CHAPTER 5 : THE

RETAIL MARKET
STRATEGY
Leader: Leonor, Jean D.
Members: Ambas, Camille
Bautista, Carla
Dasco, Elisha
Pabalate, Shalaida
Tumulac, Lovely
WHAT IS A RETAIL STRATEGY?

■ A retail strategy is a statement identifying

• The retailer’s target market

• The format the retailer plans to use to satisfy the target
market ‘s needs
• The bases upon which the retailer plans to build a
sustainable competitive advantage
■ Target Market – is the market segment(s) toward which
the retailer plans to focus its resources and retail mix.

■ Retail Format- describes the nature of the retailer’s

operations ( type of merchandise and services offered,
pricing policy, advertising and promotion program,
approach to store design and visual merchandising,
typical locations and customer services) that is
designed to satisfy the needs of its target market.

■ Sustainable Competitive Advantage – is an advantage

over the competition that is not easily copied and thus
can be maintained over a long period of time.
Examples of Retail Strategy

SM Store
 Continue retail expansions beyond Metro Manila
Maintain diversified retail portfolio
SM Supermalls was cited as one of the top five retailing
shops/stores in Southeast Asia

The SM Store delivering high-

quality customer service and
devotes considerable time
and effort to training its
sales associates to work
hard to establish personal
relationships with each of its
customers.
7-11
 7-Eleven is the world’s first convenience store founded in the year 1927
by J C Thompson.
 7-Eleven offers lots of product like food and drinks for breakfast, lunch,
evening snack, dinner and late night snack. The company offers generic
items like brand sold on every convenient store like coffee, chips, bread,
eggs etc and also privately labelled products.
 7-Eleven also offers franchise to potential owners and is therefore the
main reason for its growth around the globe.

7-Eleven stores keep the

price of items as
competitive with respect
to other stores.
S&R
 The core concept is to deliver significant
value to member-customers through an
effective and efficient system anchored on
aggressive buying, low-cost distribution and
streamlined operations.
 S&R provides an expansive selection of
imported and local items in value packed
sizes to cater to your PERSONAL and
BUSINESS needs.
 S&R offers high quality products on local
and international brand names that
guarantee satisfaction, unmatched savings
and value for members.
Each of these retail strategies involves:
1. Selecting target market segment(s)
2. Selecting a retail format
3. Developing a sustainable competitive
advantage that enables the retailer to
reduce the level of competition it faces.
 TARGET MARKET AND RETAIL FORMAT

■ Retailing concept
- is a management orientation that focuses a
retailer on determining the need of its target market and
satisfying those needs more effectively and efficiently
that it competitors do. The selection of a target market
concentrates the retailer on a group of consumer whose
needs it will attempt to satisfy and, and the selection of a
retail format outlines the retail mix to be used to satisfy
the need of those customer.

■ Retail Market
- is a group of consumer with similar needs ( a
market segment) that a group of retailers can service
using a similar retail format to satisfy them.
BUILDING A SUSTAINABLE COMPETITIVE ADVANTAGE
SOURCES OF SUSTAINABILITY OF ADVANTAGE
ADVANTAGES
LESS SUSTAINABLE MORE SUSTAINABLE

Customer loyalty Habitual repeat purchasing ; repeat Building a brand image with an
purchases because of limited competition emotional connection with customer;
in the local area. using databases to develop and
utilize a deeper understanding of
customer
Location Convenient location

Human resource More employees Committed, knowledgeable employees

management
Distribution and Bigger warehouse; automated warehouse Shared system with vendors
information
system
Unique More merchandise; greater assortment; Exclusive merchandise
merchandise lower price; higher advertising budget;
more sales promotions

Vendors relations Repeat purchases from vendor due to Coordination of procurement efforts:
limited alternatives ability to get scarce merchandise

Customer service Hours of operation Knowledgeable and helpful sales

people
Customer Loyalty
- means that customer are committed to buying merchandise
and service from a particular retailer.
Loyalty is more than simply liking one retailer over
another. Loyalty means the customer will be reluctant a
patronize competitive retailers.

Retail Branding

- Retailer uses brand to build loyalty in much the same

way that manufacturers do.
- Is it the name of the retailer or a private label, can
create an emotional tie with customer that builds their
trust and loyalty
Positioning

- Involves the design and implementation of a retail mix

to create an image of the retailer in the customer's
mind relative to its competitors
Traditional
Loyalty Programs
- are part of an overall customer relationship
management (CRM) program.
- Customer loyalty programs work hand in hand with
CRM.

Location
- is a critical factor in consumer selection of
a store
Human Resources Management
- recruiting and retaining great employees does
not come easy

Distribution and Information System

- All retailers strive to reduce operating cost – the cost
associated with running the business – and make sure the
right merchandise is available when and where customer
want it. The use of sophisticated distribution and
information system offers an opportunity for retailers to
achieve these efficiencies
Unique Merchandise
- It is difficult for retailers to develop
competitive advantage through merchandise
because most competitors can purchase and
sell the same popular nation brands.
 Vendors Relations
- by developing strong relations with vendors, retailers
may gain exclusive rights to:
(1) sell merchandise in a specific region
(2) obtain special term of purchase that are not
available to competitors
(3) receive popular merchandise in short supply.
Customer Services

- It takes considerable time and effort to build a

tradition and reputation for customer service, but
good service is a valuable strategic asset. Once a
retailer has earned a service reputation, it can
sustain this advantage for a long time because it’s
hard for a competitor to develop a comparable
reputation.
Multiple Sources of Advantage
-To build a sustainable competitive advantage,
retailers typically don’t rely on a single approach, such
as low cost or excellent service. Instead, they need
multiple approaches to build as high a wall around
their position as possible.
Growth Strategies

4 types of Growth Strategies

• Market Penetration
• Market Expansion
• Retail Format Development
• Diversification
 Target Markets
Retail Format
Existing New
E
X
I
S Market Market
T Penetration Expansion
I
N
G

Diversification
N Format (unrelated/
e Development related)
w
MARKET PENETRATION
■ Market Penetration Growth Opportunity- directed
toward existing customers using the retailer’s
present retailing format
Ex: Opening more stores in the target market.

