Subject: Retail Management

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

RETAIL STRATEGY
DEFINE MISSION 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 1. The products and services that will be offered 2. The customers who will be served 3. The geographic areas that the organization chooses to operate in 4. The manner in which he firm intends to compete

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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 This forms the basis or the core element of any strategy

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IDENTIFY OPTIONS / STRATEGIC ALTERNATIVES
After determining the strengths and weaknesses

vis--vis one 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 firms present and potential products in the existing and new markets Ansoffs 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 controls many of the firms resources and capabilities However, market penetration has limits Once the market approaches saturation, a new strategy needs to be pursued if the firm is to continue growth

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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 to a different audience Another example is McDonalds who introduced ice creams for Rs.7 This not only created add on sales, but also brought in customers who had the perception that McDonalds is an expensive fast food restaurant

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RETAIL FORMAT DEVELOPMENT When a retailer is said to introduce new retail format to customers
Example fast food retailers like McDonalds 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 Shoppers Stop Strategy may be appropriate if the retailers 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

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SET OBJECTIVES
1. 2. 3. 4. 5.

Translation of mission statement into operational terms Indicate Results to be achieved Give direction to and set standards for the measurement of performance Management sets both long term and short term objectives One or two year time frames for achieving specific targets are short term objectives 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

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OBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE

1.

Resources needed by a retailer - Human Resources - Financial Resources 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

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DEVELOP THE STRATEGIC PLAN At this stage strategy is determined through which retailer will achieve objectives
1. 2.

The retailer determines and defines his target market 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

RETAIL STRATEGY
DEVELOP THE STRATEGIC PLAN
Considerations for successful market segmentation 1. Measurable : The segment should be measurable and

identifiable?

2. Accessible : Focusing market marketing efforts on a

particular market segment should have a positive impact towards bringing out the desired response

3. Economically viable : The expense and efforts of focusing the

marketing efforts in potential segments should be justified.

4. Stable : The consumer characteristics are indicators of

market potential. Hence stable indicators to be considered.

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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

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IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL Implementation is the key to success of any strategy
Effective implementation of the retailers desired

positioning requires

1. 2. 3. 4. 5. 6.

Every aspect of stores to be focused on the target market Merchandising must be single-minded Displays must appeal to target market Advertising must talk to the target market Personnel must have empathy for the target market Customer service must be designed with the target customer in mind

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IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL After implementation the management needs feedback and should focus on
1. 2. 3. 4.

Performance Effectiveness of long term strategy by periodic evaluation Ensuring that the plans do not degenerate into fragmented ad-hoc efforts Ensuring that all efforts are in harmony with he overall competitive strategy of business

Management can also use the process to decide on

1. 2.

Any future policy change Modifications if any, in the plan, to ensure that the combination of the retailing mix variables support the firms strategy