This document outlines the key elements of developing an effective retail strategy. It discusses identifying the target market and retail format, and establishing a sustainable competitive advantage through strong customer relationships, supplier partnerships, efficient operations, and strategic locations. The document also covers growth strategies like market penetration, expansion, format development, and diversification. Finally, it summarizes the 7-step strategic retail planning process of defining the mission, conducting a situation audit, identifying opportunities, evaluating alternatives, setting objectives, developing the retail mix, and evaluating performance.

1. CHAPTER 5
Retail Market
Strategy

2. What’s
Retail Strategy?
A retail strategy is a statement identifying…
1. The retailer’s target market.
2. The format the retailer plans to use to
satisfy the target market’s needs.
3. The bases on which the retailer plans to
build a sustainable competitive advantage.

3. Target Market
the market segment(s) toward
which the retailer plans to focus
its resources and retail mix

4. Retail
Format
the nature of the retailer’s
operations—its retail mix

5. Sustainable
competitive
advantage
Establishing a competitive
advantage means that the
retailer, in effect, builds a wall
around its position in a retail
market, that is, around its
present and potential
customers and its competitors

6. Relationships with Customers
Customer Loyalty means that Customers will be
reluctant to patronize competitive retailers
Retailers build loyalty by:
• Developing a strong brand image
• Having a clear and consistent
positioning
• Developing a unique Merchandise
• Providing outstanding customer
service
• Undertaking customer relationship
management (CRM) programs

7. Relationships with Suppliers
Vender Relations
• 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

8. Efficiency of Internal Operations
Human resource
Management
Distribution and
Information Systems
“Employees are key to build a
sustainable competitive
advantage”
Flow of Information
Recruiting, Training and Retaining
great employees are challenge.
Vendor  Distribution Center  Store
By decreasing costs here, the is
more money available to invest in:
• Better services
• Increase in breadth and depth
• Decrease in prices

9. Location
is a critical opportunity for developing
competitive advantage for 2 reason.
First, location is the most important factor
determining which store a consumer patronize.
Second, location is sustainable competitive
advantage.
Starbucks
creates a competitive advantage by picking
multiple good locations that saturate area.

10. Multiple Sources of Advantage
Retailers cannot rely on a single approach.
Instead, the use multiple approaches to build as
high a wall around their position as possible
For Example

11. Growth Strategies
Four types of growth
opportunities that retailers
may pursue.
Opportunities

12. Market Penetration
Existing Target Markets – Existing Retail Format
Market penetration approach Include:
 Opening more store in the target market
 Keeping existing stores open for longer hours
 Cross-selling – sales associates in one
department sell complimentary merchandise
from other departments
Opportunities

13. Market Expansion
New Target Markets – Existing Retail Format
Example
Opportunities

14. Retail Format Development
Existing Target Markets – New Retail Format
Example
Tesco U.K.
The smallest is Tesco Express
up to 3,000 Square feet
Tesco Metro Stores
are
Square feet
Tesco superstores
up to 50,0 Square feet
Tesco Extra stores
more than ,
Square feet
Opportunities

15. Diversification
New Target Markets – New Retail Format
Related diversification growth opportunity,
The retailer’s present target market or retail format
shares something in common with the new opportunity
Unrelated diversification growth opportunity
has little commonality between the retailer’s present
business and the new growth opportunity
Opportunities

16. Global Growth Opportunities
Expending operations to international markets.
Retailers can increase:
 sales
 knowledge and systems
 bargaining power with vendors

17. Attractiveness of
International Market
Two factors
1. The potential size of the retail market in the country
2.The degree to which the country does and can
support the entry of foreign retailers.

18. Indicator of the Attractiveness
of International Markets

19. A retailer of video games
GameStop, would find a
country with a large
percentage of people under 19
to be more attractive than a
country with a large
percentage of people over 65.

