7278627 Retail Strategy

8/8/2019 7278627 Retail Strategy

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RETAIL STRATEGYRETAIL STRATEGY

A clear and definite plan outlined by the retailer to tap themarketA plan to build a long-term relationship with the consumersProcess of strategy formulation in retail is the same asthat for any other industryIt starts with the retailer defining or stating the mission forthe organization The mission is at the core of the existence of the retailerOther aspects of the strategy may change over a period of time or vary for different markets



RETAIL STRATEGY

1. Establish Mission2. Analyze Situation Objectives3. Identify Options4. Set Objectives5. Obtain & Allocate Resources6. Develop Implementation Plan

7. Monitor Progress & Control



RETAIL STRATEGYDEFINE MSSION OR PURPOSE

Mission statement is a long term purpose of theorganizationIt describes what the retailer wishes to accomplish in themarkets in which he chooses to operate

Retailers mission statement would normally highlight thefollowing

1. The products and services that will be offered2. The customers who will be served

3. The geographic areas that the organization chooses tooperate in

4. The manner in which he firm intends to compete



RETAIL STRATEGYCONDUCT A SITUATION ANALYSIS

Once the retail mission is defined, the retail organizationneeds to look inwardsUnderstand what its strengths and weaknesses areLook outwards to analyze its opportunities and threatsSituation analysis helps the retailer determine his positionand his strengths and weaknessesHelps formulate a clear picture of the advantages andopportunities which can be exploited

The weaknesses need to be worked upon This forms the basis or he core element of any strategy



RETAIL STRATEGYIDENTIFY OPTIONS / STRATEGIC ALTERNATIVES

After determining the strengths and weaknessesvis-à-vis he environment retailer needs to

consider various alternatives available to tap aparticular marketIgor Ansoff presented a matrix which looked at

growth opportunities

He focused on firm’s present and potentialproducts in the existing and new marketsAnsoff’s matrix also helps to understand theoptions available to a retailer



RETAIL STRATEGYIDENTIFY OPTIONS / STRATEGIC

ALTERNATIVES

The alternatives available to a retailer are :

Market PenetrationMarket Development

Retail Format DevelopmentDiversification



RETAIL STRATEGY



RETAIL STRATEGYMARKET 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 addingnew stores and by modifying the product mixAnother approach is to encourage salespeople to cross sellMarket penetration strategy is the least risky one, since itleverages many of the firm’s resources and capabilities

However, market penetration has limitsOnce the market approaches saturation, a new strategy needs tobe pursued if the firm is to continue growth



RETAIL STRATEGYMARKET EXPANSION / DEVELOPMENT

When a retailer is said to reach out to new market segments orcompletely changes his customer base

This strategy involves :- Tapping new geographical markets- Introducing new products to the existing range that appeal to a

wider audienceExpansion by adding new retail stores to existing network is an exampleof geographical expansionIntroducing a pharmacy in a supermarket (eg. The medicine Shoppe atthe Haiko Supermarket in Mumbai) is an example of a retailerintroducing new products, appealing o a different audienceAnother example is McDonald’s who introduced ice creams for Rs.7

This not only created add on sales, but also brought in customers whohad the perception that McDonald’s is an expensive fast food restaurant



RETAIL STRATEGYRETAIL FORMAT DEVELOPMENTWhen a retailer is said to introduce new retail format to customers

Example fast food retailers like McDonald’s and Subway offerlimited menus inside large department storesAnother example is bookstore chain Crosswords, opening smallerformat stores by the name Crossword Corner at Shopper’s StopStrategy may be appropriate if the retailer’s strengths are related

to specific customers, rather than to specific productsIn this situation retailer can leverage its strengths by developing anew product targeted to his existing customers



RETAIL STRATEGYSET OBJECTIVES

Translation of mission statement into operational termsIndicate

1. Results to be achieved2. Give direction to and set standards for the measurement of performance3. Management sets both long term and short term objectives4. One or two year time frames for achieving specific targets are short term

objectives5. 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 mindSales volume targetsMarket hare targetsProfitability targetsLiquidity targetsReturns on investment targets



RETAIL STRATEGYOBTAIN AND ALLOCATE RESOURCES NEEDED TO COMPETE

Resources needed by a retailer - Human Resources- Financial Resources

1. Human ResourceHR plan must be consistent with overall strategy of the organizationHR 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 STRATEGYDEVELOP THE STRATEGIC PLAN

At this stage strategy is determined through which retailer will achieve objectives

1. The retailer determines and defines his target market2. 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 towhich 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 theorganizations resources and skills




Considerations for successful market segmentation

1. Measurable : The segment should be measurable andidentifiable?

2. Accessible : Focusing market marketing efforts on a particularmarket segment should have a positive impact towardseliciting the desired response

3. Economically viable : The expense and efforts of focusing themarketing efforts in potential segments should be justified.

