PPT 5-1

5
th
Edition
PPT 5-2
Chapter 5
Retail Marketing Strategy
McGraw-Hill/Irwin
Levy/Weitz: Retailing Management, 5/e Copyright 2004 by The McGraw-Hill Companies, Inc. All rights reserved.
PPT 5-3
Retailing Strategy
Retail Market Strategy
Chapter 5
Financial Strategy
Chapter 6
Retail Locations
Chapters 7,8
Human Resource
Management
Chapter 9
Information and
Distribution
Systems
Chapter 10
Customer
Relationship
Management
Chapter 11
PPT 5-4
Strategy Is Over Used
Retailers Talk About A Lot of Different
Strategies
Sales Strategy
Advertising Strategy
Merchandise Strategy
Location Strategy

Strategy Is Not Just Another Term for
A Management Decision
PPT 5-5
Strategic vs. Tactical Decisions
Strategic Tactical
Direction Implementation
Strategy statement Annual plan
Broad Specific, detailed
Unstructured Structured
Problem solving Problem solving
Creativity Analytical
External focus Internal focus
Irregular Regular
Long-term Short-term
Difficult to evaluate Easy to evaluate
Note: Success Comes for Having a Good Strategy and Executing It Well
PPT 5-6
Elements in Retail Strategy
Target Market
Customer Needs
Retail Format
Method for Satisfying Needs
Bases for Building Sustainable Competitive Advantage
Defending Position Against Competitors
PPT 5-7
Chicos Strategy
Target Market
Woman 35 to 55 Who Want Comfortable, Casual, But
Stylish Apparel
Retail Format
Specialty Apparel Stores in Malls and Strip Centers
Selling Private Label, Coordinated Outfits
Bases for Building Sustainable Competitive Advantage
Unique Merchandise Sized 0,1,2,3
PPT 5-8
Analyzing McDonalds Retail Strategy

What Is McDonalds:
-Target market?

-Retail offering (format)?

-Bases for competitive advantage?

What Threats Might McDonalds Face in the Future?
PPT 5-9
Examples of Retail Strategies
Starbucks
Kohls
Restoration Hardware
Ukrops
What is the target market, retail offering, and
source of competitive advantage for each
retailer?
PPT 5-10
Strategy for Looking for a Job
Determine Your Target
Market
Area of Country
Type of Company
Type of Position
Assess and Exploit Your
Competitive Advantage
Unique Skills,
Experience, Knowledge
PPT 5-11


Why Does a Retailer Need to
Focus on a
Specific Target Market?


