Retail Management

Lecture 3
 Retail Market 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 and the bases upon
which the retailer plans to build a sustainable
competitive advantage.
 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 retailer’s
operations—its retail mix
• Sustainable Competitive Advantage: An
advantage over the competition
 Criteria For Selecting A Target Market

• Attractiveness
• Large
• Growing
• Little Competition
• More Profits
• Consistent with Competitive Advantages
Sources of Competitive Advantage
• Customer Loyalty
• Vendor Relationships
• Human Resources Management
• Distribution and Info Systems
• Location
 Customer Loyalty
• More than simply liking one retailer over another
• Customers will be reluctant to support 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
 Vendor Relationships
• Low Cost - Efficiency Through Coordination
• Collaborative Planning and Forecasting to
Reduce Inventory and Distribution Costs
• Exclusive Sale of Desirable Brands
• Special Treatment
• Early Delivery of New Styles
 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
 Distribution and Info Systems
By decreasing costs here, there is more money
available to invest in:
• Store
• Better services
• Increase in breadth and depth
• Decrease in prices
 Location
• What are the three most important things in
retailing? “location, location, location”
• Location is a competitive advantage
• A high density of store creates a top of mind
awareness and makes it very difficult for a
competitor to enter a market and find a good
location.
 Strategic Retail 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.
Strategic Retail Planning Process
 Strategic Retail 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 publically held firm is to
maximize stockholder wealth. Firms are concerned
about their impact on society.
 Strategic Retail Planning Process
• 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: Growth, Seasonality, Business Cycles
• Competition Factors: Barriers to entry, Bargaining Power
of Vendors, Competition Rivalry
• Internal Factors: Management Capabilities, Financial
Resources, Location, Operations, Merchandise, Store
Management, Customer Loyalty
 Strategic Retail Planning Process
• Step 3: Identify Strategic Opportunities
• The retailer should look for the customer
needs and wants and study the market and
avail all the possible opportunities.
• The retailer must focus on opportunities that
utilize its strengths and its competitive
advantage.
 Strategic Retail Planning Process
•  Step 4: Evaluate Strategic Alternatives
• The evaluation determines the retailer’s
potential to establish a sustainable
competitive advantage and collect long-term
profits from opportunities being evaluated.
• Market attractiveness, strengths, and
weaknesses need to be considered in this
process.
 Strategic Retail Planning Process
• 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:
• The performance sought, including a numerical index
against which progress may be measured.
• A time frame which the goal is to be achieved.
• The level of investment needed to achieve the
objective.
 Strategic Retail Planning Process
• Step 6: Develop a Retail Mix to Implement
Strategy
• Investments will be made and control and
evaluate performance.
•  [This will be covered in Step 3 and 4]
 Strategic Retail Planning Process
• 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.
Conclusions may result in starting a new planning
process, including a new situation audit