Chapter 5

Retail Marketing Strategy

5-2

What is a retailing strategy?

A retail strategy is a statement identifying
(1)The retailers target market
(2)The format (Retail Mix) the retailer plans to
use to satisfy the target markets needs
(3)The bases on which the retailer plans to
build a sustainable competitive advantage

5-3

Retail Mix

Customer
Service

Store Design
And Display

Location

Retail Strategy

Communication
Mix

Merchandise
Assortment

Pricing

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
5-5

Questions
What is a retailing strategy?
How can a retailer build a sustainable
competitive advantage?
What steps do retailers go through to develop a
strategy?
What different strategic growth opportunities can
retailers pursue?
What retailers are best positioned to become
global retailers?
5-6

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

5-7

Elements in Retail Strategy

Target Market

the market segment (s) toward which the retailer

plans to focus its resources and retail mix

Retail Format

the nature of the retailers operationsits retail mix

Sustainable Competitive Advantage

an advantage over the competition

5-8

image100 Ltd

Analyzing Otobis Retail Strategy

Target market?
Retail offering (format)?

Bases for competitive

advantage?
What Threats Might Otobi Face in the Future?
5-9

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

5-10

Target market and retail format:

Retail Market Opportunities for Womens Apparel

5-11

Criteria For Selecting A Target Market

Attractiveness

Large

Growing

Little Competition

More Profits

Consistent with Competitive Ad.

5-12

Opportunities for retailers to develop sustainable

competitive advantages

Customer Loyalty
Location
Human Resource Management
Distribution & Information Systems
Unique Merchandise
Vendor Relations
Customer Service

5-13

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 Higher Wages?

Providing Better Customer Service?

5-14

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

5-15

Internal and External Bases for

Competitive Advantage

Vendors,
Supplier
s

Retail Firm
Low Cost
Large Size
Efficient
Distribution
,
Operations
Unique
Knowledge
Loyal
Employees
Sources
of
Capital

Custome
rs

5-16

Loyalty

What does loyalty mean?

Is It the same as liking a store?
Going to the store frequently?
5-17

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

5-18

Retail Branding
Stores use brand (stores 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

Walmart
brands

5-19

Loyalty Programs
Part of an overall Customer Relationship Management
(CRM) program
Purchase behaviors of members of loyalty programs

Are identified when they buy because they use some type of
loyalty card
Saved in Data Warehouse
What they buy
When they buy
How much they buy
How often they buy
How much they spend
What channel they use

Develop personalized marketing effort to them

5-20

Approaches for Building

Customer Loyalty

Unique Positioning
Location
Customer Service
Information About Customers (Database)
Unique Merchandise

5-21

Example of Positioning

5-22

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 (DBBL ATM)
makes it very difficult for a competitor to enter a
market and find a good locations

5-23

Human Resources
Employees are key to build a sustainable
competitive advantage
Strategies for Recruiting and Retaining Talented
Employees
Employee Branding
Develop positive organizational culture

5-24

Distribution and Info Systems

Flow of Information
Vendor
Distribution Center
Store

By decreasing costs here,

more money available to
invest in:
-Better services
-Increase in breadth and depth
-Decrease in prices

5-25

Rob Melnychuk/Getty Images

Unique Merchandise: Private Labels

Sears Kenmore -- appliances
Kmarts Martha Stewart -- home
JCPenneys Arizona -- jeans
Jules Frazier/Getty Images

Jacobs Stock Photography/Getty Images

5-26

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

5-27

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

5-28

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

5-29

Growth Strategies

Market Penetration
Market Expansion
Retail Format Development
Diversification

Related vs. Unrelated

Ryan McVay/Getty Images

5-30

Ansoffs Product-Market Expansion Grid

31/32

Growth Opportunities

5-32

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.

5-33

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

5-34

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
5-35

Bharti Retail Ltd.

Easyday
Easyday market
Easyday Hyper
ACI
Shwapno
Shwapno MINI
5-36

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

5-37

Global Growth Opportunities

Who Is Successful and Who Isnt?
Specialty store retailers with
strong brand and unique
merchandise?

McDonalds

Starbucks

Zara

H&M
Discount and food retailers with
deep assortments and low
prices?

Wal-Mart

Carrefour

Metro AG
5-38

Steve Cole/Getty Images

IKEA
Operates 254 stores in 35
countries
Unique, well-designed,
functional furniture at low
prices for consumers who
have sophisticated tastes,
but have no intention to
spend a lot
You do our part. We do
our part. Together, we
save money.
5-39

Why Do Category Killers and Supercenters

Succeed Globally?
Developed operating expenses
Scale economies for buying
merchandise globally
Unique systems and standardization
formats which facilitate control over
multiple stores
Understand that consumers are willing
to forego service for lower prices

Ryan McVay/Getty Images

5-40

Key to Success in Global Retailing

Globally sustainable competitive
advantage

Low cost, efficient operations - WalMart, Carrefour

Strong private label brands:
Starbucks, KFC
Fashion Reputation - The Gap, Zara,
H&M
Category dominance Best Buy,
IKEA, Toys R Us

Adaptability
Global Culture
Financial Resources
5-41

Evaluating Global Growth Opportunities

Consider challenges and how to overcome them

China

Increasing operating costs

Lack of managerial talent
Underdeveloped and
inefficient supply chain

India

Prefers small family-owned

stores
Restricts foreign investment
5-42

Evaluating Global Growth Opportunities

Rankings are based on

weighted score using
growth (55%),
risk (25%), and
market size (20%)

5-43

Growth, Risk, and Market Size of

Top 30 Countries

5-44

International Market
Entry Strategies

Direct Investment
Joint Ventures
Strategic Alliances

Profit and Risk

Franchising
5-45

Bharti Walmart Private Limited is a joint venture between

Bharti Enterprises and Walmart
5-46

Market Attractiveness/Competitive
Position Matrix

5-47

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
5-48

Attractiveness Ratings for

International Growth Opportunities

5-49

Competitive Position in International

Growth Opportunities

5-50

Stages 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
4. Evaluate strategic alternatives
5. Establish specific objectives and allocate resources
6. Develop a retail mix to implement strategy
7. Evaluate performance and make adjustments
5-51

Amazon Mission

5-52

Elements in a Situation Audit

5-53

Market Factors
Market size large markets attractive to large
retail firms
Growth typically more attractive than mature or
declining
Seasonality can be an issue as resources are
necessary during peak season only
Business cycles retail markets can be affected
by economic conditions military base towns

5-54

Competitive Factors
Barriers to entry

Scale economies of big box retailers

Service and unique, high-end products of small retailers

Bargaining power of vendors

Markets are less attractive when only a few vendors control the
merchandise sold within it

Competitive rivalry

Defines the frequency and intensity of reactions to actions

undertaken by competitors
Conditions leading to intense rivalry: a large number of same
size retailers, slow growth, high fixed costs, a lack of perceived
differences between competing retailers
5-55

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
5-56

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 companys
unique capabilities provide a sustainable
advantage or a basis for developing one?

Stockbyte/Punchstock Images

5-57

Strengths and Weaknesses Analysis

Management Capability:
Capabilities and experience of top management
Depth of Management--capabilities of middle management
Managements commitment to firm

Financial Resources:
Cash flow from existing business
Ability to raise debt or equity financing

Operations:

Store Management Capabilities

Overhead cost structure

Quality of operating systems
Distribution capabilities
Management information systems
Loss prevention systems
Inventory control system

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
5-58