RETAIL MARKET STRATEGY

THIS SESSION

Key points:

Retail Formats

Building sustainable competitive advantage

Theories of Retail Development

Learning outcomes:

Understand ways to classify retailers

Understand organized retails value chain

Understand sources of competitive advantage in retail

RETAIL STRATEGY

TARGET AUDIENCE

FORMAT

SUSTAINABLE COMPETITIVE
ADVANTAGE

RETAIL FORMATS

CLASSIFICATION OF RETAIL STORES

Classification of Retail Stores

Store Based
Retailing

Form of Ownership

Merchandise offered

Independent retailer
Chain retailer
Franchise
Leased departments
Consumer co-operatives

Convenience stores
Supermarkets
Hypermarkets
Specialty stores
Departmental stores
Off price retailers
Factory outlets
Catalogue showrooms

Non-Store
Retailing

Direct selling
Mail order
Tele marketing
Automated Vending
E-retail

CLASSIFICATION

Food
Retailers

Retailing

General
Merchandize
Retailers

Non-Store
Retailers

Type of
Ownership

FOOD RETAILERS CLASSIFICATION

Supercentre
s

Supermarket
s

Hypermarket
s

FOOD
RETAILERS

Convenience
Stores

Warehouse
Clubs

FOOD RETAILERS

SUPERMARKETS

Self Service Food Store

70-80% of sales comes from Food Products
20000-30000 sq ft Size
Limited assortment Supermarkets: Stock
lesser number of SKUs than conventional
supermarket; Limited variety and assortment of
brands
Example: Food Bazaar

FOOD RETAILERS

SUPERCENTRES
Combines a supermarket and a full line discount
store
Broad Assortment
One stop shopping experience
Usually outside the city, customers have to travel
distances
150000-220000 sq ft in size

FOOD RETAILERS

HYPERMARKETS
Combination of Food (60-70%) and General
Merchandize stores (30-40%)
Carry larger proportion of food items than
supercentres with high emphasis on Perishables
Stock fewer SKUs than supercentres
100000-300000 sq ft in size
Example: Big Bazaar

FOOD RETAILERS

WAREHOUSE CLUBS
Offers a limited and irregular assortment of food
and general merchandize
Low Prices for the small Businesses
Equivalent to Wholesalers in India
100000-150000 sq ft in Size

FOOD RETAILERS

CONVINIENCE STORES
Convenient Location near residential areas
Limited variety and assortment
Easy access, storefront parking, quick in and out
access are key benefits
Open for long hours, seven days a week
Modern version of conventional mom and pop
stores
Example: In & Out

GENERAL MERCHANDIZE RETAILERS

DEPARTMENT STORES

Broad Variety and Deep Assortment

Offer Customer Services
Not very convenient as usually located inside
large malls and not the local neighborhood
Example: Shoppers Stop

FULL LINE DISCOUNT STORES

Broad Variety of Merchandize

Limited Service
Low Prices
Offer private labels and National Brands
Example: Target

GENERAL MERCHANDIZE RETAILERS

SPECIALITY STORES

Offer a limited number of complimentary

merchandize categories
Focus towards very specific market segment
Offer deep but narrow assortment
Example: Archies Gallery, Planet M

DRUGSTORES

Concentrate on Health and Personal Grooming

merchandize
Pharmaceuticals represent over 50% of sales
Highly fragmented market in India
Example: 98.4, Apollo Pharmacies

GENERAL MERCHANDIZE RETAILERS

CATEGORY SPECIALISTS

Discount Stores with narrow but deep assortment

of merchandize
Also known as category killers for offering very
low prices in the category they operate in

EXTREME VALUE RETAILERS

Small full line discount stores

Offer limited merchandize assortment at very low
prices
Example: The Dollar Store

GENERAL MERCHANDIZE RETAILERS

FACTORY OUTLETS
Sell Branded Merchandize at discounted price
Located away from conventional shopping places

