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Retail Positioning: Strategy in Detail

Retail Positioning: Strategy in Detail

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Published by Manoj Nakra
Retail, Positioning, Strategy Execution
Retail, Positioning, Strategy Execution

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Published by: Manoj Nakra on Jul 18, 2010
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07/25/2013

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Retailer Positioning: Strategy is in Detail
Positioning in retail is the basis of how one store competes with another retail store; itstarts by defining target consumers in terms of ‘distinctive’ needs, and ends when‘unique’ set of executable action steps are identified to achieve an ‘identity’ in the mindsof customers, an identity that customers’ experience in the store and distinguish in theirminds. A retail identity could be like Wal-Mart’s “Every Day Low Price” (note not thelowest price) or Whole Food Supermarket’s (the fastest growing grocer in USA)“World’s Leading Natural and Organic Foods Supermarket.” I am a believer thatpositioning is best based upon ‘value provided to customers’ and not on ‘price.’ Price is apositioning option only and only if a retailer has an innovative approach to being thelowest cost operator. Wal-Mart’s pricing is based upon the competitive landscape. Whereit has head-to-head competition in geographic proximity, it avoids price discountingversus competition, a potentially mutually destructive strategy. But where it has lowcompetition, pricing often is above average. And where it has somewhat distantcompetition, it discounts to attract consumers within the proximate geography. Note,however, that it defines competition very carefully – K-Mart or Target. Wal-Mart isalways cheaper than the traditional supermarkets, an option it can exercise based upon itslow-cost structure.Retailing looks very different when viewed from the perspective of a manufacturer or aconsumer. For manufacturers retailers are a link in the distribution chain that takes goodsto consumers; channel members who ‘need’ to stock ‘what manufacturers’ make,’ andwho are ‘managed’ using economic incentives like margins, incentives, and promotions.Consumers’ usually don’t articulate what they want from retailers but vote with their feetthrough store loyalty, making some stores more successful than others. Retailers,‘sandwiched’ between consumers and manufacturers, continuously strive to ensure thatthe goods they stock are liked by their customers, and successful retailers are more adeptat selecting ‘correct’ stocks. A retailer adds economic value by matching diversity of consumer demand with appropriately priced and quality suppliers. Retailers are agents of consumers’ whom they serve by first understanding their needs, and then searching forproducts to stock. Not only are consumer needs are very diverse, but consumers’ exhibitdifferent purchase behaviors even for purchasing the same product; a consumer buys milk from a hypermarket, a convenience store, and also a neighborhood grocery. It is thisdiversity that gives an opportunity to retailers to create different retail environments toserve different consumer needs; retail formats that range from hypermarkets tospecialized niche stores like exclusive shirt or tie or socks shops or even coffee cafes allserving a single product, albeit in different manifestations.
 Achieving retail differentiation
Creating a distinctive store has two goals – one, to attract customers to visit the store, andsecond, to create an image and experience of the store visit in the minds of customers sothat the memory of the store (and the products) is aroused when the need for similarproducts is aroused. Traditional retailing talks of product assortment and location as fewof the means of differentiation amongst stores. In an over-retailed environment the role of 
 
distinctive product assortments and location as a differentiator has weakened; products(and brands) can be rapidly copied (e.g. Zara), and are easily available on the net (e.g.eBay, Amazon). Newer choices of achieving retail differentiation have emerged basedupon a deeper understanding of consumer behavior; how consumers shop, understand andevaluate products on display, and make product / brand choices. Each step of consumerevaluation and choice-making offers an opportunity to retailers to ‘influence’ purchasebehavior. Research suggests that product (and often brand) choice is ‘constructed’ in thestore, rather than retrieved from memory based upon prior experience and / or a priorievaluation of alternatives. A critical first step in developing a differentiating plan is tounderstand what happens when a customer interacts with the product assortment. Threepotential levels of influence exist - assortment width / diversity / quality / price,assortment presentation (static - as visual merchandising, and dynamic - as staff-customerinteractions) impacting how consumers’ experience products in the store, and marketingmix variables like price and promotions (see inset). This emphasizes the need of assortment ‘management’ as different from assortment ‘planning.’ Assortmentmanagement is based upon planning assortments recognizing that consumers usuallymake product choice decisions on the shop floor, and the behavior and choice processthey manifest lends itself to influence.Presented hereunder are a series of steps that guide the creation of a differentiation plan.The steps are based upon a differentiation of products into two categories – functional(products that fulfill a functional need e.g. kitchen tools, appliances, luggage) andsymbolic (products that consumers use to express themselves in their social circle e.g.fashion clothing, Cartier watch, Tiffany jewelry, Prada handbag). To locate a position onthe quadrant reflect upon the consumer behavior of the targeted consumer - what docustomers want when they buy the product, how do they shop for it, and what do theyexpect from the product (and store) in terms of added features, benefits, and services. Aconsumer buying Giordano fashion is purchasing a basic functional product, and does notuse the brand to express a lifestyle statement, whereas a consumer purchasing a Guccihandbag is willing to pay a premium.
Step 1:
In table 1 identify which quadrant you are in (for an existing retailer) or desire to be (for anew retailer searching for market space). Examples of the different products that lie in thedifferent quadrants are identified. Key thoughts to be borne in mind – high marginbusinesses are an exception and not the rule, customers concern for value doesn’t implythat customers will not be willing to pay a higher price for quality, and opportunities existin creating value through services in both low-margin and high margin businesses.
Step 2:
If we have a idea about the quadrant we wish to be in, we can use table 2 to detail howretail differentiation will be implemented in practice using – differentiation at the productlevel, in-store (and post purchase) services, lifestyle and price strategies. The basis of this
 
analysis will be an understanding consumers based upon research (or intuitive insight)and analysis of competition.
Step 3:
If the quadrant and positioning options does not conform to being the best (cost-effective)option, alternatives need to be developed by changing position or fine-tuningimplementation options. Table 3 identifies examples of retailers and their location in thequadrants.
Step 4:
Retail is detail, and stage 4 requires detailing the implementation of the positioningstrategy by developing an assortment plan and an assortment management strategy.

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