Ch 5 Retailstrategy
Transcript of Ch 5 Retailstrategy
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Chapter 5
Retail Marketing Strategy
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What is a retailing strategy?
A retail strateg y is a statement identifying
(1)The retailers target market
(2)The format (Retail Mix) the retailer plans touse to satisfy the target markets needs
(3)The bases on whi ch the retailer p lans to
build a sustainable competitive advantage
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Retailing Strategy
Ret ail Mar ket Str ategyChapt er 5
Financial Strategy
Chapt er 6
Retail L ocation sChapt ers 7,8
Human Resource
Manag ementChapt er 9
Information and
Distribut ionSyst ems
Chapt er 10
Custo merRelationship
Manag ement
Chapt er 11
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Questions
What is a retailing st rategy?
How can a retailer build a sustainablecompetitive advantage?
What steps do retailers go through to dev elop astrategy ?
What different strategic growth opportunit ies canretailers pursue?
What retailers are best positioned to become
global retailers?
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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
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Elements in Retail Strategy
i mage100 Ltd
Target Market the market segment(s) toward which the retailer plans
to focus its resources and retail mix
Retail Format the nature of t he retailers operationsits retail mix
Sustainable Compet itive Adv antage an advantage over the competition
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Analyzing Otobis Retail Strategy
Target market?
Retail offering (format)?
Bases f or competitiv eadv antage?
What Threats Might Otobis Face in the Future?
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Why Does a Retailer Need to Focus ona Specific Target Market?
Why Not Sell to Everyone?
Target Market
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Target market and retail format:Retail Market Opportunities for Womens Apparel
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Criteria For Selecting A Target Market
Att ract iveness -- Large,
Growing, Little
CompetitionMore
Prof its
Consistent with Your
Competit ive AdvantagesRim Light/PhotoLi nk/Getty Images
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Opportunit ies fo r retailers t o d evelop sustainablecompet it ive advantages
Customer Loyalty
Location
Human Resource Management
Distribution & Information Systems
Unique Merchandise
Vendor Relations
Customer Service
PhotoLink/Getty Images
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Customer Loyalty
More than simply liking one retailer over another
Customers will be reluctant to patronizecompetitive 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
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Retail Branding
Retail brand
Can create an emotionaltie with customers thatbuild their trust and loyalt y
Facilitates store loyalt ybecause it stands for apredictable level of quality
Stores use brand (stores name and store brands private label brands) to build customer loyalty
Walmart
brands
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Loyalty Programs
Part of an overall Customer Relationship Management(CRM) program
Purchase behaviors of members of loyalty programs Are identifi ed when th ey buy bec ause they use s ome type of
loy alty card
Sav ed in Data Ware house
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
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Approaches for BuildingCustomer Loyalty
Unique Positioning
Location
Customer Serv ice Informat ion About Customers (Database)
Unique Merchandise
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Example of Positi oning
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Location
What are the three most important things inretailing? location, location, location
Locat ion is a competitive advantage A high density of Starbucks stores
Creates a top-of-mind awareness
makes it very difficult for a competitor to enter amarket and find a good locations
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Human Resources
Employees are key to build a sustainablecompetitive advantage
Strategies for Recruiting and Retaining TalentedEmployees
Employee Branding
Develop positive organizational cult ure
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Distribution and Info Systems
Flow of Information
Vendor
Distribution Center
Store -Better services-Increase in breadth and depth-Decrease in prices
By decreas ing costs here, theis more money av ailable to
inv est in:
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Unique Merchandise: Private Labels
Sears Kenmore -- appliances
Federateds Inc. fine apparel
Kmarts Martha Stewart -- home
JCPenneys Arizona -- jeans Jul es Frazier/GettyImages
Rob
Melnychuk/Getty
Images
Jac obs StockPhotography/Getty Images
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Vendor Relationships
Low Cost - Eff iciency Through Coordination Electronic Data Interchange (EDI)
Collaborative Planning and Forecasting toReduce Inventory and Distribution Costs
Exclusive Sale of Desirable Brands
Special Treatment Earl y Deliver y of New St yles
Shipment of Scare Merchandise
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High Quality Customer Service
Difficult to Achieve People Are Not M achines -- Inconsistent
Retail Sales Associ ates At Bo tt om of Labor Pool
Goes Beyond Hiring Good People at HighWages and Training Them -- OrganizationalCulture
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Criti cal T radeoff In DevelopingStrategic Advantage
Focus Leads to Dev eloping
A Compet itive Adv antage
But
Focus Reduces Flexibility
Low Cost, Consistent Image, VendorRelationships Reduces Flexibility
Similar to Dating and Marriage Commitmentto a Relationship (Vendor) Reduces Flexibility
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Grow th Strategies
RyanMc Vay/ Getty Images
Market Penetration
Market Expansion
Retail Format Development
Diversif ication Related v s. Unrelated
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Growth Opportunities
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Market Penetration
Attract customers from target market Walgreens onever y corner
Get current customer to visit store more often or buy oneach visit
Cros s Selling s ales ass ociates in one department sellcomplimentar y merch andise from other departments
Example: Manicurist sells ser vices plus hand lotion or nai l polish
Example: Sales per son sells le af blower directs customer t o electrical
departm ent to purc hase a 100 foot extension c ord.
