This document discusses retail strategy and the strategic planning process for retailers. It defines a retail strategy as identifying the target market, retail format, and bases for competitive advantage. The strategic planning process involves defining the business mission, conducting a situation audit of the market and competitors, identifying strategic opportunities like market penetration or diversification, evaluating opportunities, setting objectives, developing a retail mix, and evaluating performance. Building customer loyalty, having a strong location, effective human resource management, and offering unique products or services can provide sustainable competitive advantages. The document outlines the steps retailers follow to develop and implement effective long-term strategies.

1. WHAT IS A RETAIL
STRATEGY?
Strategy
- is frequently use in
retailing.
- is used to commonly it
appears that all retailing
decisions are strategic
decisions.

2. Retail strategy
is a statement identifying the retailer’s
target market’s, 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.
Target market
is the market segment toward which the
retailer plans to focus its resources and retail
mix.

3. Retail format
-suggests the type of retail mix (nature
of merchandise and service offered, pricing
policy, advertising and promotion program,
approach to store design and visual
merchandising, typical location.
Sustainable competitive
advantage
is an advantage over the
competition that is not
easily copied and thus can
be maintained over a long
period of time.

4. TARGET MARKET AND RETAIL
FORMAT
Retailing concept is a
management
orientation that
focuses a retailer on
determining the needs
of its target market
and satisfying those
needs more effectively
and efficiently than its
competitors do.

5. Retail market is a group of consumers with
similar needs ( a market segment ) that is serviced
by a group of rtailers using a similar retail format
to satisfy them.
Retail market

6. Retail markets for women's apparel
Fashion segments
conservative Traditional Fashion-forward
Specialty
store
Department
store
Discount
store
Off-price
store
Catalog
Charming
shop
The Gap
The Limited
Talbots
Wet seal
Urban Outfitter
H&M
JCPenney
Khol’s
Macy’s
Saks 5th
ave
Bloomingdale’s
Neiman Marcus
Family dollar
Dollar General
Kmart
Wal-Mart Target
Rose stores T.J max Steinmart
Bluefly.com
Fingerhut JCPenney Lands’End Neiman Marcus
Bloomingdale’s
Anthropologie
RetailFormats

7. BUILDING A SUSTAINABLE
COMPETITIVE ADVANTAGE
 The final element in a
retail strategy is the
retailer’s approach to
building a sustainable
competitive advantage.
Any business activity
that a retailer engages in
can be the basis for a
competitive advantage,
but some advantages are
sustainable over a long
period of time.

8. Seven important opportunities for retailers
to develop sustainable competitive
advantage
 Customer Loyalty
 Location
 Human resource management
 Distribution and information systems
 Unique merchandise
 Vendor relations
 Customer Service

9. Customer Loyalty
 Means that customers are committed to buying
merchandise and services from a particular
retailer.
 Other bases for sustainable competitive
advantage discussed in this section help attract
and maintain loyal customers.
 For instance, having dedicated employees,
unique merchandise, and superior customer
service all help solidify a loyal customer base.

10. o Customer Loyalty
 Is more than simply
liking one retailer over
another

11. Retail Branding
 Stores use brands to
build loyalty in much
the same way that
manufacturers do

12.  Positioning
 A retailer builds customer loyalty by developing
a clear, distinctive image of its retail offering
and consistently reinforcing that image through
its merchandise and service.
 Involves the design and implementation of a
retail mix to create an image of the retailer in
the customer’s mind relative to its competitors.

13.  Loyalty Program
 Are part of an overall customer relationship
management program (CRM).
 Customer loyalty programs work hand-in-hand
with CRM. Members of loyalty programs are
identified when they buy because they use
some type of loyalty card.
 Their purchase information then is stored n a
huge database known as data warehouse.

14. Loyalty Program
 From this data
warehouse, analysts
determine what types
of merchandise and
services certain
groups of customers
are buying.

15.  Location
 “what are the 3
important things in
retailing? Is “Location,
location, location.”
 Location is the critical
factor in consumers’
selection of a store.
 A competitive advantage
based on location is
sustainable because it is
not easily duplicated.

16. Human Resource Management
 Retailing is a labor-
intensive business, in
which employees
play a major role in
providing services for
customers and
building customer
loyalty.

17. Distribution and information systems
o All retailers strive to reduce operating costs-the
costs associated with running the business-and
make sure the merchandise that customers
want is available.
o Retailers achieve these efficiencies by
developing sophisticated distribution and
information systems and sharing information
with vendors.

18. Unique merchandise
 It is difficult for retailers to develop a
competitive advantage through merchandise
because most competitors can purchase and
sell the same popular national brands.
 Many retailers realize a sustainable competitive
advantage by developing Private Label Brands
(store brands), which are products developed
and marketed by a retailer and available only
from that retailer.