NON STORE RETAILERS

CHANNEL
Electronic
Catalog
Direct Mail
Direct selling
Television Home
Shopping
Automated
Machine
Retailing

MODE OF COMMUNICATION

FEATURES

Internet

Dramatically changed the

traditional retailing

Catalog

General and specialty catalog

retailers

Letters and Brochures

Successful with rural customers

who lacked access to retail
stores. Compete with CRM

Salespeople

Party plan system , Multi level

network

Customers watch TVB

program and then place
orders for the merchandise by
telephone

Cables channels
Infomercials
Direct response advertising

Services are stores in machine

and dispensed to customers
when they deposit
cash/credit card

Vending machine placed at

convenient ,high traffic
locations primarily contain
snacks or drinks

TYPES OF OWNERSHIP
INDEPENDENT
Owner managed, small retailers, flexible and react
quickly to market needs

CORPORATE RETAIL CHAINS

Multiple retail units under common ownership
and centralized decision making to implement
strategy
Eg: Walmart, Target, Lifestyle

TYPES OF OWNERSHIP
FRANCHISEE
A contractual agreement between a franchisor and a retail
franchisee, which allows the franchisee to conduct business
under an established name and according to a given pattern of
business
Franchisee pays an initial lump sum plus royalty on all sales
for the right to operate a store in specific location

Advantages
Advantage of owner managed business with the efficiency of
centralized decision making
Motivated to make store successful as receive profits on big
brand names
Franchisor motivated to develop new products and systems
because he receives royalty
Advertising done by franchiser with cost shared by franchisees

SERVICES RETAILING

SERVICES RETAILING
Firms primarily selling rather than merchandise

Key parameters

Intangibility
Simultaneous production and consumption
Perishable
Inconsistency of the offering to customers

CHARACTERISTICS OF
SELECT RETAIL FORMATS

21

Format

Description

Size
(sq.ft)

Examples

Intl.

India

Category
Killer /
Specialist

Narrow
variety, but
deep
assortment

50,000+

15,000+

Toys R Us,
Nallis, The Loft

Convinience
stores

Mix of
products

3,000
8,000

500 1,000 7-Eleven,

Speedmart

Department
stores

Several
product
lines, largely
non-food

75,000+

5,000
40,000

Marks &
Spencer,
Shoppers Stop,
Pantaloons

Format

Description

Size
(sq.ft)

Examples

Intl.

India

Factory
Outlets

Branded
merchandise
at a discount

5,000
10,000

500 1000

Levis factory
Outlet,
Reebok
Factory Outlet

Hypermarket

Large self
service stores,
mix of food &
non food.
Essentially low
price

80,000
220,000

40,000
75,000

Wal-mart, Big
Bazaar

Single Price
stores

Offers a mix of
branded &
unbranded
stores

5,000
20,000

2,000 5,000

Family Dollar,
9 to 9, 49 to
99

22

Format

Description

Size
(sq.ft)

Examples

Intl.

India

Specialty
stores

Focus on a
brand or
category,
narrow product
line , but good
depth

5,000
8,000

2,000 5,000 Walgreens,

Crossword,
MusicWorld

Supermarket

Food,laundry
and household
maintainance
products. Self
service, low
margin, low
cost