20. India
The retail industry is
divided into organized
and unorganized sectors
Problems:




The world’s largest pluralistic democracy
Myriad cultures
22 official languages
Restricts foreign investment

21. China
China is rapidly developing
the infrastructure to support
modern retailing
Problems:
 Operating costs are increasing
 Managerial talent is becoming more difficult to
find and retain
 Underdeveloped and inefficient supply chain
predominates

23. Globally Sustainable
Competitive Advantage
 Low cost, efficient operations:
Wal-Mart, Carrefour
 Strong private label brands:
Starbucks, KFC
 Fashion Reputation:
The Gap, Zara, H&M
 Category dominance:
Best Buy, IKEA, Toys R Us

24.  Color preference, the preferred cut of
apparel, and sizes differ across cultures
 Peak selling seasons
 Store designs and layouts
 Government regulations and cultural
values can affect store operations.

25. Global Culture
It is not sufficient to transplant
a home-country culture and
infrastructure to another
country
more than 30 years of
international experience in
30 countries, both
developed and developing.

26. Financial Resource
the large firms generally are in
a strong financial position
and therefore have the ability
to keep investing in projects
long enough to become
successful.

27. Entry Strategies




Direct Investment
Joint Venture
Strategic Alliance
Franchising

28. Direct Investment
Direct Investment
occurs when a retail firm invests in and owns a
retail operation in a foreign country.
Advantages:
the highest potential returns
the retailer has complete control of the
operations
Disadvantages:
the highest level of investment
exposes the retailer to the greatest risks

29. Joint Venture
•
•
•
•
•
More resources
reduces the entrant’s risks
Increased productivity and greater profits
Sharing of costs and risks with partners
ownership, control, and profits are shared
Problems with this entry approach
can arise if the partners disagree or
the government places restrictions
on the repatriation of profits.

30. Strategic Alliance
EXAMPLE
A strategic alliance is a collaborative
relationship between independent firms.

31. Franchising
Advantages:
 the lowest risk
 the least investment
Disadvantages:
 the retailer has limited
control Country
 potential profit is reduced
 local domestic competitor
increases

32. Top 5 Global Franchises - 2013 Rankings
Source: http://www.franchisedirect.com/top100globalfranchises/rankings/

33. 1. Define the business mission
2. Conduct a situation audit:
- Market attractiveness analysis
- Competitor analysis
- Self-analysis
7 Steps
3. Identify strategic opportunities
The Strategic Retail
Planning Process
4. Evaluate strategic alternatives
The set of steps a retailer goes
5. Establish specific objectives and allocate resource
6. Develop a retail mix to implement strategy
7. Evaluate performance and make adjustments
through to develop a strategy
and plan

34. Step 1: Define the Business Mission
The mission statement is a broad description of a
retailer’s objectives and the scope of activities it
plans to undertake.
Managers need to answer
QUESTIONS:
I.
II.
III.
IV.
V.
What business are we in?
What should our business be in the future?
Who are our customer?
What are our capabilities?
What do we want to accomplish?

35. Step 2: Conduct a situation Audit
Elements in a Situation Audit

36. Step 3: Identify Strategic
Opportunities
for increasing retail sales
Step 4: Evaluate Strategic
Opportunities
A retailer must focus on
opportunities that utilize its
strengths and its competitive
advantage.
Step 5: Establish Specific
Objectives and Allocate
Resources
The retailer’s overall objective is
included in the mission statement;
the specific objectives are goals
against which progress toward the
overall objective can be measured.
These specific objectives have three
component:
1. The performance sought
2. A time frame
3. The levels of investment

37. Step 6: Develop a retail
mix to implement
strategy
Step 7: Evaluate
performance and make
adjustments
The planning process is to
develop a retail mix for each
opportunity in which an
investment will be made and
control and evaluate
performance.
If the retailer is meeting or
exceeding its
objectives, change aren’t
needed. But if the retailer
fails to meet its
objectives, reanalysis is
required.