Why Not Sell to Everyone?
PPT 5-12
Retail Market Opportunities for
Womens Apparel
PPT 5-13
Methods for Segmenting Markets
Demographics
Geographic
Lifestyle, Psychographics
Buying Situations
Benefits Sought
PPT 5-14
Criteria For Selecting
A Target Market
Attractiveness -- Large,
Growing, Little
Competition More
Profits
Consistent with Your
Competitive
Advantages
PPT 5-15
Can A Retailer Develop a Sustainable
Competitive Advantage by:
Dropping the Price of Your
Merchandise?
Building a Store at the Best Location?
Deciding to Sell Some Hot
Merchandise?
Increasing Your Level of Advertising?
Attracting Better Sales Associates by
Paying Higher Wages?
Providing Better Customer Service?
PPT 5-16
Internal and External Bases for
Competitive Advantage
Retail Firm
Low Cost
Large Size
Efficient
Distribution,
Operations
Unique
Knowledge
Loyal Employees
Sources of
Capital
Vendors,
Suppliers
Customers
PPT 5-17
Sources of Competitive Advantage
More Sustainable
Location
Customer Loyalty
Customer Service
Exclusive Merchandise
Low Cost Supply Chain
Management
Information Systems
Buying Power with Vendors
Committed Employees
Less Sustainable
Better Computers
More Employees
More Merchandise
Greater Assortments
Lower Prices
More Advertising
More Promotions
Cleaner Stores
PPT 5-18
What does loyalty mean?
Is It the same as liking a store?
Going to the store frequently?
Loyalty
PPT 5-19
Approaches for Building
Customer Loyalty
Unique Positioning
Customer Service
Information About Customers (Database Retailing)
Unique Merchandise
Location
PPT 5-20
Example of Positioning
PPT 5-21
Basis of Loyalty, Commitment
Costs
Location
Frequent Shopper Programs
Unique Merchandise
Mental, Emotional Attachment
PPT 5-22
Creating Store Loyalty
Mental and Emotional Attachments
Elements in a Strong Brand
Top of the Mind Awareness
Associations with
Brand/Store Name
Methods Used to Develop a
Strong Brand
Massive Exposure
Symbols to Reinforce
Image
Consistent Positioning
Creating Strong
Associations
Limited Brand Extensions
PPT 5-23
Vendor Relationships
Low Cost - Efficiency Through Coordination
Electronic Data Interchange (EDI)
Collaborative Planning and Forecasting to
Reduce Inventory and Distribution Costs
Exclusive Sale of Desirable Brands
Special Treatment
Early Delivery of New Styles
Shipment of Scare Merchandise
PPT 5-24
High Quality Customer Service
Difficult to Achieve
People Are Not Machines -- Inconsistent
Retail Sales Associates At Bottom of Labor Pool
Goes Beyond Hiring Good People at High
Wages and Training Them -- Organizational
Culture
PPT 5-25
Critical Tradeoff In Developing
Strategic Advantage
Focus Leads to Developing
A Competitive Advantage
But
Focus Reduces Flexibility

Low Cost, Consistent Image, Vendor
Relationships Reduces Flexibility
Similar to Dating and Marriage Commitment
to a Relationship (Vendor) Reduces Flexibility
PPT 5-26
Growth Opportunities
Market Penetration
Market Expansion
Retail Format Development
Diversification
- Related vs. Unrelated
PPT 5-27
Growth Opportunities
PPT 5-28
International Growth Opportunities

Europe
China
Mexico, Latin America
Japan


PPT 5-29
Key to Success in
Global Retailing
Domestic market leadership strong base
Exploiting core competencies competitive
advantage
Low cost - Wal-mart, Carrefour
Fashion Reputation - The Gap, Zara, H&M
Category dominance - Toys R Us, Office Depot
Unique Image, Brand Disney, IKEA, Starbucks
Adaptability
Global Culture
Long-term commitment
PPT 5-30
International Market
Entry Strategies
Direct Investment
Joint Ventures
Strategic Alliances
Franchising
PPT 5-31
Steps in the Strategic
Retail Planning Process
1. Define the business mission
2. Conduct a situation audit:
Market attractiveness analysis
Competitor analysis
Self-analysis

3. Identify strategic opportunities
5. Establish specific objectives and allocate resources
7. Evaluate performance and make adjustments
6. Develop a retail mix to implement strategy
4. Evaluate strategic alternatives
PPT 5-32
Elements in a Market Analysis
MARKET
FACTORS
COMPETITIVE
FACTORS
ENVIRONMENTAL
FACTORS
ANALYSIS OF
STRENGTHS &
WEAKNESSES
Barriers to entry
Bargaining power of
vendors
Competitive rivalry
Threat of superior
new formats
Technology
Economic
Regulatory
Social
Size
Growth
Seasonality
Business cycles
Management
capabilities
Financial resources
Locations
Operations
Merchandise
Store Management
Customer loyalty
PPT 5-33
Questions for
Analyzing the Environment
New developments or changes --
technologies, regulations, social
factors, economic conditions
Likelihood changes will occur
Key factors determining change
Impact of change on retail market
firm, competitors
PPT 5-34
Porters Five Forces
Competitive
Rivalry
Bargaining
Power of
Vendors
Barriers to Entry
Large
Customers
Threat of
Substitution
PPT 5-35
Strengths and Weaknesses Analysis
Management Capability:
Capabilities and experience of top management
Depth of Management--capabilities of middle management
Managements commitment to firm
Financial Resources:
Cash flow from existing business
Ability to raise debt or equity financing
Operations:
Overhead cost structure
Quality of operating systems
Distribution capabilities
Management information systems
Loss prevention systems
Inventory control system
Merchandising Capabilities:
Knowledge and skills of buyers
Relationships with vendors
Capabilities in developing private
capabilities
Store Management Capabilities
Management capabilities
Quality of sales associates
Commitment of sales associates to firm
Locations

