Retail Session 5,6 Retail Strategy

RETAIL STRATEGY
Dr. Archana. B. A [Course: Retail Management]

1 [Topic: Retail Strategy]
LEARNING OBJECTIVES
➢ What is Retail Strategy?
➢Elements of retail strategy
➢Steps in strategic planning for retailers
➢How can a retailer build a sustainable competitive

advantage? – Retail Growth Strategies
2 [Course: Retail Management]
[Topic: Retail Strategy]
What is Retail Strategy?
The overall plan or framework of action that guides a retailer
▪ Long-term/ Atleast one year in duration
▪ Outlines:
o Mission, goals
o Consumer market
o Overall and specific activities
o Control mechanisms
3 [Course: Retail Management]

More attention to long-term strategic planning than ever before
Due to the emergence of

▪ New competitors
▪ New formats
▪ New technologies
▪ Shifts in customer needs
[Course: Retail Management]

Elements in Retail Strategy
• Target Market The market segment(s) toward which the retailer

plans to focus its resources and retail mix
• Retail Format The nature of the retailer’s operations—its

retail mix
• Sustainable An advantage over the competition

Competitive
Advantage
Retail Strategy: Example - Lululemon
Lululemon
• Athletic Apparel Retailer
• Canadian Speciality store
• Sell apparel and accessories
supporting the practice of Yoga
▪ “Athleisure apparel” trend

• Lululemon stores are a community
hub
• Company recruits local
ambassadors before opening a store
Retail Strategy: Example
• Divya Pharmacy of Baba

Ramdev focuses on selling
products that appeal to
customers seeking spiritual
enrichment and wellness
through yoga.
• The chain builds a competitive

advantage through its network
of local yoga teacher and
Ayurveda doctors.

Retailer
Building a sustainable
Competitive Advantage

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?

Example - Building a sustainable Competitive Advantage???
V/S

Sources of Competitive Advantage
Source of
advantage More Sustainable Less Sustainable
Customer Loyalty • Building brand image – • Habitual repeat purchasing
connecting with customers
due to limited competition
in the local area
Location • Convenient locations
• More Employees
Employee
• Committed knowledgeable • More Merchandise
Employee\ • Greater Assortments
s • Lower Prices
Unique merchandise
• Exclusive Merchandise • More Advertising
• More Promotions
Customer service • Buying Power with Vendors
Vendor relations • Low Cost Supply Chain
Management
Multiple sources of competitive advantage
Strong competitive position in the quick-
service restaurant market
Providing customers with a good value
Good customer service
Strong brand name
Convenient locations

Provides thorough analysis of the requirements for doing
business for different types of retailers
Outlines retailer goals

Benefits of Allows retailer to determine how to differentiate itself from
Strategic competitors
Allows retailer to develop an offering that appeals to a group of

customers
Retail Offers an analysis of the legal, economic, and competitive
environment
Planning Provides for the coordination of firm’s total efforts
Encourages anticipation and avoidance of crises

Elements of a Retail Strategy

Situation Analysis
▪ Evaluation of the opportunities and
threats facing a prospective or existing
retailer
▪ Seek to answer two general questions:

- What is the firm’s current status?
- In which direction should it be heading? A firm needs to spot trends early enough
to satisfy customers and stay ahead of
competitors, yet not so early that
▪ Opportunities shoppers are not ready for changes or
▪ Threats that false trends are perceived

Elements of a Retail Strategy: Situation Analysis
Ownership and Management Alternatives
•Sole proprietorship • Start a new business,
•A partnership • Buy an existing business
•A corporation • Franchisee.
Management format chosen:

Organizational Mission • Owner-manager versus professional manager
• Type of business • Centralized versus decentralized structures
• Distinctive role in the marketplace
• Desired market scope
Goods and Service category
• Whether to base a business around • Goods Establishments (Durable Goods
- Goods and services sold or around consumer needs? Stores| Nondurable Goods Stores)
• Service Establishments (Personal|
• Whether a retailer wants a place in the market as: Amusement|Repair services|Hotel services)
- Leader or Follower?
Retail Strategy
• Type of business
• Distinctive role in the marketplace
• Desired market scope
• Leader or Follower?
Whether a retailer
wants a place in
the market as a:
Leader
OR
Follower?
Example:
• Tanishq’s ‘Gold harvest saving scheme’ gives the
best savings for a customer buying Tanishq
jewelry.
• Under this scheme Tanishq would give a special

bonus at the end of the scheme – a customer
basically gets more than what they pay for.
• Though similar scheme was followed by some

