What is Retail Strategy?

For a company that sells consumer products, retail strategy is their plan for getting
their products in the right stores and reaching consumers at those stores. it may
involve a number of things like promotions, product placement, incentives given to
retailers, in-store signage and lots of other things.

1. Strategic Retail Planning

2. What is Strategic Retail Planning Process • Set of steps a retailer goes through to develop
a strategic retail plan. • It describes how retailers select target market segment, determine
the appropriate retail format, and build a sustainable competitive advantage
3. 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 4. Evaluate strategic alternatives 5. Establish specific objectives
and allocate resources 6. Develop a retail mix to implement strategy 7. Evaluate
performance and make adjustments
4. Step 1: Define the business mission • Mission statement-broad description of a retailer’s
objectives and the scope of activities it plans to undertake. – 1. What business are we in?
– 2. What should our business be in the future? – 3. Who are our customers? – 4. What
are our capabilities? – 5. What do we want to accomplish?
5. Step 2: Conduct a Situation Audit • Situation Audit-and analysis of the opportunities and
threats in the retail environment and the strengths and weaknesses of the retail business
relative to its competitors
6. Elements in a Market Analysis 100 50 0 1st Qtr 2 nd Q t r 3r d Qtr 4th Qtr MARKET
COMPETITIVE ENVIRONMENTAL ANALYSIS OF FACTORS FACTORS
FACTORS STRENGTHS & WEAKNESSES Size Barriers to entry Technology
Management Bargaining power of Economic capabilities Growth vendors Regulatory
Financial resources Seasonality Locations Business cycles Competitive rivalry Social
Operations Threat of superior Merchandise new formats Store Management Customer
loyalty
7. Market Factors • Market size – large markets attractive to large retail firms • Growing
markets – typically more attractive than mature or declining • Business cycles – retail
markets can be affected by economic conditions – military base towns • Seasonality – can
be an issue as resources are necessary during peak season only
8. Competitive Factors Barriers to Entry Bargaining Power of Competitive Large Vendors
Rivalry Customers Threat of Substitution
9. Environmental Factors • Questions for analyzing: • New developments or changes --
technologies, regulations, social factors, economic conditions • Likelihood changes will
occur • Key factors determining change • Impact of change on retail market and
competitors
10. Strength and Weakness Analysis • Indicates how well that business can seize
opportunities and avoid harm from threats in the environment
 11. Management Capability: Capabilities and experience of top management Depth of
Management--capabilities of middle management Management’s commitment to firm
Financial Resources: Cash flow from existing business Ability to raise debt or equity
financing Operations: Store Management Capabilities Overhead cost structure
Management capabilities Quality of operating systems Quality of sales associates
Distribution capabilities Commitment of sales associates to firm Management
information systems Loss prevention systems Locations Inventory control system
Merchandising Capabilities: Knowledge and skills of buyers Customers Relationships
with vendors Loyalty of customers Capabilities in developing private capabilities
12. Step 3: Identify Strategic Opportunities • After completing the situation audit, the next
step is to identify opportunities for increasing retail sales.
13. Step 4: Evaluate Strategic Opportunities • Evaluate opportunities that have been identifies
in the situation audit\\ The evaluation determines the retailer’s potential to establish a
sustainable competitive advantage and reap long-term profits from the opportunities
being evaluated.
14. Step 5: Establish Specific Objectives and Allocate Resources • Establish a specific
objective for each opportunity • Three components: – 1. Performance sought • Included a
numerical index which progress may be measured – 2. Time frame within which the goal
is to be achieved – 3. level of investment needed to achieve the objective
15. Step 6: Develop a Retail Mix to Implement Strategy • Develop a retail mix for each
opportunity in which an investment will be made and control and evaluate performance
16. Step 7: Evaluate Performance and Make Adjustments • Evaluate the results of the
strategy and implementation program • If the retailer is meeting or exceeding its objective
changes aren’t needed but if the retailer fails to meet its objective, reanalysis is required •
The conclusion would result in starting a new planning process, including a new situation
audit

Retail Strategy
2 years ago

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Retail Strategy - Presentation Transcript

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 markets
2. RETAIL STRATEGY
○ Establish Mission
○ Analyze Situation Objectives
○ Identify Options
○ Set Objectives
○ Obtain & Allocate Resources
○ Develop Implementation Plan
○ 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
○ The products and services that will be offered
○ The customers who will be served
○ The geographic areas that the organization chooses to operate in
○ The manner in which he firm intends to compete
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 exploited
○ The weaknesses need to be worked upon
○ This forms the basis or he core element of any strategy
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
○ Once the market approaches saturation, a new strategy needs to be
pursued if the firm is to continue growth
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
○ 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
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
○ 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
14.RETAIL STRATEGY
○ DEVELOP THE STRATEGIC PLAN
○ Considerations for successful market segmentation
○ Measurable : The segment should be measurable and identifiable?
○ Accessible : Focusing market marketing efforts on a particular market
segment should have a positive impact towards eliciting the desired
response
○ Economically viable : The expense and efforts of focusing the
marketing efforts in potential segments should be justified.
○ 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
○ 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
17.RETAIL STRATEGY
○ IMPLEMENT THE STRATEGY, EVALUATE AND CONTROL
 ○ After implementation the management needs feedback and should
focus on
○ 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
○ Any future policy change
○ 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
○ Removal of trade barriers between countries
○ 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
○ Retailer having a distinct product / own brand that may be attractive
○ Franchising / licensing
○ Granting permission/license to a company in target country to use the
property of the licensor
○ Property is intangible such as trade marks, patents and production
techniques
○ Licensee pays a fee in exchange for the rights to use the intangible
property
○ For franchising to be successful it is necessary for careful selection of
partners
○ 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
○ Long term commitment towards business
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 SUPPLIERS THIRD PARTY LOGISTICS RETAIL OPERATIONS
CUSTOMER MGMT CUSTOMERS SYSTEMS