19. Vendor Relations
 By developing strong
relations with vendors,
retailers may gain exclusive
rights to sell merchandise in a
specific region, obtain special
terms of purchase that are not
available to competitors who
lack such relationships, or
receive popular merchandise
in short supply.

20.  Customer Service
 Retailers also can build a sustainable
competitive advantage by offering excellent
customer service. Offering good service
consistently is difficult because customer
service is provided by retail employees, and
humans are less consistent than machines.
 The quality of service can vary from person
to person and from day to day.

21. Customer Service
 Retailers that offer
good customer
service instill its
importance in their
employees over a
long period of time
through coaching
and training.

22. Multiple Sources of Advantage
To build a sustainable competitive
advantage, retailers typically don’t rely on
a single approach, such as low cost of
excellent service.
Instead, they need multiple approaches
to build as high a wall around their
position as possible.

23. Growth Strategies
Four types of growth opportunities that
retailers may pursue:
1. Market Penetration
2. Market Expansion
3. Retail Format Development
4. Diversification

24. 1. Market Penetration
A market penetration growth opportunity
involves realizing growth by directing
efforts toward existing customers using
the retailer’s present retailing format.
Market penetration approaches include
opening more stores in the target market
keeping existing stores open for longer
hours.

25. Market Penetration
 Other approaches involve
displaying merchandise to
increase impulse purchases
and training sales people.
 Cross-selling means that
sale associates in one
department attempt to sell
complementary
merchandise from other
departments to their
customer’s.
Market Penetration

26. 2. Market Expansion
A market
expansion growth
opportunity
involves using the
existing retail
format in new
market segments.

27. 3. Retail Format Development
 A retail format
development growth
opportunity is an
opportunity in which
a retailer develops a
new retail format-a
format with a
different retail mix-
for the same target
market.

28. 4. Diversification
 A diversification growth opportunity is one
in which a retailer introduces a new retail
format directed toward a market segment
that’s not currently served by the retailer.
 Diversification opportunities are either
related or unrelated

29. Related versus Unrelated
Diversification
 In a related diversification growth opportunity,
retailer’s present target market or retail format
shares something in common with the new
opportunity.
 Unrelated diversification lacks any
commonality between the present business and
the new business.

30. Vertical Integration
 Is diversification by retailers into wholesaling
or manufacturing.
 In addition, retailers and manufacturers have
different customers; the immediate customers
for a manufacturer’s merchandise are retailers,
whereas a retailer’s customers are consumers.

31. Strategic Opportunities and Competitive
Advantage
 Typically, retailers have
the greatest competitive
advantage when they
engage in opportunities
that are similar to their
present retail strategy.

32. Global Growth Opportunities
International expansion is a market
expansion growth opportunity that many
retailers find attractive. But international
expansion can be risky because retailers
must deal with different government
regulations, cultural traditions, supply
chain considerations, and languages.

33. Key to success
4 characteristics of retailers that have
successfully exploited international
growth opportunities:
a. A global sustainable competitive advantage
b. Adaptability
c. Global culture
d. Financial resources

34. a. A global sustainable competitive
advantage
 Entry into non-domestic markets is most
successful when the expansion opportunity
is consistent with the retailer’s core bases of
competitive advantage.
Core Advantage Global Retailer Example
Low-cost, efficient operation Wal-Mart, Carrefour
Strong private brands IKEA, Starbucks
Fashion reputation The Gap, Zara, H&M
Category dominance Office Depot, Toys “R” Us

35. b. Adaptability
 While successful
global retailers build
on their core
competencies, they
also recognize
cultural differences
and adapt their core
strategy to the needs
of local markets.

36. C. Global culture
 To be global,
retailers must think
globally. It is not
sufficient to
transplant a home-
country culture and
infrastructure into
another country.

37. Financial Resources
 Expansion into
international markets
requires a long term
commitment and
considerable upfront
planning. Retailers find
it very difficult to
generate short-term
profits when they make
the transition to global
retailing.

38. Entry Strategies
 4 approaches that retailers can take when
entering nondomestic markets are:
1. Direct investment
2. Joint Venture
3. Strategic alliance
4. Franchising

39. 1. Direct investment
 Involves a retail firm
investing in and owning
a division or subsidiary
that operates in a foreign
country. This entry
strategy requires the
highest level of
investment and exposes
the retailer to significant
risks, but is also has the
highest potential returns.

40. 2. Joint Venture
 Is formed when the
entering retailer
pools its resources
with a local retailer to
form a new company
in which ownership,
control, and profits
are shared.

