Retail Strategy Mix and Wheel of Retailing

Retailer Strategy MixRetailer Strategy Mix A strategy mix is the retailer’s specific

combination of: store location, operating procedures, goods/services offered, pricing tactics, store atmosphere, customer services, and promotional methods

THE WHEEL OF RETAILINGTHE WHEEL OF RETAILING

A cyclical theory of retail evolution that assumesevolving retail institutions from low price – low serviceconcept to higher level of service and higher prices offering.

A cyclical theory of retail evolution that assumesevolving retail institutions from low price – low serviceconcept to higher level of service and higher prices offering.

„ The wheel always revolves, sometimes slowly, sometimesmore rapidly, but it does not stand still. The cycle frequentlybegins with the bold new concept, the innovation. Somebody gets a bright new idea … At the outset he isin bad odour, ridiculed, scorned and condemned as illegitimate.” MacNair, (1931)

The Wheel of RetailingThe Wheel of Retailing

Three Basic Strategic PositionsThree Basic Strategic Positions

Low endMediumHigh end

Retail Retail Strategy AlternativesStrategy Alternatives

Retailing StrategyRetailing StrategyA retailer develops a marketing strategy

based on the firm’s goals and strategic plans– Two fundamental steps:

Selecting a target market Developing a retailing mix to satisfy the chosen

target market

– Retail image: Consumers’ perceptions of a store and the shopping experience it provides

Selecting a Target MarketSelecting a Target Market– Retailers analyze demographic,

geographic, and psychographic profiles to segment and select potential markets

Merchandising StrategyMerchandising Strategy– Planograms: Diagrams of how to exhibit

selections of merchandise within a store– Category management: Retailing strategy

which views each product category as an individual profit center, and the retailer manages the performance and growth of the entire category

The Battle for Shelf SpaceThe Battle for Shelf Space– Stockkeeping unit (SKU): specific product

offering within a product line that is used to identify items within the line

– Slotting allowances: fees paid by manufacturers to secure shelf space from retailers for their products

Customer Service StrategyCustomer Service Strategy– Retailers must decide on the variety of services

they make available for shoppers Examples include gift wrapping, bridal registry,

return privileges, electronic shopping, and delivery and installation

Objectives are to enhance shopper comfort and attract and retain customers

Pricing StrategyPricing Strategy– Markup: The amount a retailer adds to a

product’s cost to determine its selling price Determined by the services the retailer performs and

the inventory turnover rate

– Markdown: The amount by which a retailer reduces a product’s original selling price

Location/Distribution StrategyLocation/Distribution Strategy– Planned shopping center: A group of retail

stores planned, coordinated, and marketed as a single unit

– Four types of planned shopping centers: Neighborhood Community Regional Power

Promotional StrategyPromotional Strategy– Retailers use a variety of promotional techniques

to establish store images and communicate information about their stores

– Selling up: retailing selling technique in which salespeople try to persuade customers to buy higher-priced items than originally intended

– Suggestive selling: involves salespeople attempting to broaden a customer’s original purchase by adding related items, promotional products, and/or holiday or seasonal merchandise

Store AtmosphericsStore Atmospherics– Physical characteristics and amenities that

attract customers and satisfy their shopping needs

Types of RetailersTypes of RetailersRetailers can be categorized by:

– Form of ownership– Shopping effort expended by customer– Services provided to customers– Product lines– Location of retail transactions

Retail Life CycleRetail Life Cycle

Retail institutions pass through identifiable life stagesintroductiongrowthmaturitydecline

Store-Based Retail Strategy Store-Based Retail Strategy MixesMixes

Food Oriented Convenience store Conventional

supermarket Food-based superstore Combination store Box (limited-line) store Warehouse store

General Merchandise Specialty store Traditional department Full-line discount store Variety store Off-price chain Factory outlet Membership club Flea market

Convenience Store Strategy MixConvenience Store Strategy Mix

Location:Neighborhood

Merchandise:Medium width and low depth of assortment; average quality

Prices:Average to

Above average

Atmosphere andServices:Average

Promotion:Moderate

Conventional Supermarket Conventional Supermarket Strategy MixStrategy Mix

Location:Neighborhood

Merchandise:Extensive width

and depth of assortment; average quality; manufacturer,

private, and generic brands

Prices:Competitive

Atmosphere andServices:Average

Promotion:Heavy use of

newspapers, flyers, and coupons

Food-Based Superstore Food-Based Superstore Strategy MixStrategy Mix

Location:Community shopping center or isolated site

Merchandise:Full assortment plus health

and beauty aids and general merchandise

Prices:Competitive

Atmosphere andServices:Average

Promotion:Heavy use of

newspapers, flyers

Specialty Store Strategy MixSpecialty Store Strategy Mix

Location:Business district or

shopping center

Merchandise:Very narrow width and

extensive depth of assortment; average to

good quality

Prices:Competitive to Above average

Atmosphere andServices:

Average to excellent

Promotion:Heavy use of displaysExtensive sales force

Traditional Department Store Traditional Department Store Strategy MixStrategy Mix

Location:Business district, shopping

center or isolated store

Merchandise:Extensive width and

depth of assortment; average to

good quality

Prices:Average to

Above average

Atmosphere andServices:

Good to excellent

Promotion:Heavy ad and catalog

use; direct mail; personal selling

Full-line Discount Store Strategy Full-line Discount Store Strategy MixMix

Location:Business district, shopping

center or isolated store

Merchandise:Extensive width and

depth of assortment; average to

good quality

Prices:Competitive

Atmosphere/ Services:Slightly below

average to average

Promotion:Heavy on newspapers;price-oriented; selling

Off-Price Chain Strategy MixOff-Price Chain Strategy Mix

Location:Business district, shopping

center or isolated store

Merchandise:Moderate width and

poor depth of assortment;

average to good quality;low continuity

Prices:Low

Atmosphere/ Services:Below average

Promotion:Use of newspapers;

brands not advertised;limited selling

Factory Outlet Strategy MixFactory Outlet Strategy Mix

Location:Out of the way site

or discount mall

Merchandise:Moderate width and

poor depth of assortment;

low continuity

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Little

Flea Market Strategy MixFlea Market Strategy Mix

Location:Isolated store

Merchandise:Extensive width and

poor depth of assortment;

low continuity; variable quality

Prices:Very Low

Atmosphere/ Services:Very low

Promotion:Limited

DIALECTIC PROCESSDIALECTIC PROCESS

New retail institutions result from storesborrowing characteristics from other very different competitors and much like childrenare a combination of the genes of their parents.

Framework of the theory:Thesis: established retail institution

Antithesis: innovative retail institution

Synthesis: combination of the establishedand innovative retail concept.

DIALECTIC PROCESSDIALECTIC PROCESS

Specialty store• High margin• Low turnover• High prices• Full service• Narrow variety• Deep assortment

Specialty store• High margin• Low turnover• High prices• Full service• Narrow variety• Deep assortment

Full-line discount store:• Low margin• High turnover• Low prices• No service• Broad variety• Shallow assortment

Full-line discount store:• Low margin• High turnover• Low prices• No service• Broad variety• Shallow assortment

Category specialist:• Modest margin• Medium turnover• Low prices• Limited service• Narrow variety• Deep assortment

Category specialist:• Modest margin• Medium turnover• Low prices• Limited service• Narrow variety• Deep assortment

THESISTHESIS

ANTITHESISANTITHESIS

SYNTHESISSYNTHESIS