Retailers resort to carpet bombing strategy as a part of aggressive expansion plans. A rapid roll out offers advantages like Building Economies of Scale, Creating Entry barriers, Capturing possibly scarce resources in terms of location, manpower etc and Building brands.
11 strategic planning in retail
Strategic Planning in Retail Keywords: Vision, Mission
Introduction• Retailing Strategy outlines the mission and vision of a retail organization• Sets the tone for creating sustainable competitive advantage through the optimization of available resources• Its more a planning process
Strategic Retail Planning Process• Deciding the store’s philosophy, mission & objectives• Situation Analysis• Formulation of Retail Strategy• Strategy Implementation & Control
Philosophy Speaks About Company• Starts with identification of store’s mission for its existence & its scope• Mission Deals with • Goods & services to be offered • Customer Satisfaction • Sustainable Development • Competitors• Involves the way of Store’s functioning
Objectives• Objectives classified as: • External Store Objective • Internal Store Objective• External objectives define the impact of store on its environment• Internal objectives define how much is expected to be achieved with the available resources
Some of the Missions & Objectives• Brand Philosophy of Croma • If service wasnt important. • If technology wasnt complex. • If variety wasnt confusing. • We would have no reason to be in business. • We help you buy• “Future Group shall deliver Everything, Everywhere, Everytime for Every Indian Consumer in the most profitable manner”• At Westside our mission is to be the most preferred and consistently profitable lifestyle retailer
External Analysis• Economic environment of retailing• Political environment of retailing• Legal environment of retailing• Socio-cultural environment of retailing• Technological environment of retailing• International environment of retailing
Internal Analysis• Objective is to identify the store’s capabilities & weaknesses• Resources grouped into: • Human Resources • Financial Resources • Physical Resources • Intangible Resources
Human Resources• Sufficient Strength of employees at various levels• Trained and capable employees to perform assigned tasks• Loyalty of employees• Punctuality & regularity• Competency Mapping for multitask performance
Financial Resources• Total cash flow from store’s present activities• Ability of the store to collect money during requirement / emergency• Effective and stable financial policies• Ratio between fixed and current assets• Contingency plans in case of negative cash flows
Physical Resources• Contribution of fixed assets• Position of abandoned / unused assets• Effective & updated Store’s information system
Intangible Resources• Present capability of company’s management• Effective R&D cell• Competitor’s Intelligence System• Effectiveness of store’s loyalty programmes• Capability of store manager• Loyalty of customers towards store products
Porter’s Five Forces Suppliers: • Single Brand • Multi Brand • Niche Brands • Exclusive Products • Suppliers’ dependence on Volumes Substitutes:Threats: Competition • Buyer Willingness• Technology • Organized Vs. Unorganized • Opportunity Gain / Loss• Economies of Scale • Diversity of competitors • Assortments of• Absolute cost advantage • Cost Conditions Merchandise• Capital Requirement • Exit Barriers • Rising Consumerism• Government & Legal barriers • Low Switching cost Buyers: • Organized vs non-organized Retail • Buyers’ Information • Cost of Product • Product Assortments differentiation • Buyer’s power to Negotiate • Switching cost of Buyers
FORMULATION OF RETAIL STRATEGY(IDENTIFYING OPTIONS / STRATEGICALTERNATIVES
The Igor Ansoff Matrix Existing New Market Penetration Market Development / ExpansionExisting • Increase the Basket Size • New Market Segments with • Increase the Customer RETAIL FORMATS existing formats • Increase the Purchase • New Customer Base Frequency Retail Format Development DiversificationNew • New format with existing • New Retail formats directed at customers new market segments MARKET SEGMENTS
Market Penetration• Strategy adopted by firm seeking growth with existing products in the existing market segment• Customers can be increased by: • Adding new stores • Modifying product mix• Cross-selling by salesperson can increase the basket size. (Shirts with trousers, Pizza with Pasta)• Buying frequency can be increased through multiple offers and freebees
Market Expansion / Development• Market Expansion can be done through reach outs to new market segments or completely changing customer base.• It can be done by: • Tapping new geographical markets • Introducing Products to the range that will appeal to wider customer base• Addition of new stores in new cities or new areas in the city• Introduction of merchandizes like Pharmacy, Mobile etc. will appeal to a totally new set of customers
Retail Format Development• Carries more risk as the format may fail• Normally used when the retailer wants to introduce new product to existing customers• E.g. CCD Express, Smaller retail formats of Subway or Dominos or Crosswords corner etc.
Diversification• Develop new products for new markets• E.g. ITCs foray from tobacco based products to introduction of FMCG like foods and apparels (Wills Lifestyle). Latest additions are Greeting Cards.• Expanding across countries is also diversification.
Developing the Strategic Plan• How to Target Customers • Look at the entire market from both size and segments • Identifying a smaller segment that appeals the retailer • Test marketing • Final identification of the target customers• Retailer should evaluate: • Growth Potential of each target segment • Investment needed to compete • SWOT of the competition
Developing the Strategic Plan• Retailer must ensure the following in order to be successful in segmenting the market: – Measurable : Is the segment measurable and identifiable? – Accessible : Desired response of the focus marketing – Economically Viable : Whether enough space is there in the segment to make the entry profitable – Stable : Are customer characteristics stable indicators of the market potential
Implementing the Strategic Plan• Merchandise must be single minded• Displays must appeal to target market• Advertising must talk to it• Personnel must have empathy for it• Customer service should be designed in accordance with target market• All implementations should follow-up with controls like effectiveness of the long term competitive strategy.
International Trade• Rise because of two factors: • Removal of trade barriers between countries • Rise in consumerism• Retailers start as local or regional players• Improve operational efficiencies and then become national players• Reasons for entering international market • Saturation in domestic market • Reach Dominance in domestic market• Consumer behaviour is instrumental in shaping the business of international retailer
Methods of Entering International Market• Export• Franchising / Licensing• Mergers and Acquisitions• Joint Ventures• Organic Growth
Ethics in Retailing• Customers • Recognize rights of the customers regarding safety, information availability, freedom to exercise choice, delivery of services and grievances • No regulations available in India • Issues pertaining to invasion of privacy through electronic media (Tele-calling, etc.)• Community and the General Public • Avoidance of hoarding and black marketing • Contribution to charity • Environmental sensitivity • Avoid selling of socially taboo products like tobacco
Ethics in Retailing• Employees • Fair employment practices compliant with employment legislation • Equal Opportunities employment • Addressing Employees’ grievances • Issues related to Sexual harrassment at work places • More responsibility towards women employees • Addressing Employee dishonesty • Trusting his employees• Business Partners (Suppliers, Logistics Organizations, Banks, Other Professional Organizations) • Conducting Business in transparent manner • Delivering value to all stakeholders
Ethics in Retailing• Shareholders • Highest standards of corporate governance • Recall programmes for building trust of the customers • Issues like Child Labour