice. Introduction of a lower quality and lower priced Panasonic brand
increases choice of the higher quality and priced Panasonic. Both examples suggest that options enable
consumers to use the lower quality and price product as a basis of comparison while making choice.

Choice of compromise options unpredictable: Consider three ice cream choices – best taste (implicitly high
fat), low fat, and a middle option. It is a lot easier for consumers to respond to the two extreme choices
reflected in higher sales versus the middle choice. In an experiment two cameras were presented to
consumers, and then a third option of mid-level features and quality was introduced. It was observed that
the share of the expensive & features increased.

Number of quality levels in the assortment: Number of quality levels influences consumer selection. If a
third, higher quality option is introduced, consumers may shift to the higher quality, higher priced option
with the cheapest option losing the most. Adding a lowest quality option may not shift choices to lower
quality levels because stores don’t start attracting new customers. Similarly adding an intermediate option
may shifts the maximum choices away from the lowest tier i.e. consumers graduate up.

One value offer versus two value offers: When consumers are confronted with two value offers they
perceive a decision conflict and may often delay the purchase. It is best to design one good offer that is
superior for the customer.

Affect of assortment presentation: Consumers evaluate options the way they are presented in the store and
don’t re-organize options in their minds based on earlier knowledge.

Nature of display - side by side or separately: For well recognized brands of discernible quality and price
end-aisle displays i.e. separate displays work. Lower quality and lower priced brands are better when
placed next to other brands within the category to make comparison easy. In comparing two choices, one
higher priced of a well known brand name, and another of a lesser known brand with higher features at a
lower price, consumers preferred the weaker brand.

Nature of display - assortment display by model or brand: When models are displayed, consumers are more
likely to select the mid or top brand whereas when brands are displayed then less likely to buy the cheapest

Choice of options using three tiers of customers for national, private label and generic: Low tier
consumers switch to a promoted higher level brand whereas higher tier don’t switch to a lower tier
promoted brand.

Role of promotions perception of value of the offer: Value offerings have no impact if consumers are
unable to discern value
Adapted from Wortzel, Lawrence H., “Retailing Strategies For Today’s Mature Marketplace,” Journal of Business Strategy, Spring
87, Vol. 7, Issue 4.

© Manoj Nakra 2006