Customers
Loyalty of customers
PPT 5-36
Illustration of the
Strategic Retail Planning Process
Kelly Bradford Owner of Gifts To Go
Two Store Chain in Chicago
Target Market Upper Income Men and Women
Looking for Gifts between $50 and $500
Strong Customer Loyalty Based on Knowing
What Customers Want, Providing Good
Customer Service
Low Turnover Among Associates
PPT 5-37
Mission Statement for
Gifts To Go
The mission of Gifts to Go is to be the leading
retailers of higher-priced gifts in the Chicago
and provide a stable income of $100,000 per
year for the owner.
Define growth opportunities will and wont
consider
Indicates objective of company
PPT 5-38
Situation Analysis of
Gifts to Go
Market Factors
Chicago is an attractive market. (+)
Relatively expensive gifts are not affected much
by the economy. (+)
Gifts are highly seasonal. (-)
Competitive Factors
Many in area. Primary department stores, craft
galleries, catalogs, and Internet retailers (-)
Lack of large suppliers, customer (+)
Opportunities for differentiation (+)
Limited competitive rivalry. (+)
PPT 5-39
Situation Analysis of
Gifts to Go (continued)
Environmental Factors
Potential Threat - Development of electronic channel by
traditional bricks and mortar retailers (-)
Strengths and Weaknesses
Management Capability Limited
Financial Resources Good
Operations Poor
Merchandise Capabilities Good
Store Management Capabilities Excellent
Locations Excellent
Customer Loyalty Good
Customer Database - Good

PPT 5-40
Growth Opportunities for
Gifts to Go
Market Penetration
Increase size of present stores
Open additional gifts stores in Chicago area
Market Expansion
Open gift stores outside Chicago area
Sell lower priced gifts in present stores
PPT 5-41
Growth Opportunities for
Gifts to Go (continued)
Retail Format Development
Sell non-gift merchandise to same customers in present or
new stores
Sell similar gifts to same customers through an electronic
channel
Diversification
Manufacture craft gifts
Open an apparel store targeting teenagers
Open a category killer store selling a broader assortment
of gifts
PPT 5-42
Evaluating Growth Opportunities for
Gifts to Go
Market Attractiveness

Market Penetration
Increase size of present stores (low)
Open additional gifts stores in Chicago area (medium)
Market Expansion
Open gift stores outside Chicago area new geographic
segment (medium)
Sell lower priced gifts in present stores new benefit
segment (medium)
PPT 5-43
Evaluating Growth Opportunities for
Gifts to Go (continued)
Market Attractiveness
Retail Format Development
Sell non-gift merchandise to same customers in present or
new stores (High)
Sell similar gifts to same customers through an electronic
channel (High)
Diversification
Manufacture craft gifts (High)
Open an apparel store targeting teenagers (High)
Open a category killer store selling a broader assortment
of gifts (High)

PPT 5-44
Evaluating Growth Opportunities for
Gifts to Go
Competitive Position
Market Penetration
Increase size of present stores (High)
Open additional gifts stores in Chicago area
(Medium)
Market Expansion
Open gift stores outside Chicago area (Low)
Sell lower priced gifts in present stores (low)
PPT 5-45
Evaluating Growth Opportunities for
Gifts to Go (continued)
Competitive Position
Retail Format Development
Sell non-gift merchandise to same customers in present or
new stores (Low)
Sell similar gifts to same customers through an electronic
channel (Medium)
Diversification
Manufacture craft gifts (Low)
Open an apparel store targeting teenagers (Low)
Open a category killer store selling a broader assortment
of gifts (Low)

