Retail strategy

1. RETAIL STRATEGY
RETAIL STRATEGY
 A clear and definite plan outlined by the
retailer to tap the market
 A plan to build a long-term relationship with
the consumers
 Process of strategy formulation in retail is the
same as that for any other industry
 It starts with the retailer defining or stating the
mission for the organization
 The mission is at the core of the existence of
the retailer
 Other aspects of the strategy may change
over a period of time or vary for different

2. RETAIL STRATEGY
2. Establish Mission
3. Analyze Situation Objectives
4. Identify Options
5. Set Objectives
6. Obtain & Allocate Resources
7. Develop Implementation Plan
8. Monitor Progress & Control

3. RETAIL STRATEGY
DEFINE MSSION OR PURPOSE
 Mission statement is a long term purpose of
the organization
 It describes what the retailer wishes to
accomplish in the markets in which he
chooses to operate
 Retailers mission statement would normally
highlight the following
5. The products and services that will be
offered
6. The customers who will be served
7. The geographic areas that the organization
chooses to operate in

4. RETAIL STRATEGY
CONDUCT A SITUATION ANALYSIS
 Once the retail mission is defined, the retail
organization needs to look inwards
 Understand what its strengths and
weaknesses are
 Look outwards to analyze its opportunities
and threats
 Situation analysis helps the retailer
determine his position and his strengths and
weaknesses
 Helps formulate a clear picture of the
advantages and opportunities which can be

5. RETAIL STRATEGY
/IDENTIFY OPTIONS STRATEGIC ALTERNATIVES
 After determining the strengths and
weaknesses vis-à-vis he environment
retailer needs to consider various
alternatives available to tap a particular
market
 Igor Ansoff presented a matrix which looked
at growth opportunities
 He focused on firm’s present and potential
products in the existing and new markets
 Ansoff’s matrix also helps to understand
the options available to a retailer

6. RETAIL STRATEGY
/IDENTIFY OPTIONS STRATEGIC ALTERNATIVES
The alternatives available to a retailer are :
 Market Penetration
 Market Development
 Retail Format Development
 Diversification

7. RETAIL STRATEGY

8. RETAIL STRATEGY
MARKET PENETRATION
 Strategy may focus either on:
- Increasing the number of customers
- Increasing the quantity purchased by
customers(basket
size)
- Increasing the frequency of purchase
 Increasing the number of customers can be
achieved by adding new stores and by
modifying the product mix
 Another approach is to encourage salespeople
to cross sell
 Market penetration strategy is the least risky
one, since it leverages many of the firm’s
resources and capabilities
 However, market penetration has limits

9. RETAIL STRATEGY
MARKET EXPANSION / DEVELOPMENT
When a retailer is said to reach out to new market segments or
completely changes his customer base
 This strategy involves :
- Tapping new geographical markets
- Introducing new products to the existing range that appeal to a
wider audience
 Expansion by adding new retail stores to existing network is an
example of geographical expansion
 Introducing a pharmacy in a supermarket (eg. The medicine Shoppe at
the Haiko Supermarket in Mumbai) is an example of a retailer
introducing new products, appealing o a different audience
 Another example is McDonald’s who introduced ice creams for Rs.7
 This not only created add on sales, but also brought in customers who
had the perception that McDonald’s is an expensive fast food restaurant

10. RETAIL STRATEGY
RETAIL FORMAT DEVELOPMENT
When a retailer is said to introduce new retail format to customers
 Example fast food retailers like McDonald’s and Subway offer
limited menus inside large department stores
 Another example is bookstore chain Crosswords, opening smaller
format stores by the name Crossword Corner at Shopper’s Stop
 Strategy may be appropriate if the retailer’s strengths are related
to specific customers, rather than to specific products
 In this situation retailer can leverage its strengths by developing a
new product targeted to his existing customers

11. RETAIL STRATEGY
SET OBJECTIVES
 Translation of mission statement into operational terms
 Indicate
5. Results to be achieved
6. Give direction to and set standards for the measurement of performance
7. Management sets both long term and short term objectives
8. One or two year time frames for achieving specific targets are short term objectives
9. Long term objectives are less specific and reflect the strategic dimension of the firm
Two important focus areas of retailers - Market Performance
- Financial Performance
Objectives are set keeping these focus areas in mind
 Sales volume targets
 Market hare targets
 Profitability targets
 Liquidity targets
 Returns on investment targets

12. RETAIL STRATEGY
OBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE
 Resources needed by a retailer - Human Resources
- Financial Resources
1. Human Resource
 HR plan must be consistent with overall strategy of the organization
 HR management focuses on issues such as recruiting, selecting, training,
compensating, and motivating personnel
 These activities must be managed effectively and efficiently
2. Financial Resources
 Takes care of the monetary aspects of business
 Shop rent, salaries and payments for merchandise

13. RETAIL STRATEGY
DEVELOP THE STRATEGIC PLAN
At this stage strategy is determined through which retailer will achieve objectives
5. The retailer determines and defines his target market
6. The retailer finalizes the retail mix that will serve the audience
 Target Market – that segment of consumer market that the retail orgn.decides to serve
 No definite process of deciding and selecting the target market
 Most retailers look at the entire market in terms of both size and consumer segments to
which it might appeal
 From these segments he identifies smaller number of segments that appear promising
 These become possible targets
 Variables like growth potential, investment needed to compete, the strength of competition, etc are
evaluated.
 This enables the retailer to arrive at the best alternative that is most compatible with the
organizations resources and skills

14. RETAIL STRATEGY
DEVELOP THE STRATEGIC PLAN
 Considerations for successful market segmentation
5. Measurable : The segment should be measurable and identifiable?
7. Accessible : Focusing market marketing efforts on a particular market
segment should have a positive impact towards eliciting the desired
response
9. Economically viable : The expense and efforts of focusing the
marketing efforts in potential segments should be justified.
11. Stable : The consumer characteristics are indicators of market potential.
Hence stable indicators to be considered.