local jewellers, Tanishq has the trust of TATA
and the customers are assured that their savings
with Tanisq is totally safe and secure. [Course: Retail Management]
Ownership and Management Alternatives
Sole proprietorship Partnership Corporation
• An unincorporated retail firm owned • An unincorporated retail firm • Retail firm that is formally
by one person owned by two or more incorporated under state law
persons, each with a financial
• All benefits, profits, risks, and costs interest • Legal entity
accrue to that individual
• Responsibility and expertise - • Funds can be raised through the
• Simple to form, fully controlled by the divided among multiple sale of stock
owner principals
• Legal claims against individuals
• Operationally flexible, easy to dissolve • greater capability for raising
funds than with a are not usually allowed
• Single taxation by the government proprietorship • Ownership transfer is relatively
• Owner personally liable for legal • Subject to single taxation by easy
claims from suppliers, creditors, others the government
• Firm is more assured of long-term
• Capital and Expertise - Limited • Can make owners personally existence (if a founder leaves,
liable for legal claims retires, or dies)

Checklist to Consider When Starting a New Business
Starting a new business
—being entrepreneurial
—offers a retailer flexibility in
location, operating style, product lines,
customer markets, and other factors,
and involves planning and
implementing a strategy that is fully
tailored to the owner’s desires and
strengths.
- There may be high construction costs,
a time lag until the business is opened
and then until profits are earned.

Checklist for Purchasing an Existing Retail Business

Goods and Service category
Goods Establishments Service Establishments

Durable Goods Stores Personal • Laundry and dry cleaning
• Automotive group • Beauty/barber shops
• Furniture and appliances group • Health-care services
• Lumber, building, and hardware group
• Jewelry stores Amusement • Movie theaters
• Bowling alleys/ Game arcades
• Dance halls
Nondurable Goods Stores • Golf courses
• Apparel group • Amusement parks
• Food group
• General merchandise group Repair Hotel
• Gasoline service stations
• Automobile repair Hotels
• Car washes
• Appliance repairs [Course: Retail Management]
Retail Snapshot: Example – Chai Point
Chai retail business
Building a sustainable Competitive Advantage???
• India’s largest organized chai retailer
• Chai retail business
• Large market → Not even a single organized player
• No tea bars v/s Coffee chains
• Target Market
• Stores are modern yet lean to facilitate quick service
“We want to do for tea what Starbucks has done for

coffee. We had to commit ourselves to elevating chai.”
- Amuleek Singh Bijral, Co-founder of Chai Point

After situational analysis,

a retailer sets objectives

Elements of a Retail Strategy: Objectives
Objectives are:
Long-run
Short-run performance targets
Retailer hopes to attain
Organization objectives → organizational mission ---- action

Image (Positioning)
• Image - How a given retailer is perceived by consumers
and others
• Innovative <–> Conservative
• Specialized <–> Broad based
• Discount- Oriented <–> Upscale
Sales Objective Profit Objective Satisfaction of

Retailers seek at least a
publics objective
Related to the volume of goods
and services a retailer sell minimum profit level
during a designated • Stockholders
• Sales Growth period, usually a year. • Customers
• Stability (Stable sales) • Suppliers
• Market share • Employees
• Government
Image (Positioning)
Mass merchandising Niche retailing
• Retailers offer a discount or value- • Retailers identify specific customer
oriented image segments
• Wide and/or deep merchandise • Deploy unique strategies to
selection address the desires of those
segments
• Large store facilities
• Example: First Cry which appeals
• Broad customer market to mothers and parents with
• Example: Reliance Mart children up to the age of 9.
Bifurcated Retailing [Course: Retail Management]

Image (Positioning): Example
Bifurcated Retailing
Anita Dongre (Fashion Designer)

Retail Positioning Map
Retail positioning map is based
on two shopping criteria:
1. Price and Service
2. Product lines offered
- There is a link between price
and service (high price
equals excellent service)

Retail Snapshot: Example

Retail Snapshot:
Example
American Girl
Doll


American Girl Doll

Upscale Specialty
store
Barbie doll
available at
Hamleys
toy store Barbie doll
available online
on Amazon etc.,

Selected Retail Positioning Strategies: Retail positioning map
Upscale specialty stores

(Tanishq) offer outstanding service Upscale department store (Ex:
and focus on one general product Lifestyle) offer outstanding customer
category service and carry designer apparel
Traditional specialty store Traditional department

(Raymond’s) have trained store (Westside) focus more
staff to help customers on private-label apparel
Power retailers (Hometown) offer moderate

service, low prices and a huge assortment
within one general product category Discount department stores
(Walmart) carry a broad variety of
product lines and rely on self-service
Discount specialty stores
(Megamart) rely more on self
Membership clubs have a limited
service and focus on one generated
selection in the number of product
product category
categories