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Market Expansion
Market expansion growth opportunity inv olvesusing the existing retail format in new marketsegments
Dunkin Donuts new stores (and at gas stations)outside northeastern
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Retail Format Development
Develops a new retail f ormat with a diff erentretail mix f or 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 widestrange of food and non-food products
Bharti Retail Ltd.
Easyday
Easyday market Easy day Hyper
ACI
Shwapno
Shwapno MINI
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Diversification
Int roduces a new retail format toward a marketsegment that is not currently serv ed by theretailer
Related div ersif icat ion
Unrelated div ersif icat ion
Vertical integration into wholesaling ormanuf acturing
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Global Grow th Opportunit ies
SteveCole/Getty Images
Specialty store retailers withstrong brand and uniquemerchandise?
McDonalds
Starbucks Zara
H & M
Discount and food retailerswith deep assortments and lowprices?
Wal-Mart
Carrefour
Metro AG
Who Is Successful and Who Isnt?
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IKEA
Operates 254 stores in 35countries
Unique, well-designed,functional furniture at lowprices for consumers whohave sophisticated tastes,but have no intention tospend a lot
You do our part. We doour part. Together, wesave money.
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Why Do Category Killers and SupercentersSucceed Globally ?
Developed operating expenses
Scale economies for buyingmerchandise globally
Unique systems and standardization
formats which facilitate control overmultiple stores
Understand that consumers are willingto forego service for lower prices
RyanMcVay/Getty Images
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Key to Success in Global Retailing
Globally s ustainable competit iveadv ant age
Low cost, efficient operations - W al-Mart, Carref our
Strong pr ivat e lab el bra nds:Starbucks, KF C
Fashion Reputation - T he Gap, Zara,H&M
Categ ory dominance B est Buy,IKEA, Toys R Us
Adaptabi lity
Global Culture
Financial Resources
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Evaluating Global Growth Opportunities
China Increasing operating costs
Lack of managerial talent Underdeveloped and
inefficient supply chain
India Prefers small family-owned
stores
Restricts foreign investment
Consider challenges and how to overcome them
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Evaluating Global Growth Opportunities
Rankings are based onweighted score usinggrowth (55%),
risk (25%), and
market size (20%)
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Growth, Risk, and Market Size of
Top 30 Countries
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International Market
Entry Strategies
Direct Investment
Joint Ventures
Strategic Alliances
Franchising
/
Profit and Ris k
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Bharti Walmart Priv ate Limit ed is a join t ventu re between
Bharti Enterpris es and Walmart
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Stages in the StrategicRetail Planning Process
1. Define the busine ss mis sion
2. Conduct a sit uatio n audit:Market attractiveness analysis
Competitor analysi s
Self-analysis
3. Identify strategic opportunities
5. Establish specific objectives and allocate resources
7. Evaluate performance and make a djustmen ts
6. Develop a retai l mix to impleme nt strategy
4. Evaluate strategic alternatives
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Amazon Mission
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Elements in a Situation Audit
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Market Factors
Market size large markets attractiv e to largeretail firms
Growth typically more attractive than mature ordeclining
Seasonality can be an issue as resources arenecessary during peak season only
Business cycles retail markets can be affectedby economic conditions military base towns
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Competitive Factors
Barriers to entry
Scale e conomies of big box r etailers
Service and unique, high- end pro ducts of small r etailers
Bargaining power of vendors Markets are less attract ive when only a fe w vendors control the
merchand ise sold within it
Competitive rivalry
Defi nes the frequency and intensity of reactions t o actionsundertaken by c ompet itors
Conditions le ading to intense riva lry: a large num ber of same
size r etailers, slow growth, high fixed costs, a lack of perceived
differences between c ompeting r etailers
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Questions forAnalyzing 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 marketfirm, competitors
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Performing a Self-Analysis
At what is our company good?
