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Strategic Retail Management - 2012


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This presentation educates the audience about Strategic Retail Management. This presentation is intended for educational purposes. The examples used are also for educational purpose. If any person or organization has any issues pertaining to same, please inform me, I will alter the same.

Strategic Retail Management - 2012

  1. 1. Classification of Retail Based on Ownership INDEPENDENT CHAINS FRANCHISE COOPERATIVE LEASED Based on StrategyGeneral Department Discount Stores Specialty Store Off PriceMerchandise Stores Category Killers Retailers
  2. 2. Formats in Food Retailing Types Conventional Superstore Hyper Market Convenience Store Hard Discounter Parameters Supermarket Size (sq. m) 400- 1,000 1,000-5,000 5,000-30,000 200-400 500-1,500 Merchandise extensive width full assortment of full selection of medium width medium width and depth of supermarket supermarket and and low depth of and low depth, assortment; items, plus drugstore items, assortment, heavy use of average quality; health and and general average quality store brands manufacturer beauty aids and merchandise; (up to 90 %) and store brands general extensive width, merchandise and depth SKUs 20,000-30,000 30,000-40,000 40,000-150,000 1,000-3,000 700-1,500 Percentage foods 75 - 90% 60- 80% 60- 70 % 90% 80-90 % Prices average/ competitive competitive average to above very low competitive average/highAtmosphere & Services average/ average average average low good Locations city or community shopping community shopping city or neighbourhood neighbourhood centre centre neighbourhood or or traffic - or isolated sites or isolated sites highly frquented oriented sites Promotions use of heavy use of heavy use of little to moderate heavy use of newspapers, newspapers, newspapers, newspapers & flyers, coupons flyers, coupons flyers, coupons flyers
  3. 3. The Wheel of RetailingMature Retailer Innovation Retailer• top heaviness • low status• conservatism Vulnerability Phase Entry Phase • low price• declining ROI • minimal service • poor facilities • limited product offering Trading –UP Phase The Retail Life cycle Traditional Retailer • elaborate facilities • fashion-orientation • expectation of both • higher prices • essential and • extended product • exotic services • offerings • higher-rent locations II • Introduction Stage II • Development Stage III • Growth Stage IV • Maturity Stage V • Decline Stage
  4. 4. B2B Retailing Format “Big Box Strategy Mix” • HoReCa (On –Premise) Businesses • Area covered : 9,000 toCustomers • Corporates & SMEs 30,000 sq.m. • Educational Institutions • SKUs : 50,000 – 60,000 • Self- Employed Professionals • Food percentage: 60-70 % • Traders & Resellers • Prices: Low price strategy. • Wholesalers & Distributors • Atmosphere & service : • Supermarkets & Pharmacies average, WH look & feel • Fresh Meat & Poultry + Groceries • Location : isolated sitesCategories • Gourmet • Promotion : aggressive low • DIY & Home Improvement price strategy, mailers, • Healthcare & wellness coupons., loyalty programs • Technology World • Electronics & Appliances • Apparel & Footwear • Office & Stationery • Uncompromising customer focus • Professional service • High-quality, diverse range • Large selection of fresh products • High availability of goods • Low prices • Clear organisation and cleanliness • Quick processing at check-out • Good accessibility • Convenient opening hours
  5. 5. Non Store Formats in Food RetailingTraditional Non-Store formatsFor Fresh merchandise e.g. farm produce, bakery products,meat / fish , the use of market stands or truck and vansVending MachineKiosks or VM provide customers with product displays andinformation on the merchandise or electronic systems trackinventory and cash, thus reducing out –of-stocks ormalfunctions.Remote OrderingRO Channels such as internet Shops, traditional cataloguesor TV shopping are gaining importance , in the scenarioswhere dominant share of food retailing is generated by storeformats.Direct SellingSales persons contact customers directly at a convenientlocation(at home or work or via phone etc.) , theydemonstrate the product or provide them with informationor services. Eg. Party selling , MLM
