Lesson 5 - Retail Market Strategy

RETAIL MARKE T STRATE GY

Thursday, January 16, 14

• What is a retailing strategy? • How can a retailer build a sustainable competitive advantage? • What steps do retailers go through to develop a strategy? • What different strategic growth opportunities can retailers pursue?

• What retailers are best positioned to become global retailers?

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

ELEMENTS OF RETAIL STRATEGY Thursday, January 16, 14

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 Competitive Advantage an advantage over the competition

Target Market? Retail Format? Sustainable Competitive Advantage?

Thursday, January 16, 14

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Thursday, January 16, 14

TARGET MARKET AND RETAIL FORMAT A retail market is a group of consumers with similar needs (a market segment) and a group of retailers that satisfy those needs using a similar retail format.

Thursday, January 16, 14

SEGMENTS

RETAIL FORMAT

TRADITIONAL

SPECIALTY STORE

DEPARTMENT STORE

OFF PRICE RETAILER

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

TRENDY

SEGMENTS

RETAIL FORMAT

TRADITIONAL

SPECIALTY STORE

DEPARTMENT STORE

OFF PRICE RETAILER

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

TRENDY

SEGMENTS

RETAIL FORMAT

TRADITIONAL

SPECIALTY STORE

DEPARTMENT STORE

OFF PRICE RETAILER

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

TRENDY

SEGMENTS

RETAIL FORMAT

TRADITIONAL

SPECIALTY STORE

DEPARTMENT STORE

OFF PRICE RETAILER

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

TRENDY

SEGMENTS

RETAIL FORMAT

TRADITIONAL

SPECIALTY STORE

DEPARTMENT STORE

OFF PRICE RETAILER

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

TRENDY

SEGMENTS

RETAIL FORMAT

TRADITIONAL

SPECIALTY STORE

DEPARTMENT STORE

OFF PRICE RETAILER

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

TRENDY

QUESTION •If SM Store decides to focus upon

a limited set of markets for women’s apparel, which should it pursue? •What should the retail strategy be for that target market?

Thursday, January 16, 14

BUILDING SUSTAINABLE COMPETITIVE ADVANTAGE •builds a wall around its position in a retail market •IS PRICE A SOURCE OF SCA? •DOES OFFERING MORE MERCHANDISE PROVIDE SCA? •all advantages erode due to competitive forces so build high walls

Thursday, January 16, 14

L I A RET KET R A Y M G E T A R ST Thursday, January 16, 14

DEVELOPING SUSTAINABLE COMPETITIVE ADVANTAGE 1. Building strong relationships with customers 2. Building strong relationships with suppliers 3. Achieving efficient internal operations.

Thursday, January 16, 14

BUILDING CUSTOMER RELATIONSHIPS CUSTOMER LOYALTY

• not simply liking - committed to buying merchandise and services from a particular retailer - reluctant to buy from others 1. Developing a strong brand image 2. Having a clear and consistent positioning 3. Providing outstanding customer service 4. Undertaking customer relationship management (CRM) programs.

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

Developing a strong brand image Thursday, January 16, 14

• Well known and attractive image of brand and name

• Favorable beliefs about brand How does it facilitate loyalty?

• Reduce risk • Emotional tie with a customer that leads the customer to trust the retailer

Developing a strong brand image Thursday, January 16, 14

• Well known and attractive image of brand and name

• Favorable beliefs about brand How does it facilitate loyalty?

• Reduce risk • Emotional tie with a customer that leads the customer to trust the retailer

Positioning Thursday, January 16, 14

• The design and implementation of a retail mix to create an image of the retailer in the customer’s mind relative to its competitors.

• Perceptual Map

Thursday, January 16, 14

Unique Merchandise Thursday, January 16, 14

• Not just carrying National Brands but Private Label Brands (Store Brands or Own Brands)

Unique Merchandise Thursday, January 16, 14

• Not just carrying National Brands but Private Label Brands (Store Brands or Own Brands)

Unique Merchandise Thursday, January 16, 14

• Not just carrying National Brands but Private Label Brands (Store Brands or Own Brands)

Unique Merchandise Thursday, January 16, 14

• Not just carrying National Brands but Private Label Brands (Store Brands or Own Brands)

Thursday, January 16, 14

Customer Service Thursday, January 16, 14

• Difficult to Achieve • People Are Not Machines -Inconsistent

• Retail Sales Associates At Bottom of Labor Pool

• Goes Beyond Hiring Good People

at High Wages and Training Them -- Organizational Culture

Thursday, January 16, 14

CRM Programs

• or Loyalty or Frequent shopper

programs, are activities that focus on identifying and building loyalty with a retailer’s most valued customers.