■ Cross-selling- sales associates sell items that are

not in their department.
Ex. Electronics Associate take a customer to
clothing and sells them a pair of pants.
MARKET EXPANSION

Involves using the existing retail format in

new market segments.
EX: Dunkin’ Donuts opening outside the US
RETAIL FORMAT DEVELOPMENT
■ Retail format development growth opportunity- is an
opportunity in which a retailer developments a new
retail format a format with a different retail mix for
the same target market.
Ex. Tesco having both Tesco Metro and Tesco
Express stores

■ Multichannel retailing
Example of retail format development, a bricks and
mortar retailer is offering an internet channel as a
new format, in addition to its existing channel.
DIVERSIFICATION

■ Diversification growth opportunity- one in which a

retailer operates a new retail format directed toward
a market segment that’s not currently served by the
retailer.
■ Related Diversification Growth Opportunity- retailer’s
present target market or retail format and its new
market or format have nothing in common.
■ Unrelated Diversification Growth Opportunity - lacks
any commonality between the present business and
new business
■ Vertical Integration- retailers go into wholesaling or
manufacturing.
Global Growth Opportunities

■ International expansion is a market

expansion growth opportunity that many
retailers find attractive but International
expansion can be risky, because retailers
must deal with different government
regulations, cultural traditions, supply chain,
considerations, and language.
Keys to success
■ Globally Sustainable Competitive Advantage
• Most successful when then expansion opportunity builds on
the retailer’s core bases of competitive advantage
• Some retailers have a competitive advantage due to
emulation of American culture

■ Adaptability
• Retailers realize they must adapt their core strategy and
store designs/layouts to the needs of the local market
Ex. Color preferences, sizes
• Government regulations and cultural values may also affect
how a store is operated
■ Global Culture - Retailers must thing
globally

■ Financial Resources
• Long-term commitment with
considerable up-front planning
• Can be difficult to generate short-term
profits.
• All stores initially have difficulty
achieving success in new global
markets
Entry strategies
■ Direct Investment - Retail firm invests
and owns a retail operation in a foreign
country
■ Joint Venture - Entering retailer teams
up with a local retailer to form a new
company in which profits are shared
■ Strategic Alliance- Collaborative
relationship between two firms for a
single project
■ Franchising
The Retail Strategic Planning Process

• This is a set of steps a retailer goes through to

develop, strategize, and plan.
• It describes how retailers select target market
segments, determine the appropriate retail
format, and build a sustainable competitive
advantage.
• It is not always necessary to go through the
entire process each time a strategy and plan
are developed.
The Retail Strategic 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
The Retail Strategic Planning Process

Step 1: Define Business Mission

The mission statement is a broad description of
retailer’s objectives and the scope of activities it plans
to undertake.

• It defines the general nature of the target

segments and retail formats on which the firm
will focus on.
• The principle objective of a publicaly held firm is
to maximize stockholder wealth. Firms are
concerned about their impact on society.
Step 1: Define Business Mission
When developing a mission statement,
managers need to answer five questions:
1. What business are we in?
2. What should our business be in the future
3. Who are our customers
4. What are our capabilities
5. What do we want to accomplish
Step 2: Conduct a Situation Audit (SWOT
Analysis)
• This is an analysis of the opportunities and threats in the
retail environment, and the strengths and weaknesses of the
retail business relative to its competition.
• The elements analyzed include:
Market Factors: Sixe, Growth, Seasonality, Business
Cycles
Competition Factors: Barriers to entry, Bargaining Power of
Vendors, Competition Rivalry
Environmental Factors: Technology, Economic, Regulatory ,
Social
Internal Factors: Management Capabilities, Financial
Resources, Location, Operations, Merchandise, Store
Management, Customer Loyalty
Elements in a Situation Audit
Step 3: Identify Strategic Opportunities
Step 4: Evaluate Strategic Alternatives
• The evaluation determines the retailer’s potential to
establish a sustainable competitive advantage and reap
long-term profits from opportunities being evaluated The
retailer must focus on opportunities that utilize its strengths
and its competitive advantage.
• Market attractiveness, strengths, and weaknesses need to
be considered in this process.
• The greatest investments should be made in market
opportunities in which the retailer has a strong competitive
position.
Step 5: Establish Specific Objectives and
Allocate Resources
• The specific objectives are goals against which progress
toward the overall objective can be measured.
• The specific objectives have three components:
1. The performance sought, including a numerical index
against which progress may be measured.
2. A time frame which the goal is to be achieved.
3. The level of investment needed to achieve the objective.
Step 6: Develop a Retail Mix to Implement Strategy
• Investments will be made and control and evaluate performance.
• [This will be covered in Sections III and IV]

Step 7: Evaluate Performance and Make Adjustments

• If the retailer is meeting or exceeding its objectives, changes
aren’t needed.
• If the retailer fails to meet its objectives, reanalysis is required.
• Reanalysis starts with reviewing the implementation programs
but may indicate that the strategy or mission statement needs to
be reconsidered.