  6. 6. New Competitors-Vertical Strategies Suppliers becoming Competitors for their Customers ! Controlled Distribution Secured Distribution System System Direct Selling Dealer Partnership Program Electronic Selling Franchise Systems Equity Stores Strengths Weaknesses Equities • High degree of Control • High capital costs • Organizational control • Huge operational costs • Brand/Promo controlAdvantages & • Guaranteed distributionDisadvantagesof Secured &Controlled Franchising • Limited capital costs • Limited ControlDistribution • Less ownership riskConcepts • Guaranteed distribution • Low fluctuation Dealer Partnerships • Low cost solution • Little control • Rapid expansion • High risk of losing partners • Less stability
  7. 7. Direct Selling Electronic Selling Equity Stores Factory Outlet Flagship Store Specialty StoreMulti Channel Distribution Dealer Partnership Program Franchise System Independent Retailers Flagship Store Factory Outlet Ecommerce portal
  8. 8. Controlled and Secured Distribution Verticals • Verticals perform all production and distribution functions themselves. • Successful for both Brick N Mortar formats & E- Controlled Stores. Secured Distribution • Brands like Zara, Mango are successful e.g. in Distribution apparel industry. From Sheep to Shelf. • Advantage lies in controlling total value chain , SCM and understanding consumer behavior Retail Equity quickly. Partnership Franchising Concept • Secured Distribution used to develop equity chains . • Now manufacturer can sell directly to consumers without Brick N Mortar stores over the internet & through Dealer Partnership programs and Indirect and Direct/Secured Franchising. Distribution at Esprit • Main challenge is to manage the potential conflict between independent retailers, selling products from a particular manufacturer, and retailers , cooperating in a contractual system with this manufacturer on the one hand, and equity stores from this manufacturer as competitors on the other hand. As “pure players”, verticals are in much better position – they do not compete with their customers.
  9. 9. Growth Strategies Growth Options Products • With present products & in present markets , growth Present New can be achieved by Market Penetration. • Product Development is characterized by offering new Market Product products to existing customers. Present Penetration Development • Market Development is when a current product offer is targeted to a new customer segment, often in a newMarket Ansoff’s geographic area. Matrix New • Diversification entails offering new products to new Market markets. Diversification Development • Withdrawal from Markets is closing down or divesting (selling –off) the unprofitable parts of business . • Organic Growth (Internal Growth) is primary method for expansion. Outlet Growth Options • Joint Ventures is when parties agree to contribute equity and share the revenue, expenses & control of enterprise. • Franchising is a contractual agreement between two legally and financially separate companies. Organic Mergers & • M&A involves the consolidation or purchasing of existing Franchising Growth Acquisitions retail companies or retail outlets.
  10. 10. Internationalization of Retailing Internationalization of Benefits of Integration Standardization Adaptation Global Glocal Some products Some products International are global need some Hi Orientation Orientation Retailing products, changes in the Retail Sourcing meaning they product or can be sold in promotion Cross – Border foreign markets strategy to fit Retailing with virtually no new markets. Domestic Multinational adaptation. Lo Market Orientation Orientation Lo Hi Low responsiveness Non- standardized Strategic Sequencing of Market Entry Glocal Multinational Entry & Operating Strategy Export Orientation OrientationAssortment Licensing Global/ Franchising standardized Domestic Market Orientation Joint Venture standardized Non- standardized Format