15. RETAIL STRATEGY
DEVELOP THE STRATEGIC PLAN
After choosing the target market the retail mix needs to be developed
This process involves
 the determination of the merchandise mix
 the pricing policy
 types of location the retail stores would be located at -
 services to be offered -
 communication platform that would be adopted by the retailer
Next is the formulation of positioning strategy. This refers to
 the image the retailer wants the customers to have in their minds about
 the products and services

16. RETAIL STRATEGY
IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL
 Implementation is the key to success of any strategy
 Effective implementation of the retailers desired positioning
requires
6. Every aspect of stores to be focused on the target market
7. Merchandising must be single-minded
8. Displays must appeal to target market
9. Advertising must talk to the target market
10. Personnel must have empathy for the target market
11. Customer service must be designed with the target customer in
mind

17. RETAIL STRATEGY
IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL
After implementation the management needs feedback and should focus on
5. Performance
6. Effectiveness of long term strategy by periodic evaluation
7. Ensuring that the plans do not degenerate into fragmented ad-hoc efforts
8. Ensuring that all efforts are in harmony with he overall competitive strategy of
business
Management can also use the process to decide on
12. Any future policy change
13. Modifications if any, in the plan, to ensure that the combination of the retailing
mix variables support the firms strategy

18. RETAIL STRATEGY
INTERNATIONAL EXPANSION – A GROWTH STRATEGY
Factors facilitating the rise of international retail trade
6. Removal of trade barriers between countries
8. The rise of consumerism

19. RETAIL STRATEGY
Concept of international retailing (RETAIL INTERNATIONALIZATION)
 More than just replicating retail stores in other countries and markets
 Defined as “The management of retail operations in markets which are different from
each other in their regulation, economic development, social conditions, cultural
environment and retail structure.”
 Typically retailers start as regional players
 They develop operational efficiencies as they expand in size
 Growth in size gives them financial resources
 International expansion happens when retailer reaches a dominance in domestic market
 Saturation in domestic market is also a reason for retailer to look at international
expansion

20. RETAIL STRATEGY
INTERNATIONAL EXPANSION – A GROWTH STRATEGY
Decision on entering a new market
 Confidence of having a sound understanding of that market
 Understanding of the cultural and buying habits of the local
population
 Ability to use technology, systems and processes available in that
market
 Understanding of the expected growth rates, density of
population, income levels

21. RETAIL STRATEGY
METHODS OF ENTERING A NEW MARKET
 Export
5. Retailer having a distinct product / own brand that may be attractive
 Franchising / licensing
9. Granting permission/license to a company in target country to use the property
of the licensor
11. Property is intangible such as trade marks, patents and production techniques
13. Licensee pays a fee in exchange for the rights to use the intangible property
15. For franchising to be successful it is necessary for careful selection of partners
17. Partners should share the same understanding of the parent organizations vision
mission, goals and the marketing plans and strategies

22. RETAIL STRATEGY
METHODS OF ENTERING A NEW MARKET
 Joint Venture
Strategic partnership between a local retailer and a international / foreign player
Benefits / Advantages
International player learns from expertise of domestic partner
Domestic retailer learns from foreign player the international practices
 Key issues
Ownership, control, length of agreement, pricing, technology transfer, government
regulations.
Many joint ventures involve one local partner and one foreign player
At times for convenience two retailers can also form a JV company to enter new market

23. RETAIL STRATEGY
METHODS OF ENTERING A NEW MARKET
 Acquisitions
One organization acquiring another organization
Easy way of entering non domestic market without any complications
Considerations : management structure
new operating culture
financial burden
Example : Shopper’s stop acquiring bookstore chain Crossword,
Wal-mart acquiring ASDA
 Mergers
Imply : Coming together of two organizations to form a combined entity
Example : Retail giants Carrefour and Promodes in Europe

24. RETAIL STRATEGY
METHODS OF ENTERING A NEW MARKET
 Organic growth
Replication of retail format in a new non domestic
market within the
regulatory framework of the new market.
It gives retailer the kind of control that he requires
It also requires a great deal of investment
 Factors affecting decisions on entry in particular
markets
Position in the domestic market : Expertise,
leader, new entrant
Access to global systems
Ability to adapt to requirements of global markets

25. RETAIL STRATEGY
RETAIL VALUE CHAIN
Retail Field : Very challenging and dynamic
Growth : Retailer grows from a single shop to a chain of retail stores.
From a local to a regional and national presence.
Strategy and planning becomes very important
Retailer should have a clear focus and strategy
Retail Strategy Models : Retailer can either become a pentagon player or a triangle
player
 Pentagon : The retailer’s focus on
- Product Image
- Place
- Price / Value
- People
- Communications

26. RETAIL STRATEGY
RETAIL VALUE CHAIN
 Triangle : The retailer’s focus on
- Systems
- Logistics
- Suppliers
 Above approaches to developing strategies are perhaps appropriate in mature
marketplace
 At present , retail in India is oriented towards the mass market
 As such the retailer must consider all aspects of strategy development, such as product ,
price, place, communication and the supply chain
 There is an absence of a robust infrastructure and inadequate capabilities of the service
providers in India
 Thus the retailer must necessarily invest in creating the appropriate support structure for
its operations

27. RETAIL STRATEGY
RETAIL VALUE CHAIN
SUPPORT FUNCTION
SUPPLIE
RS
THIRD PARTY
LOGISTICS
RETAIL
OPERATIONS
CUSTOMER
MGMT
CUSTOME
RS
SYSTEMS