41. 3. Strategic alliance
is a collaborate
relationship
between
independent
firms.

42. 4. Franchising
 Offers the lowest risk
and requires the least
investment. However,
the entrant has limited
control over the retail
operations in the foreign
country, potential profit
is reduced, and the risk
of assisting in the
creation of a local
domestic competitor is
increased.

43. The Strategic Retail Planning Process
 Entails the set of steps a retailer goes through
to develop a strategic retail plan. It describes
how retailers select target market segments,
determine the appropriate retail format, and
build sustainable competitive advantages.
 The planning process can be used to formulate
strategic plans at different levels within a retail
corporation.

44. Stages in the strategic retail planning
process
Exhibit 5-5
1. Define the business mission
2. Conduct a situation audit:
Market attractiveness analysis
Competitor analysis
Self-analysis
3. Identify strategic opportunities
4. Evaluate strategic alternatives
5. Establish specific resources
6. Develop a retail mix to implement strategy
7. Evaluate performance and make adjustments

45. 1. Define the business mission
 The first step in the strategic retail planning
process is to define the business mission.
 The mission statement is a broad description of
a retailers objectives and the scope of activities
it plans to undertake.
 The mission statement defines the general
nature of the target segments in retail formats
on which the firm will focus.

46. business mission

47. 2. Conduct a situation audit
 After developing a mission statement and
setting objectives, the next step in the strategic
planning process is to conduct a situation
audit, an analysis of the opportunities and
threats in retail environment and the strengths
and weaknesses of the retail business relative to
its competitors.

48. Market Factors
 Some critical factors related to consumers and their
buying patterns and the target market size and growth,
sales cyclicity, and seasonality. Market size, typically
measured in retail sales dollars, is important because it
indicates a retailer’s opportunity to generate revenues
to cover its investment.

49. Competitive Factors
 The nature of the competition in retail
market is affective by barriers to entry, the
bargaining power or vendors, and
competitive rivalry.
 Barriers to entry institute condition in a
retail market that make it difficult for other
firms to enter the market, such as scale
economies, customer loyalty, and the
availability of great locations.

50. Competitive Factors
Scale economies are cost
advantages due to a retailer’s
size. Markets dominated by
large competitors with scale
economies are typically
unattractive.
Bargaining power of vendors
markets are less attractive
when only a few vendors
control the merchandise sold
in it.

51. Environmental Factors
 can affect market attractiveness span
technological, economic, regulatory, and social
changes.
 When a retail market is going through
significant changes in technology, existing
competitors are vulnerable to new entrants that
are skilled at using the new technology.

52. Strengths and weaknesses analysis
 The most critical aspect of the situation audit is for a
retailer to determine its unique capabilities in terms of
each strengths and weaknesses relative to the
competition.
 Indicates how will the business can seize opportunities
and avoid harm and threats in the environment.

53. 3. Identify Strategic Opportunities
After completing the situation audit,
the next step is to identify
opportunities for increasing retail
sales. Kelly Bradford presently
competes in gift retailing using a
specialty store format.

54. Identify Strategic Opportunities
Market
penetration
1. Increase size of present stores and amount of
merchandize in stores
2. Open additional gift stores in Chicago area
Market
expansion
1. Open gift stores outside the Chicago area (new
geographic segment).
2. Sell lower-priced gifts in present stores
Format
Development
1. Sell apparel and other nongift merchandise to
same customers in same or new stores.
2. Sell similar gift merchandise to same market
segment using the internet.
Diversification 1. Manufacture craft gifts.
2. Open apparel stores targeted toward teenagers.
3. Open a category specialist selling low-priced gifts

55. 4. Evaluate Strategic Opportunities
 The 4th
step in the strategic planning progress is
to evaluate opportunities that have been
identified in the situation audit.
 The evaluation determines the retailer’s
potential to establish a sustainable competitive
advantage and reap long-term profits from the
opportunities being evaluated.

56. 5. Establish specific objective and allocate
resources
 After evaluating the strategic investment
opportunities, the next step in the strategic
planning process is to establish a specific
objective for each opportunity.
 The retailer’s overall objective is included in
the mission statement; the specific objectives
are goals against which progress toward the
over all objective can be measured.

57. 6. Develop a retail mix to implement
Strategy
 The 6th
step in the planning process is to
develop a retail mix for each opportunity in
which an investment will be made and control
and evaluate performance.

58. 7. Evaluate Performance and Make
Adjustments
 The final step in the planning process is to
evaluate the results of the strategy and
implementation program.
 If the retailers is meeting or exceeding its
objectives, changes aren’t needed. But if the
retailer fails to meet its objectives, reanalysis is
required.

59. Thank you..