  11. 11. Retail Branding & Positioning • Retail Branding – A retailer’s products are his stores; hence Retail Measurement of Brand Equity Brand is then a group of retailer’s outlets that carry a unique name Monetary Brand Consumer Oriented Equity Brand Equity or logo or both. • Indicators of Consumer Oriented retail brand equity are Brand •Additional Cash flow achieved by •When consumers react favorably to an Awareness, Trustworthiness of the Brand, Customer associating a brand element of marketing with product or mix. Satisfaction/Loyalty, Brand Liking & Differentiation. service. •Eg. Macy’s (in US) & • Positioning is deliberate defining and influencing customer’s •Eg. The Gap (8.2 Bi Big Bazaar /Food perception of marketable object, with strong focus on USD), Zara (3.7 Bi Bazaar are among the USD) most recognized and competitiveness. likeable brands. • Positioning depends upon Quality of merchandise, variety of merchandise, convenience, price, customer service, location & store atmosphere. Branding Strategies at Different Retail CompaniesBrand Strategy Retail Company Retail Brands of the Company Café Coffee Day Café, Lounge, Express Principles of Successful Retail Branding Pizza Hut Dining, Express, PHDUmbrella Brand Spencers Deli, Super Market, Hyper Market Differentiation from Competitors Tesco Tesco Extra, Tesco (Super Markets), Tesco Express Pantaloons, Central, Brand Factory, Home Town, Ezone, Long-term marketing Continuity Future Group Planet Sports Big Bazaar, KBs Fair Price, Food Bazaar, Coherence of different marketing componentsFamily Brand Trends, Footprints, Mart, Fresh,Digital, Jewels,Subhiksha Reliance Retail ,Autozone,Time Out & Brands (Diesel, Paul&Shark, Steve Madden,Hamleys, Thomas Pink etc.) Rocket Internet,, Bamarang, Food Panda, 21DiamondsMixed Strategy Smile Group Dealsand you, Fashionandyou, Juvalia&you Metro Metro Cashn Carry,Real, Media-Markt, Saturn, Kaufhof
  12. 12. Marketing Mix in Retail - IStore Location – Trade Area & Analysis Location Assessment Techniques Location Evaluation Checklists Importance of Location • A good location can lead to competitive advantage. • Element of Marketing mix which is unique & cannot be imitated. • Long term decision implies long term capital commitment. • Fixed nature, hence cannot be changed in short term like prices, customer service, product assortment or advertising.
  13. 13. Marketing Mix in Retail - IIMerchandise & Category Management Depth of Assortment Specialty Stores Department Stores Merchandise Mix Staple Merchandise Fashion Deep Merchandise Seasonal Merchandise Convenience Stores Discounters Fad Merchandise Shallow Narrow Wide Breadth of Assortment Category Definition Category Category Review Category Rule Strategies • TrafficManufacturer / National Brand Store Brands / Private Labels •Opportunity for •Pull Effect Enhance differentiation , customer frequency in available at retailer Increasing stores. only •If a customer is Category • Transaction •Image Transfer , A retailer image can be satisfied with private Plan Management Category Building improved when it is label, then he will Implementation Assessment associated with the revisit the store to buy Process • Profit it again. manufacturer’s brands that are evaluated •Price competition is Generating positively. less severe , lower • Image procurement or production & Performance Creating marketing cost Category Tactics Measures Category Strategies
  14. 14. Marketing Mix in Retail - III Pricing Strategy Cost Oriented • Price positioning is a retailer’s price image in relation to his competitors Pricing & is determined by the positioning of company. Competition • W.r.t price structure , the differentiation is made between value(budget)Pricing Oriented Pricing price segment, medium(standard) price segment and a premium price segment. Demand Oriented Pricing • Price Differentiation occurs due to loyalty programs etc , also depending on target customer (for eg. Senior citizens) • Temporary Price Reductions happen through Promotion Packs, BOGOFs (Buy One Get One Free), Multipacks, Coupons & Store Wide reductions. Psychological Pricing Price –Quality relationship – Consumers some times evaluate product’s HiLo v/s EDLP quality based on the price, reason being consumers at times lack knowledge & information to judge the merchandising quality accurately. Price Communication - A red or yellow color of price sticker, large price HiLo (High Low ) Retailers have high regular Retailers offer consistently signs, crossed out “old” prices, comparison with recommended retail price prices, but they advertise low prices, thus enhancing by the manufacturers , and many other communicative measures can lead EDLP (Every Day Low Price ) their products & draw trust in retailer. Higher customers through temporary price transparency, smooth & decreased operations to a perception of lower prices. reductions. Reduced price costs, reduced out of credibility & change in stocks& reference prices.
