You are on page 1of 27

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 markets
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
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
8. The manner in which he firm intends to compete
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 exploited
 The weaknesses need to be worked upon
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
RETAIL STRATEGY
IDENTIFY OPTIONS / STRATEGIC
ALTERNATIVES

The alternatives available to a retailer are :

 Market Penetration
 Market Development
 Retail Format Development
 Diversification
RETAIL STRATEGY
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
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
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
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
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
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
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.
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
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
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
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


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
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


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
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
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
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
Long term commitment towards business
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
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
RETAIL STRATEGY
RETAIL VALUE CHAIN

SUPPORT FUNCTION

SUPPLIER THIRD PARTY RETAIL CUSTOMER CUSTOMER


S LOGISTICS OPERATIONS MGMT S

SYSTEMS