4. Stable : The consumer characteristics are indicators of marketpotential. Hence stable indicators to be considered.




After choosing the target market the retail mix needs to be developed

This process involvesthe determination of the merchandise mixthe pricing policytypes 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 tothe image the retailer wants the customers to have in their mindsaboutthe products and services



RETAIL STRATEGYIMPLEMENT THE STRATEGY, EVALUATE AND CONTROL

Implementation is the key to success of any strategy

Effective implementation of the retailers desiredpositioning requires

1. Every aspect of stores to be focused on the target market2. Merchandising must be single-minded3. Displays must appeal to target market4. Advertising must talk to the target market5. Personnel must have empathy for the target market6. Customer service must be designed with the target

customer in mind



RETAIL STRATEGYIMPLEMENT THE STRATEGY, EVALUATE AND CONTROL

After implementation the management needs feedback and should focus on

1. Performance2. Effectiveness of long term strategy by periodic evaluation3. Ensuring that the plans do not degenerate into fragmented ad-hoc efforts4. Ensuring that all efforts are in harmony with he overall competitive

strategy of business

Management can also use the process to decide on

1. Any future policy change2. Modifications if any, in the plan, to ensure that the combination of theretailing mix variables support the firms strategy



RETAIL STRATEGYINTERNATIONAL EXPANSION – A GROWTH STRATEGY

Factors facilitating the rise of international retail trade 1. Removal of trade barriers between countries

2. The rise of consumerism



RETAIL STRATEGYConcept 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 fromeach other in their regulation, economic development, social conditions, culturalenvironment 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 internationalexpansion



RETAIL STRATEGYINTERNATIONAL 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 localpopulation

Ability to use technology, systems and processes available in

that market

Understanding of the expected growth rates, density of population, income levels



RETAIL STRATEGYMETHODS OF ENTERING A NEW MARKET

Export

1. Retailer having a distinct product / own brand that may be attractive

Franchising / licensing

1. Granting permission/license to a company in target country to use theproperty of the licensor

2. Property is intangible such as trade marks, patents and productiontechniques

3. Licensee pays a fee in exchange for the rights to use the intangibleproperty

4. For franchising to be successful it is necessary for careful selection of partners

5. Partners should share the same understanding of the parent organizationsvision mission, goals and the marketing plans and strategies




Joint Venture

Strategic partnership between a local retailer and a international / foreignplayer

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 enternew market




Acquisitions

One organization acquiring another organization

Easy way of entering non domestic market without any complications

Considerations : management structurenew operating culturefinancial 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




Organic growthReplication of retail format in a new non domestic market within theregulatory 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 entrantAccess to global systemsAbility to adapt to requirements of global marketsLong term commitment towards business



RETAIL STRATEGYRETAIL 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 importantRetailer should have a clear focus and strategy

Retail Strategy Models : Retailer can either become a pentagon player or atriangle

player

Pentagon : The retailer’s focus on- Product Image- Place- Price / Value- People- Communications




Triangle : The retailer’s focus on- Systems- Logistics- Suppliers

Above approaches to developing strategies are perhaps appropriate in maturemarketplaceAt present , retail in India is oriented towards the mass marketAs such the retailer must consider all aspects of strategy development, such asproduct , price, place, communication and the supply chain

There is an absence of a robust infrastructure and inadequate capabilities of theservice providers in India

Thus the retailer must necessarily invest in creating the appropriate supportstructure for its operations




SUPPORT FUNCTION

SUPPLIERS

THIRD PARTY LOGISTICS

RETAIL OPERATIONS

CUSTOMER MGMT

CUSTOMERS

SYSTEMS

7278627 Retail Strategy

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