  15. 15. Marketing Mix in Retail - IVIn store Easy internal orientation , In Store MarketingMarketing facilitate search process • Visual Merchandising – Refers to the arrangement of products (presentation & aesthetic appeal) in the store. Create positive store • Shopping process is differentiated through motives -Task atmosphere, emotional mind Completion and Recreational Shopping. of customers • Store Atmosphere comprises of visual elements (color, brightness etc.), aural elements ( music, audio advert. ), olfactory elements ( perfumes ), tactile (materials on floor, touching), gustatory elements (food samples, coffee served in book store) • Highly valuable store areas – entrance area , ground level space, end caps of gondolas, feature / special displays, check out area, eye level shelves..
  16. 16. Marketing Mix in Retail - V Customer Relationship Management Relative Customer Individualization/ Attitude Information segmentation Latent Loyalty (True) high Loyalty CRM No Loyalty Spurious low Loyalty CustomerProfit Orientation Interaction and Integration low high Repeat Patronage• Segmentation is done on three parameters : Value based, Customer based & Consumer behavior based.• CRM takes place through marketing communication by Customer Relationship Lifecycle Addressed direct mailings, E-Mail Marketing, Instore Multimedia Kiosks, Mobile Marketing, Personal Shopping Assitants.• A higher level of CRM can be employed through Internet marketing using Web Analytics, Web usage mining, SEO&SEM , Social Media Marketing.
  17. 17. Buying – Strategy & Concepts A Merchandise Philosophy must reflect Target Market desires, retailer’s institutional type, market Sourcing Tool Box place positioning, defined value chain, supplier Source Company-Owned Outside Supplier capabilities, costs, competitors, product trends. Interacting with active passive Merchandising SourceTransformation of the interface Supplier relationships transactional collaborativebetween Manufacturer and Retailer Stocking Merchandise stock Stock reduced Stock less Geographical market local/national international/global Mode of Buying individual cooperative Organisational Form internal external electronic Technological Form traditional (web -based) Mode of Buying and Organisational Form Individual & Cooperative Buying – A group of Retailers bundle their purchasing volumes to obtain volume discounts from the suppliers. Inside & Outside Buying Org. – A Buyer & Key Account Manager Relationship • KAM for • Buyer for • Buyer for • Buyer for Benetton ABC Benetton ABC Buying Shopper’s Benetton House • Buyer for Benetton • KAM for Stop • KAM for • KAM for Raw Shopper’s Corporate Jabong Material Stop Sales
  18. 18. Logistics – Physical DistributionLogistics Storage Facilities : ware houses, From Linear to Circular Logistics SystemsMix Distribution centers, retail stores. Inventory: Amount of stock to be held for each product Transportation : By ship, truck, rail or plane – from factory to WH/ DC and WH to Retail outlets Recycling/Reuse : Reverse logistics operations i.e. return of packaging Delivery of Online Orders Via E-Fulfillment Centre material and handling products. Consolidation of Supply Chain Logistics Model for Store-Based Picking of Online Orders
  19. 19. Performance Management Parameters Sales objectivesObjectives Objectives Objectives Customer Patronage Customer Traffic Financial Market Customer Loyalty Market Share Competitive Position Retail Image Vendor Relations Targeted returns Profitability Earnings per share Stockholder Dividends Labor Productivity Space Merchandise Social ResponsibilitySocietal Corporate Values
  20. 20. The Retail Life cycle •Introduction •Sales and •Rapid growth •Market •Sales VolumeDevelopment Maturity Growth Introduction Decline of new format Profits are of sales & Saturation decline •Alteration in low , but profit is seen. •Decline in •Profitability at least one of growing. •Existing sales & profit diminish the marketing •High Cost & Comp. expand growth •Either mix. risk their market. •New & repositioning •Diversion •Long term •New entrants Existing the retail is a from the sustainability arrive in the competition solution or strategy mix is not assured same format. gets tougher abandoning •Towards the •Aim is to the existing end , growth prevent format & acceleration decline of introduction begins to business & of a new decline & cost maintain format pressure profitability emerges.