In which of these areas is our company betterthan our competitors?
In which of these areas does our companysunique capabilities provide a sustainableadv antage or a basis for developing one?
Stockbyte/Punchstock Images
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Strengths and Weaknesses Analysis
Management Capability:Capabilities and exp erience of top man agement
Depth of Management--capab ilities of midd le m anagement
Manag ements commitment to firm
Financial Resources:Cash flow from existing b usiness
Ab ility to ra ise debt or eq uity financing
Operations:
Overhead cost structure
Quality of operating systems
Distribu tion capabilities
Management information systems
Loss p revention systems
Inventory control system
MerchandisingCapabilities:Knowledge and skills of bu yersRelationsh ips with vendo rs
Capabilities in developing private
capab ilities
Store Management CapabilitiesManag ement c apabilities
Qu ality o f sales associates
Commitment of sa les assoc iates to firm
Locations
CustomersLoyalty of customers
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Illustration of the
Strategic Retail Planning Process
Kelly Bradford Owner of Gifts To Go Two Store Chain in Chicago Target Market Upper Income Men and Women
Looking for Gifts between $50 and $500 Strong Customer Loyalty Based on Knowing What
Customers Want, Providing Good Customer Service Low Turnover Among Associates
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Mission Statement for Gifts To Go
The mission of Gifts-to-Go is to be the leadingretailers of higher-priced gifts in the Chicago andprovide a stable income of $100,000 per year forthe owner.
Def ine growth opportunities will and wontconsider
Indicates objectiv e of company
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Situation Analysis of Gifts to Go
Market Factors Chicago is an attractive market. (+) Relatively expensi ve gifts are not affected much by
the economy. (+) Gifts are highly seasonal. (-)
Competitive Factors Many in area. Primary department stores, craft
galleries, catalogs, and Internet retailers (-)
Lack of large suppliers, customer (+) Opportunities for differentiation (+) Limited competitive r ivalry. (+)
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Situation Analysis of Gifts to Go
Environmental Factors Potential Threat - Dev elopment of electronic channel by
tradit ional bricks and mort ar retailers (-)
Strengths and Weaknesses Mana gement Capability Lim ited
Financial Resources G ood
Oper ations Poor
Merchandis e Capabilit ies Good
Store M anageme nt Capabilities E xcellent
Loc ations Excellent
Cust omer Loyalty Good Cust omer Database - Good
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Growth Opportunities for Gifts to Go
Market Penetration Increase size of present sto res
Open addit ional gif ts stores inChicago area
Market Expansion Open gift stores outside Chicago
area
Sell lower priced gifts in presentstores
RyanMc Vay/ Getty Images
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Growth Opportunities for Gifts to Go
Retail Format Development Sell non-gift merchandise to same customers in
present or new stores
Sell similar gifts to same customers through anelectronic channel
Div ersif ication Manufacture craft gifts
Open an apparel store targeting teenagers
Open a category killer store selling a broaderassortment of gi fts
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Evaluating Growth Opportunities for
Gifts to Go
Market Att ract iveness
Market Penetration Increase s ize of pr esent stores (low)
Open addit ional gifts stores in Chi cago area (medium)
Market Expansion Open gift stores outside Chicago ar ea new geographic
segment (medium)
Sell low er pr iced gifts in present stores new benefit s egm ent(medium)
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Steps in Using Market Attractiveness -Competitive Position Matrix
Def ine strategic opportunit ies
Identify market attractiv eness and competitiv eposition factors
Assign weight based on importance of factors
Rate opportunities on market attractivenessand competitive position
Calculate scores and ev aluate opportunities
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Attractiveness Ratings forInternational Growth Opportunities
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Competitive Position in InternationalGrowth Opportunities