Target Market Selection
•Target market selection
The customer group sought by a retailer Three techniques
Concentrated Differentiated
• Mass marketing marketing marketing
• Spectrum of customers: • Spectrum of • Spectrum of customers:

Broad customers: One
specific group Aiming at two or more
distinct consumer groups,
• Examples: Conventional with different retailing
supermarkets • Examples: A small
upscale men’s shoe approaches for each
store group

Differentiated marketing: Example
Bifurcated Retailing Differentiated marketing
Anita Dongre (Fashion Designer)

COMPETITIVE ADVANTAGE

COMPETITIVE ADVANTAGE
Department stores seek
multiple segments.
The significance of
competitive advantages –
the distinct competencies
of a retailer relative to
competitors – must not be
overlooked.
Examples
Lifestyle seeks affluent, status- Westside targets middle class, value-

conscious consumers. It places stores conscious shoppers. It is located mostly in
in prestigious shopping areas, offers suburban shopping areas, and offers
high-quality products, uses elegant national brands and Westside’s private
ads, has extensive customer services label brands of medium quality and
and sets high prices. charge average price
Upscale Upscale department store

Department (Ex: Lifestyle) offer outstanding customer
store service and carry designer apparel
Traditional department store

Traditional
Department (Westside) focus more on private-label
Store apparel

Strategic Implications of Target Market Techniques
• Retailer’s location
• Goods and service mix
• Promotion efforts
• Price orientation
• Strategy

Target Marketing Techniques and Their Strategic Implications
Strategic Implications Mass Marketing Concentrated Differentiated
Marketing Marketing
Retailer’s location Near a large Near a small or medium Near a large population base
population base population base
Goods and service mix Wide selection of Selection geared to market Distinct goods/services aimed
medium-quality items segment—high- or low- at each market segment
quality items
Promotion efforts Mass advertising Direct mail, E-mail, and Different for each segment
subscription segmented social media
Price orientation Popular prices High or low High, medium, and low—
depending on market
segment
Strategy One general strategy One specific strategy Multiple specific strategies,
for a large directed at a specific, limited each directed at different
homogeneous (similar) group of customers (heterogeneous)
group of consumers groups of consumers


Developing an Overall Retail Strategy
Controllable Variables Uncontrollable Variables
• Store location • Consumers

• Managing business • Competition
• Merchandise management and • Technology
pricing • Economic conditions
• Communicating with customer • Seasonality
• Legal restrictions

Controllable Variables
Store location Managing business
• Store or non-store format
• Retail organization and human
• A general location --- Specific site resource management
• Factors: Competitors, transportation • Operations management
access, population density
• Terms of tenancy
• Build, buy, or rent?

Controllable Variables
Merchandise management Communicating with the
and pricing customer
• General quality of goods/services
• Physical attributes (atmosphere) of
• Width and depth of assortment
the store and its surrounding area
• Innovation in introducing new items
• Impact of the storefront
• Forecasting, budgeting, and
• Customer services and community
accounting procedures
relations
• Choice of several pricing techniques
• Promotion techniques
Controllable Variables Uncontrollable Variables
• Store location • Consumers

• Managing business • Competition
• Merchandise management and • Technology
pricing • Economic conditions
• Communicating with customer • Seasonality
• Legal restrictions

Legal Environment and Retailing
Uncontrollable Variables
Controllable factor affected - Store location Controllable factor affected - Managing the business
Store Location Managing the Business

• Zoning laws • Personnel laws
• Blue laws • Antitrust laws
• Environmental laws • Franchise agreements
• Direct selling laws • Business taxes
• Local ordinances • Recycling laws
• Leases and mortgages

Uncontrollable Variables: Legal Environment and Retailing
Controllable factor affected - Store location Controllable factor affected - Managing the business
Example
Example
• Zoning laws restrict the potential choices
for a location and the type of facilities • Personnel laws involve nondiscriminatory
constructed. hiring, promoting, and firing of employees.
Example: Residential areas cannot have

personal entertainment services / Industrial • Franchise agreements require parties to abide
zones by various legal provisions.
• Environmental laws limit the retail uses of • Business taxes include real-estate and income
certain sites. taxes.
• Leases and mortgages require parties to • Recycling laws mandate that retailers
abide by stipulations in tenancy participate in recycling for various materials.
documents.

