• Retail strategy has several components in a
• Begins with a “mission statement”
• Markets are selected based on their
• Profits are due to sustainable advantages.
1. Define the business mission
2. Conduct a situation audit:
Market attractiveness analysis
3. Identify strategic opportunities
5. Establish specific objectives and allocate resources
7. Evaluate performance and make adjustments
6. Develop a retail mix to implement strategy
4. Evaluate strategic alternatives
Steps in the Strategic Retail Planning Process
Elements in Retail Strategy
• Target Market
– Customer Needs
• Retail Format
– Method for Satisfying Needs
• Bases for Building Sustainable Competitive
– Defending Position Against Competitors
Criteria For Selecting
A Target Market
• Attractiveness -- Large, Growing,
Little Competition ===>Profitable
• Consistent with Your Competitive Advantages
• Actionability: Will respond as a segment to your
Mission Statement and the Household
• “Generic markets” for retailers:
• Products lie on a “goods and services”
• Recognition that households have basic
needs for products on this continuum.
Can You Develop a Sustainable
Competitive Advantage by:
• Eliminating a line of merchandise?
• Offering the lowest prices?
• Eliminating less profitable locations?
• Increasing your level of advertising?
• Discontinuing services?
Basis for Competitive Advantage
• Loyal Employees
Michael Porter’s “Five Forces” Models
• Bargaining Power of Suppliers
• Bargaining Power of Customers
• Threat of Entry of New Firms
• Threat of Substitutes
• Rivalry of Competitors
• “Attractiveness” is associated with
profitability, not ease of entry.
Bargaining Power of Suppliers
• Few, powerful suppliers
• Several, highly competitive suppliers
Threat of Entry
• Markets that are difficult—high barriers to
entry—remain less competitive, and remain
• Geographic markets can become over-
stored due to low barriers to entry, leading
to “unattractive” price competition.
Threat of Substitutes
• What is the basic household need?
• How do the service output levels affect
• How does decreasing services provided
Sources of Competitive Advantage
• Customer Loyalty
• Low Cost Supply Chain
• Information Systems
• Exclusive Merchandise
• Buying Power
• Customer Service
• Committed Employees
• Better Computers
• More Employees
• More Merchandise
• Greater Assortments
• Lower Prices
• More Advertising
• More Promotions
• Cleaner Stores
Sustainability of Retailing Functions:
• Managing effective
breadth and depth of
• Minimizing assortment to
• Information through
experienced sales people.
• Economies of the chain.
• Extending credit.
• Aligning with specific vendors
for exclusive displays.
• Using web-pages and point-of-
purchase displays to provide
• Providing services that cannot
be easily provided without
• Providing convenience through
large-store, one-stop shopping
Approaches for Building
• Unique Positioning
• Customer Service
• Information About Customers (Database
• Unique Merchandise
• Low Cost - Efficiency Through Coordination
– Electronic Data Interchange (EDI)
– Functions Performed By Most Efficient Party
• Difficult to view this as a long-term sustainable
advantage without guaranteeing vendor’s
Challenges to High Quality
• Difficult to achieve
• People are not machines -- Inconsistent
• Retail sales associates at bottom of labor pool
• Organizational culture is difficult to maintain with
• Shoppers are showing that they are willing to accept
less customer service in the shopping process.
• Sales taxes on all retail e-commerce
• Regulation of distribution
• Maximum resale price maintenance
• Enforcement of Robinson-Patman Act
• Third-party payers, such as insurance and
• Restrictions on store size