8,000
20,000

800 5,000

23

Asda,
Kroger,Food
Bazaar, Food
World

COMPETITIVE ADVANTAGE

RETAIL MIX

25

Customer
Service

Store Design
And Display

Location

Retail Strategy

Communication
Mix

Pricing

Merchandise
Assortment

WAL-MARTS RETAIL
MIX

26

Location Strategy

Free-standing Stores

Customer
Service
Store Display
And Design

Communication
Pricing
Mix

Merchandise
Assortment

WAL-MARTS RETAIL
MIX

27

Assortment Strategy

Customer
Service Location

Store Design
and Display

Communication
Pricing
Mix

Large Number
of Categories
Few Items
in Each Category

WAL-MARTS RETAIL
MIX

28

Location
Customer
Service

Pricing Strategy
Merchandise
Assortment

Store Design
and Display

Communication
Mix

Low, EDLP

29

WAL-MARTS RETAIL
MIX
Customer
Service Location

Communication Mix

Store Design
and Display

Merchandise
Assortment

Pricing

TV and Newspaper
Insert Ads

30

WAL-MARTS RETAIL
MIX
Store Design and Display

Customer
Service Location

Basic, Special
Displays
for Products

Merchandise
Assortments

Communication
Pricing
Mix

WAL-MARTS RETAIL
MIX

31

Customer Service
Limited
Location
Merchandise
Assortment
Store Design
and Display

Pricing

Communication
Mix

THE PENTAGON & TRIANGLE OF

RETAIL- BUILDING COMPETITIVE
ADVANTAGE

The Eight Ways To Win In Retailing

The Pentagon & The Triangle

33

Place

Size
Location
Layout & Design

Positional
Communication

Systems

Product

Promotional

Style & Fashion

Intensity
Assortment

Logistics Suppliers

Service
Knowledge
Climate

Price
People

Value

Quality

Place

Size
Location
Layout & Design

Size: Apparel & Accessories offer in

two sizes - XXX sq ft & XXXX sq ft
based on success rate and future
potential of current categories
Location: In the catchment area with
trading radius of 5-7 Km, either stand
alone or housed in a mall.
Layout & Design: Convenience for all.
L&D to drive CSI and ESI. Additional
area for value added services in stand
alone stores. Faade to be developed
for easy identification of store. Large
windows and clean looks to add value
to the layout.

Style & Fashion: Traditional to Fashion

domain.

Style & Fashion

Intensity
Product
Assortment

Intensity: Driven by GMROI & GMROF

Assortment: Mix of various wardrobe
components. At least 4-5 brands and 1-2
own labels in each product group.
Standard assortment across stores.
Develop two tier credible offer for each
department.
Core Customer segment to be 25-45
years. Capitalize on the youth and women
with high purchasing power. 75% of the
merchandise what customer is expecting.
25% beyond expectations. Assortment
driven through Range Planning and range
presentation.

Price: Will not be a price leader.

Quality: Good quality merchandise.
Value driven by merchandise (quality)
and convenience (time).

Price
Value

Quality

Service: Service is parameter for

differentiation. Right job for the right
people. Service guarantee and
consistency at all customer touch
points.

Service
Knowledge
Climate

People

Knowledge: Sales persons must be

able to make recommendations based
on fashion, fit, fabric and occasion
(Fashion Consultant), providing
personalization.
Climate: Enjoyment and fun at work.
Relaxed atmosphere to enhance
shopping experience.

Brand: Positioned as a Department

Store, a Family Store and a Global
Retailer in India. Continue to build a
strong store brand

Positional
Communication

Promotional

Positional: Communication will

promote other corners of the pentagon
for store and store brand.
Promotional: Promotions will deliver
More for Same and not Same for
Less .
Loyalty Program: Strong relationships
with our most valuable customers to
ensure repeat buys and patronization.

Assortment and customer are the key.

Will strengthen corresponding systems.

Systems

Systems will reflect the right product

assortment and customer information,
the critical elements of successful
implementation.
People will drive systems, rather than
systems driving people.
Training programs for systems
implementation.

Branded merchandise will be bought

out.

Suppliers

Each component of supply chain from

factory to store, must be defined in
hours, days or weeks.
Hub & spoke format for distribution
system to reduce lead time.
Logistics

THEORIES OF RETAIL
DEVELOPMENT

43

THE WHEEL OF RETAILING

Mature retailer
Top heavy
Conservative
Declining ROI

Innovative retailer
Low status and price
Minimum service
Poor facilities
Limited product offering

Traditional retailer
Elaborate facilities
Higher rent
More locations
Higher prices
Extended product offerings

Trading up phase