• Rewards based on amount or merchandise purchased

• May appear not to provide SCA

but the information you get gives personal relationship

Thursday, January 16, 14

BUILDING SUPPLIER RELATIONSHIPS Low Cost - Efficiency Through Coordination •Electronic Data Interchange (EDI) •Collaborative Planning and Forecasting to Reduce Inventory and Distribution Costs •Special Treatment •Early Delivery of New Styles •Shipment of Scare Merchandise •Exclusive Sale of Desirable Brands/Collaboration with Vendors

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

Thursday, January 16, 14

Thursday, January 16, 14

Thursday, January 16, 14

Thursday, January 16, 14

EFFICIENT INTERNAL OPERATIONS HUMAN RESOURCES

•“Employees are key to build a sustainable competitive advantage” •Strategies for Recruiting and Retaining Talented Employees •Employee Branding •Develop positive organizational culture

DISTRIBUTION AND INFORMATION SYSTEMS

•Through its data sharing about merchandise sales, information flows

seamlessly from Walmart to its vendors to facilitate quick and efficient merchandise replenishment that avoids costly stockouts. •Tailor store merchandise assortments and promotion

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

LOCATION Location is a critical opportunity for developing competitive advantage 1. The most important factor determining which store a consumer patronizes 2. It is not easily duplicated

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

MULTIPLE SOURCES •

Building more than one - greater walls

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

MULTIPLE SOURCES •

Building more than one - greater walls

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

MULTIPLE SOURCES •

Building more than one - greater walls

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

GROWTH STRATEGIES

Thursday, January 16, 14

Market Penetration Thursday, January 16, 14

•

directed toward existing customers using the retailer’s present retailing form

•

attracting new consumers from current target market who don’t patronize the retailer currently

•

get current customers to visit the retailer more often or buy more merchandise on each visit.

• •

open for longer hours.

•

training salespeople to cross-sell.

displaying merchandise to increase impulse purchases

Market Expansion Thursday, January 16, 14

•

using the retailer’s existing retail format in new market segments

Market Expansion Thursday, January 16, 14

•

using the retailer’s existing retail format in new market segments

Market Expansion Thursday, January 16, 14

•

using the retailer’s existing retail format in new market segments

Market Expansion Thursday, January 16, 14

•

using the retailer’s existing retail format in new market segments

Retail Format Development

• Develops a new retail format with a

Thursday, January 16, 14

different retail mix for the same target market

Diversification Thursday, January 16, 14

• New format for a new market segment • Related - retailer’s present target

market or retail format shares something in common with the new opportunity.

• Unrelated - as little commonality between the retailer’s present business and the new growth opportunity

• Vertical Integration

Diversification Thursday, January 16, 14

• New format for a new market segment • Related - retailer’s present target

market or retail format shares something in common with the new opportunity.

• Unrelated - as little commonality between the retailer’s present business and the new growth opportunity

• Vertical Integration

GLOBAL GROWTH OPPORTUNITIES

Thursday, January 16, 14

ATTRACTIVENESS OF INTERNATIONAL MARKETS

• the potential size of the retail market in the country and

• the degree to which the country does and can support the entry of foreign retailers.

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

ATTRACTIVENESS OF INTERNATIONAL MARKETS

• the potential size of the retail market in the country and

• the degree to which the country does and can support the entry of foreign retailers.

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

ATTRACTIVENESS OF INTERNATIONAL MARKETS

• the potential size of the retail market in the country and

• the degree to which the country does and can support the entry of foreign retailers.

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

INDIA

• local shops, owner-operated

general stores, convenience stores, and handcart and street vendors.

• Most prefer to shop in open

shops and independent shops (kirana)

• Restricts foreign investment partner with Indian firm

Thursday, January 16, 14

CHINA

• More open than India • Increasing operating costs • Lack of managerial talent • Underdeveloped and inefficient supply chain

Thursday, January 16, 14

KEYS TO SUCCESS IN GLOBAL MARKETS

• •

GLOBALLY SUSTAINABLE COMPETITIVE ADVANTAGE

•

H&M, Forever 21, Uniqlo - low priced fast fashion

ADAPTABILITY

•

adjust to taste and preference of target market

• •

Merchandise

• •

Store Layout and Design

Peak selling period - School Supplies (August - US, but not in Europe, April in Japan but not in the Philippines)

Culture

L I A T RE KET R A Y M G E T A R ST Thursday, January 16, 14

DIRECT INVESTMENT

ENTRY STRATEGIES

Thursday, January 16, 14

a retail firm invests in and owns a retail operation in a foreign country highest investment and greatest risk

DIRECT INVESTMENT

ENTRY STRATEGIES

Thursday, January 16, 14

a retail firm invests in and owns a retail operation in a foreign country highest investment and greatest risk

JOINT VENTURE

ENTRY STRATEGIES

Thursday, January 16, 14

The entering retailer pools its resources with a local retailer to form a new company in which ownership, control, and profits are shared reduces the entrant’s risks sharing the financial burden, understanding of market, local resources

JOINT VENTURE

ENTRY STRATEGIES

Thursday, January 16, 14

The entering retailer pools its resources with a local retailer to form a new company in which ownership, control, and profits are shared reduces the entrant’s risks sharing the financial burden, understanding of market, local resources

FRANCHISE

ENTRY STRATEGIES

Thursday, January 16, 14

lowest risk and requires the least investment.

FRANCHISE

ENTRY STRATEGIES

Thursday, January 16, 14

lowest risk and requires the least investment.