PPT 5-46
Market Attractiveness/Competitive
Position Matrix
M
a
r
k
e
t

A
t
t
r
a
c
t
i
v
e
n
e
s
s

Competitive Position
High Low Medium
Maximum
investment

Consolidate
position
Invest to
challenge leader


Opportunities
investment

Build strength or
exit
Selective
investment

Build on strengths
Cautious
investment


Harvest
or
divest


Protect
position

Manage for cash
generation
Harvest or
divest


Harvest
or
divest


Aggressive
investment
Cautious
investment
Minimal
investment
PPT 5-47
Steps in Using Market Attractiveness -
Competitive Position Matrix
Define strategic opportunities
Identify market attractiveness and competitive
position factors
Assign weight based on importance of factors
Rate opportunities on market attractiveness
and competitive position
Calculate scores and evaluate opportunities
PPT 5-48
Characteristics of
International Markets
U.S. Germany Japan
Population (Millions) 266 82 126
Business Climate 3 10 24
Logistical Infrastructure Exc. Good Avg.
PPT 5-49
Attractiveness Ratings for
International Growth Opportunities
PPT 5-50
Competitive Position in International
Growth Opportunities
PPT 5-51
Evaluation of International
Growth Opportunities
PPT 5-52
Risk and Rewards in Latin America:
Country Risk Assessment
Source: Coopers & Lybrand Analysis, Global Retailing: Assignment Latin
America, Chain Store Age Executive, April 1996, seciton 2, p. 4.
RISK
M
a
r
k
e
t

S
i
z
e

(
G
D
P

B
i
l
l
i
o
n
s
)

400

350

300

250

200

150

100

50

0

Low Medium High
Short-Term Risk
Long-Term Risk

Chile


Colombia

Peru
Venezuela


Argentina

Mexico

Brazil

PPT 5-53
Evaluation of Retail Market
Opportunities in European Community
High Low
UNITED KINGDOM
NETHERLANDS
O
p
e
n

R
e
s
t
r
i
c
t
e
d

M
A
R
K
E
T
S

SPAIN
ITALY
FRANCE
GERMANY
BELGIUM
PORTUGAL
LUXEMBOURG
IRELAND
GREECE
DENMARK
GROWTH
PPT 5-54
Market Attractiveness Ratings for
Growth Opportunities in Merchandise Categories
Weight
Market size
Growth
Vendor power
Competitive
intensity
Social trends
Score
Juniors
(2)
Mens
(3)
Childrens
(4)
Furniture
(5)
Cons. Elec.
(6)
Soft Home
(7)
Womens(
1)
Factors
20
20
15
20

25
10
9
4
5
4

5
540
7
3
4
3

5
445
5
6
10
10

6
720
4
5
9
2

6
505
5
4
2
5

6
485
6
8
1
2

4
435
7
6
8
10

9
805
PPT 5-55
Competitive Position Ratings
in Merchandise Categories
Weight
Location
Vendor
relationship
Costs
Skills of
buyers
Image with
customer
Score
Juniors
(2)
Mens
(3)
Childrens
(4)
Furniture
(5)
Cons. Elec.
(6)
Soft Home
(7)
Womens
(1)
Factors
20
25

20
10

25

100
9
8

8
6

8

800
9
7

8
7

8

785
8
5

5
5

5

560
6
7

6
9

6

655
4
4

3
5

5

415
2
3

1
4

2

225
4
7

7
8

8

675
PPT 5-56
Evaluation of Merchandise
Category Opportunities
1
,
0
0
0

M
a
r
k
e
t

A
t
t
r
a
c
t
i
v
e
n
e
s
s

High Low Medium
Soft home
Mens clothing
Womens
clothing

Childrens
clothing
Consumer
electronics
1,000 667 333
L
o
w

H
i
g
h

M
e
d
i
u
m

3
3
3

6
6
7




Juniors
clothing


Furniture