Merchandise Management
and Pricing
Example:
• Trademarks
• Trademarks provide retailers with exclusive
• Merchandise restrictions rights to the brand names they develop.
• Product liability laws
• Product liability laws allow retailers to be
• Sales taxes
sued if they sell defective products.
• Unit-pricing laws
• Collusion laws
• Sale prices must be a reduction from the
• Sale prices retailer’s normal selling prices.
• Price discrimination laws

Communicating with the

Customer Example:
• Trademarks provide retailers with exclusive
• Truth-in-advertising and selling rights to the brand names they develop.
laws
• Truth-in-credit laws • Product liability laws allow retailers to be
sued if they sell defective products.
• Telemarketing laws
• Bait-and-switch laws
• Sale prices must be a reduction from the
• Inventory laws retailer’s normal selling prices.
• Labeling laws


Retail Strategy – Cost Control (1 of 2)
Control
• In the control phase, a semiannual or annual review of the
company takes place.
• This procedure is called a retail audit, which is a systematic
process for analyzing the performance of a retailer.
• As a retailer’s performance is assessed, its strengths and
weaknesses are revealed.
• Adjustments are made if necessary and are reviewed in the firm’s
next retail audit.

Retail Strategy – Cost Control (2 of 2)
Feedback
• Signals or cues about the success of a retail strategy represent
feedback.
• Forms of positive feedback are high sales revenue, no problems
with the government, and low employee turnover.
• Negative feedback includes falling sales revenue, government
sanctions (e.g., fines), and high employee turnover.
• Retail executives look for positive and negative feedback so they
can determine the causes and then capitalize on opportunities or
rectify problems.

Retail
Snapshot:
Example -
Zara

The Next Big Question
Single source or multiple sources to build

sustainable competitive advantage?

RETAIL GROWTH STRATEGIES
Growth
Four types of growth strategies
that retailers can pursue to
Strategies
expand their base to capture a
larger set of customers:

RETAIL GROWTH STRATEGIES – Market Penetration
• Directed towards existing customers using the

Growth retailer’s existing retailing format.
Strategies • Attracting new customers from retailer’s

current target market -- not yet patronized
the retailer, making existing customers buy
more and visit the store more.
• Keeping existing stores open for more hours
or opening more stores for target market.
• Pushing impulse purchases and focusing on
cross-selling

RETAIL GROWTH STRATEGIES – Market Expansion
• Using existing retail format in new

Growth market segments
Strategies

RETAIL GROWTH STRATEGIES – Format Development
• Multi-channel retailing
Growth
Strategies • A new retail format with a different
retail mix for same target market.

RETAIL GROWTH STRATEGIES – Diversification
Introducing
a new retail
format for a
market
segment not
being served
currently

62
Factors to Consider When Engaging in Global Retailing

Leadership
Lessons from
Retail
Executives

Summary of Retail Strategy
1. What is a retail strategy?
2. Elements of retail strategy

• Situational analysis → Objectives → Identification of consumers
→ Overall strategy → Specific activities → Control
3. Retail Growth Strategies

• Market Penetration| Market Expansion| Format
Development| Diversification
Strategic Planning Process and Global Retailing


Retail Session 5,6 Retail Strategy

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RETAIL STRATEGY

Dr. Archana. B. A [Course: Retail Management]

➢Elements of retail strategy

➢Steps in strategic planning for retailers

➢How can a retailer build a sustainable competitive

The overall plan or framework of action that guides a retailer

▪ Long-term/ Atleast one year in duration

3 [Course: Retail Management]

Due to the emergence of

[Course: Retail Management]

• Target Market The market segment(s) toward which the retailer

• Retail Format The nature of the retailer’s operations—its

• Sustainable An advantage over the competition

▪ “Athleisure apparel” trend

• Divya Pharmacy of Baba

• The chain builds a competitive

[Course: Retail Management]

[Course: Retail Management]

• 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?

[Course: Retail Management]

[Course: Retail Management]

Providing customers with a good value

Good customer service

Strong brand name

[Course: Retail Management]

Outlines retailer goals

Allows retailer to develop an offering that appeals to a group of

Planning Provides for the coordination of firm’s total efforts

Encourages anticipation and avoidance of crises

[Course: Retail Management]

[Course: Retail Management]

▪ Seek to answer two general questions:

[Course: Retail Management]

Management format chosen:

• Under this scheme Tanishq would give a special

• Though similar scheme was followed by some

[Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

Goods Establishments Service Establishments

“We want to do for tea what Starbucks has done for

[Course: Retail Management]

After situational analysis,

[Course: Retail Management]

Organization objectives → organizational mission ---- action

[Course: Retail Management]

Sales Objective Profit Objective Satisfaction of

Bifurcated Retailing [Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

[Course: Retail Management]

American Girl Doll

[Course: Retail Management]

Upscale specialty stores

Traditional specialty store Traditional department

Power retailers (Hometown) offer moderate